YOUNGSTOWN, Ohio (WKBN) – For years, we’ve been hearing how the oil and gas industry could help kick start the Valley’s economy.
A natural gas processing plant is online now and industry suppliers have plants in the area. Activity has slowed a lot, but the Youngstown-Warren Regional Chamber says it’s part of the industry cycle.
Owners who signed their mineral rights to drilling companies are experiencing the affects of the industry slowing down first hand.
A cut-back in drilling activity means a product isn’t being produced, which means a smaller royalty payment.
Oil and gas business is just like any other business with its lows and highs. Right now, it’s on a down cycle, especially in the Valley. Crude oil is less than $40 a barrel.
It means cheaper prices at the pump for the consumer but cutting back on drilling for companies.
“Why develop if you’re only going to make a dollar a barrel, why not wait until there’s a better market for it?” Robert Rea of Buckeye Mineral Development said.
Buckeye Mineral said that when you look back in history, you’ll see the price of oil has gone up , it’s gone down and then gone up again. The thing to remember here is the royalty is based on the value of the product, in this case oil.
“We aren’t used to it because it has never been such a big factor in the local economy,” Guy Coviello with the Youngstown-Warren Regional Chamber said.
The Chamber says the influx of production in the U.S. and globally is one reason prices are going down. Even with the price dip, the Chamber says it’s still getting interest in the supply chain, but nothing has the green light yet.
“Both upstream, midstream, downstream, our economic development staff continues to work with those companies,” Coviello said. “Those leads at the current time are on hold simply because of the downturn in the oil prices.”
Back at Buckeye Mineral Development, the President says there are companies still looking to sign leases with land owners. He says if you do sign a lease, make sure you have the right to do a land audit.
“That’s how you deduce whether or not you’re adequately being paid, if the product that’s coming out of the ground is being called the right name,” Rea said.
Rea said the average mineral owner really has no idea what’s in a lease, as the oil and gas industry also uses its own language.