Shale Oil in America: Economy Fix or Dangerous Fantasy?

After sitting idle for two decades, there’s steam billowing from the top of the big old steel plant in Youngstown, Ohio.

This does not represent a renewal of the steel production that once created the Rust Belt. Instead, this is a product of a new industry proponents say can be a game changer, not just for the depressed Youngstown Warren area, but for the U.S. economy and the bigger energy game. It is the exploitation of oil shale.

The former steel plant now builds things like seamless piping for extracting the natural gas and oil deep underground.

There’s enough natural gas down there, some experts claim, to end U.S. dependence on foreign oil and completely turn around the current financial state.

It sounds fantastic, but opponents call it a fantasy. They claim big oil companies will ravage the land, contaminate groundwater, even create earthquakes, then pack up and leave once the profit has been exploited.

It’s a battle that has been raging for years. But a “new and improved” process for pulling massive deposits of fossil fuels from the ground in financially devastated areas of Ohio, Pennsylvania and West Virginia, is bringing a lot of hope to communities where homelessness and poverty run rampant.

In northeastern Ohio, oil companies from across the U.S. are setting up shop, developing wells and putting people to work, trying to get the oil out of the sedimentary rock.  The controversial process used to get the oil out is called “fracking,” which involves a highly pressurized fluid injected into the shale as a way to extract the fossil fuels caught between the rock.

“Years ago we couldn’t figure out how to get it out of there in an economical way, but somebody came up with a better mousetrap,” said oil analyst Phil Flynn of PFGBest.  “Instead of only getting maybe 10 percent of that oil and gas out of the market, now we get 75 to 80 to 90 percent of that oil and gas out” he said.

The latest fracking process, which developers claim is less environmentally damaging, involves a seamless pipe drilled thousands of feet into the ground, which then curves horizontally. Water and chemicals are pumped through to break up the shale. The water is then withdrawn, pulling with it oil and natural gas.

Flynn, who is very enthusiastic when talking about the possibilities of natural gas, said this can change everything, including foreign policy. “We're the Saudi Arabia of natural gas. This single-handedly can change the US economy” he said.

The potential of 5.5 billion barrels of oil and 15-billion cubic feet of natural gas has companies like Exxon Mobile investing in impoverished eastern Ohio.

“People who have opportunities in many other places in the country or elsewhere in the world have elected to come to Ohio and seek opportunity here, that tells me that people who are making very rational decisions spending shareholder money are coming to the conclusion that this is worth chasing,” said Tom Steward of the Ohio Oil and Gas Association.

The shale oil industry seems to have many heading toward Ohio with dollar signs in their eyes. On its website, the Ohio Department of Natural Resources posted this statement: “In the spring of 2010, the Division started receiving a number of calls from landowners who were being approached by land persons seeking to lease the Marcellus Shale and subsequently, the Utica Shale beneath their property for oil and natural gas exploration. We expect the permitting and drilling to the Marcellus Shale and Utica Shale to increase but at a gradual pace.”

It’s too soon to say business is booming, but Tom Humphries, from the Youngstown Warren regional chamber of commerce, estimates more than 400,000 jobs could be created in the area from the shale oil industry.

But extensive exploration of land and growth in the natural gas industry will need to involve the federal government.  Proponents accuse President Obama of focusing too much on renewables, like wind farms and low return energy sources.

And environmentalists, like Tina Posterli from Riverkeepers, said the industry’s falsely putting a positive spin on it. “The gas and oil industry greatly exaggerate the benefits of fracking” she said.  “They have these hopes of jobs, when the reality is they come into communities, they contaminate the water with their process, they destroy the land and people's properties and then they leave."

Posterli worries that concern over the economy and eagerness to make money from fossil fuels will lead to bigger, long term problems, like earthquakes and destruction of natural resources .

“Fracking is growing because there's this fallacy that we can hurry up get in there and solve all of our energy problems through this process and through getting there first."

An EPA report said the risk to groundwater is minimal and that no earthquake has been definitively linked to fracking.

Still, for now shale oil is tightly gripped in a tug of war with environmental concerns versus jobs and a domestic fuel source.

People on both sides are eagerly watching to see what happens.