How Can Your Ohio Business Benefit from the Utica Shale Play?

David Shallenberger | December 5th, 2012

Ohio is in the early stages of what may be a large oil & gas boom. The state overlays a large shale play called the Utica Shale. However in recent months, news from the oil patch has slowed as oil & gas companies have cut back on efforts to lease additional mineral interests, and are instead focused on exploration. But while news of the play has been quiet, that doesn’t mean the business opportunity is any less.

Utica Shale Play Opportunities

So what does this shale play mean for your business? The Utica play will expand business activity in Ohio, and accordingly, will increase the opportunities for your business. Before considering how to take advantage of the play in your business, first consider if this is truly an opportunity that your business can participate in.

The Utica play is regionalized, with the actual well drilling contained largely to Eastern Ohio. However, that doesn’t necessarily limit businesses from outside the region from taking advantage of the opportunity. The key factor with regard to geography is that you need to be able to bring your business into the region to provide goods or services. For example, a construction contractor may be able to send crews and equipment to Eastern Ohio to construct well pads.

Doing Business 24/7/365

If your business can overcome the geographic hurdle, the next consideration is the 24/7/365 mentality of the oil & gas industry. With the immense capital cost of a drilling rig, once a well is spudded-in it is very costly to shut a rig down temporarily. Because of this, oil & gas companies look to partner with businesses that are willing to work with them to achieve continuous drilling. If you are not willing to answer a business call at 2 a.m., then perhaps your target market is not “Big Oil.”

However, even if your business may not be able to perform 24/7, that doesn’t mean that the business has lost an opportunity, it just means that you would have to change your target. Rather than focusing on Big Oil perhaps you target “second generation money.” Second generation money is the money that was paid to landowners, rig workers or other contractors to Big Oil.

Getting Involved with Ohio Oil & Gas

You may wonder how your business can get involved. To work with this industry, you need to be in front of them and meeting with them. Nothing takes the place of networking. There are some regional groups or coalitions like the Ohio Valley Oil & Gas Association who have joined together, trying to market to Big Oil and to learn from other members’ successes. You may also want to get involved with trade associations such as the Ohio Oil & Gas Association to learn about the industry.

Ohio Oil and Gas Tax

The Utica Shale play could mean big money for Ohio – and for your business.  But, it could also mean higher taxes.  Through Ohio severance tax, Ohio commercial activity tax (CAT), and corporate income tax, the state of Ohio is also looking to cash in on Utica shale money.  Planning for Utica-fueled growth?  You should also develop a tax plan, making sure that you’re increased profits stay with you, not with the state.  Need tax planning help?  Contact Rea & Associates.  Our Ohio Oil and Gas tax team will help you create a tax plan to mitigate your growing business’s tax liability.

Want more information on Ohio oil and gas tax?  Follow me, @OilandGasTax, on Twitter

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