Ohio City Looks to Fracking as Way to Raise Money for Demolition

Youngstown, Ohio, needs money to demolish vacant buildings, so it’s turning to fracking.

The City Council of the northeast Ohio city is debating a proposal to combat blight by leasing the rights for oil and gas drilling under public land. The city has enough money to raze only 260 homes, with more than 5,000 other structures vacant or ready for demolition, Mayor Charles P. Sammarone said.

Opponents of hydraulic fracturing say the money isn’t worth the risk of polluting drinking water and the environment. Sammarone said demolition is a priority because dilapidated homes are causing people to leave or avoid the city, and raising taxes isn’t an option. Surrounding cities and private landowners are already leasing mineral rights, he said.

“We’re not inventing anything here,” Sammarone said in a telephone interview from Youngstown. “We need money for demo, and if we don’t get it, then there’s no demo.”

Municipalities and school districts in states including Texas, Pennsylvania and Colorado have been approving oil and gas leases to pay for services as horizontal drilling with fracking opens land for development, said John Krohn, a spokesman for Energy in Depth, a Washington-based group that represents drillers.

“Given our national energy needs will increase significantly, it’s reasonable to assume these arrangements will continue to increase,” Krohn said in a e-mail.

Municipal finance officers anticipate that revenue will fall 3.9 percent this year when adjusted for inflation, the sixth decline in a row, according to a National League of Cities report released Sept. 13.

Clearing Out

Youngstown faces a deficit of as much as $5 million next year as it weeds out unneeded housing after its population declined to about 66,500 from 168,330 in 1950, Sammarone said. The city has seen the benefits and pitfalls of fracking, a process that involves injecting chemicals, water and sand underground to free gas reserves.

A new $650 million mill in Youngstown for Vallourec SA (VK)’s V&M Star is employing 350 workers to produce seamless pipes for the process. The mill is about two miles (3.2 kilometers) from an injection well for disposing of fracking wastewater that was closed after 11 earthquakes shook Youngstown last year.

A U.S. Environmental Protection Agency report in December 2011 linked water contamination to fracking in Pavillion, Wyoming, and a U.S. Geological Survey report released yesterday found methane and diesel compounds in a monitoring water well there.

Satan’s Leases

The risks are not worth the short-term financial gain, said Robert Hagan, a Democratic state representative who represents Youngstown.

“I understand the desperation of cities,” Hagan said in a telephone interview. “I just don’t think making a deal with devil is right way to go.”

Opponents will be trying to derail an Oct. 3 vote on an ordinance authorizing the mayor to seek proposals from drillers, said Susie Beiersdorfer, a geology instructor at Youngstown State University who opposes fracking.

It doesn’t make sense to take money from drilling to improve neighborhoods if the environment is harmed, Beiersdorfer said.

“If the air and water are polluted, then who’s going to want to live here?” she said.

Sammarone said drilling can be properly regulated. He estimated there are about 180 acres that could be leased and, if the council approves, wants a study to determine how much municipal property might be eligible.

Drilling Parks

Campbell, a city of 8,179 in fiscal emergency that abuts Youngstown, leased mineral rights on 167 acres to Houston-based Hilcorp Energy Co. in June for $5,000 an acre plus 20 percent in royalties from gas production, Administrator Jack Dill said in a telephone interview.

The land includes two parks, and Dill said he was surprised there wasn’t more opposition from residents.

In Barnsville, about 120 miles southwest of Youngstown, there also was no major protest, Mayor Ron Bischof said. The village of 4,178 signed a contract Sept. 10 with Denver-based Antero Resources to lease more than 1,000 acres for $5,700 an acre plus 20 percent in royalties, he said.

Besides the municipalities, Ohio is exploring leasing parks, forests and other state land for drilling after the Legislature approved a bill in June 2011 to allow it.

“It creates jobs here, reduces our dependence on foreign oil and helps towns and cities meet their budgets without relying on taxpayer revenues,” said Jerry James, president of both the Marietta-based Artex Oil Co. and the Ohio Oil and Gas Association.

Next-Door Neighbor

Fort Worth, Texas, has about 1,480 producing wells inside city limits, with another 615 permitted or applying, according to its website. While the city requires wells to be at least 600 feet from homes and other sensitive areas, it has allowed them as close as 200 feet with a waiver, Bill Begley, a city spokesman, wrote in an e-mail.

Officials have had to balance the interests of drilling companies against those of homeowners worried about pollution, truck traffic and the impact on property values.

Youngstown Councilman John Swierz said the city has no choice but to seek ways to make up for dwindling state funding and other resources. Fracking, he said, provides a solution.

“We can do some good for the city,” he said.

To contact the reporter on this story: Mark Niquette in Columbus at mniquette@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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