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In-depth shale coverageWe analyze the trends and the

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VOL. 33, NO. 34

CRAIN’S FILE PHOTO

Key solicitingoptions fornew HQ spaceBanking giant seeks efficiency, thoughothers theorize a better lease is its goal

By STAN [email protected]

KeyCorp is indicating to developers andproperty owners that it might want to builda new headquarters in Cleveland, thoughsome real estate brokers believe it may be expressing such interest in order to extract abetter lease deal at its current home, the 57-story Key Tower.

A property development source familiarwith the situation said KeyCorp has askedmore than one downtown developer to provide office alternatives for the company.The source said Key wants less space thanthe banking company occupies now at 127Public Square.

“They are not looking to downsize (staff),but want a more efficient layout,” the sourcesaid.

According to a Feb. 27 regulatory filing,KeyCorp leases 26 floors totaling almost690,000 square feet in Key Tower, the second-tallest skyscraper between Chicago and NewYork City.

The source said the space KeyCorp wouldneed for its headquarters could be trimmedwith more efficient layouts. KeyCorp alsocould benefit from technological improve-ments in the 20 years since Key Tower’scompletion. The source asked not to beidentified because he is not authorized to

See TECH Page 8

See KEY Page 28

HOSPITALS AT BOTTOM OF BOTTLEScarcity of some drugs, ‘suffocation’ of supply chain forces pharmacists to get creativeBy TIMOTHY [email protected]

The medicine cabinets at North-east Ohio’s hospitals are sparsethese days, and while it’s no faultof their own, a nationwide drugshortage has forced pharmaciststo come up with creative ways to

make supplies of medications last.

Although the federal governmenthas offered a few tools to ease theburden, local hospital pharma-cists say the shortages show fewsigns of easing. More than 200drugs are in short supply or un-available entirely; the bulk of these

are generic injectable drugs. Alter-natives, if they exist, often are soldat high markups.

One hard-to-come-by painmedication typically costs theCleveland Clinic 10 cents a dose.But, given the difficulty in securing

See DRUGS Page 29

Deals showtech sectorattractiveto investorsBy CHUCK [email protected]

Northeast Ohio’s technology sceneis coming of age.

In the wake of two acquisitionslate last month totaling $470 million,several people who follow technologycompanies in the region say manylocal tech firms now are capable ofattracting far greater amounts ofmoney than they could have just afew years ago.

In some cases, that money willcome via acquisitions. In others, itwill be in the form of larger venturecapital investments.

Both the former and the latter already are starting to happen.

Although the number of local techcompanies being acquired hasn’trisen drastically during the last twoyears or so, some recent deals havebeen especially large.

On Aug. 24, for example, medicalimplant maker OrthoHelix SurgicalDesigns Inc. of Medina announced itwill be sold to medical device firm

20120903-NEWS--1-NAT-CCI-CL_-- 8/31/2012 3:28 PM Page 1


SEPTEMBER 3 - 9, 2012 WWW.CRAINSCLEVELAND.COM CRAIN’S CLEVELAND BUSINESS 3

INSIGHT

THE WEEK IN QUOTES“The hospitals basi-cally validated thatthey felt the (drug)shortage was some-what severe. Yearsago, it was sporadic.Now it’s more of achronic problem.”— Lisa Anderson, a registerednurse and vice president ofmember services for the Centerfor Health Affairs. Page One

“The Utica is an inter-esting area and an interesting play andpeople go where opportunities are. …And lots of people seepotential in the Utica.”— Gregory Brown, general counsel for Texas-based BelandEnergy Utica LLC and Beusa Energy. Page 13

ERC study finds more — and bigger — raises on tap for 2013Only a small number of manufacturing companies plan to freeze wages

By DAVID [email protected]

A slightly better Northeast Ohioworker pay picture is painted thisyear by employers participating inthe latest compensation survey pub-lished by the Employers ResourceCouncil, a human resources serviceorganization in Mayfield Village.

Raises are expected to increase

by an average of 3% next year, com-pared to the 2.8% wage and salaryhikes projected in the year-ago survey. Actual increases put in placeduring the current year averaged3%, slightly higher than anticipatedin the year-ago survey.

Marty Mordarski, director of research and membership at ERC,said the latest survey “indicatesthere is also a trend toward more

companies deciding to increasewages and salaries.”

He said the 3% average projectedwage hike is slightly higher than recent averages and is the highestsince 2009. The largest average payhike recorded in the last dozen ERCsurveys was 4.4%; that occurred in2001.

Half the companies surveyedsaid they raised pay 3% or more this

year, and 60% said they would do soin 2013. Mr. Mordarski also notedthat only a small number of manu-facturing companies said theywould freeze wages next year, agood sign.

The ERC contacted 154 companiesand organizations for the survey —76 manufacturing companies, 46non-manufacturing companies and32 nonprofit organizations. Employers

that said they would freeze pay werenot included in calculating pay raiseaverages. The ERC survey coveredfive job classifications ranging fromexecutives to production, supervi-sory and clerical.

This year, when it came to actualraises, service companies loosenedthe purse strings a little more thanmanufacturers. The raises at servicefirms exceeded those at manufac-turing firms by a small margin, andthat is expected again next year.

See ERC Page 9

“What we’ve done tosurvive is we’ve gotteninto some other areas.We’ve diversified ourbusiness.We’re findingindustries and oppor-tunities where we canuse our existing capitalequipment.”— Matt Reineke, president andCEO, Americarb. Page 12

“We’re not anti-taxand we’re not afraidto pay our share, wejust want to knowwhat we’re dealingwith.”— Terry Fleming, executive director of the Ohio PetroleumCouncil in Columbus. Page 18

With final $25M,art institute willfinish expansionCIA reaches $66 million goal, allowing it to start second phase of campus integrationBy TIMOTHY [email protected]

Grafton Nunes’ paramounttask upon becoming presi-dent and CEO of the Cleve-land Institute of Art in 2010was to sniff out the remaining$25 million needed to com-plete the college’s $66 mil-lion fundraising effort — the largestin the institution’s 130-year history.

Nearly 2½ years later, the smallart school steered by Mr. Nunes hasreached that goal and is ready tobreak ground this fall on the finalphase of its expansive building ini-tiative. The project’s goal is to unitethe school’s fragmented East Sidecampus into a single complex onEuclid Avenue in University Circle’sUptown district.

“The last $20 million is thetoughest,” said Mr. Nunes,who led a successful $15million fundraising effort atEmerson College in Bostonprior to his arrival in Cleve-land. “Finishing that $66million was important be-cause the capital campaignand unification project was

so important to the growth of theschool.”

Completed in December 2010, thefirst phase of the unification projectwas the complete renovation of the college’s Joseph McCullough Center for the Visual Arts on EuclidAvenue; it’s a former Ford Model Tassembly plant built in 1915 and acquired by the college in 1981.

The second phase, expected toSee CIA Page 28

SAME GAME. NEW NAME?Cleveland Browns Stadium soon may be rebranded, but what value a deal might bring is tricky to gauge

By JOEL [email protected]

When soon-to-be Cleve-land Browns owner Jimmy Haslam intro-duced himself to Cleve-

landers at a news conference Aug. 3at Browns headquarters in Berea, hewas open and direct about everythingexcept potential personnel changes;with the sale still not complete, hewas hesitant to comment on thosematters.

His bluntness was a marked departure from the reclusive RandyLerner, followed quickly by anotheranomaly: Mr. Haslam admitted thathe would explore, “probably,” sellingthe naming rights to ClevelandBrowns Stadium, a potentially lucrativetransaction.

“We live in a marketing world,” Mr.Haslam said simply that day.

Two things appear to be certain inany potential naming rights deal on theNorth Coast: First, that it won’t be PilotFlying J, the giant Knoxville-based operator of truck stops that Mr. Haslamruns; he reiterated in a Plain Dealerinterview last week a previous asser-tion that his company would not be the

presenting sponsor. It’s also a lock that Westlake-based TravelCenters ofAmerica, Pilot’s chief competitor intheir business, won’t be chosen.

After that, the deal seems to be fairgame. Browns spokesman Neal Gulkis

FRANK JANSKY/ZUMA PRESS

New Cleveland Browns owner Jimmy Haslam (left) standswith general manager Tom Heckert at the team’s FamilyNight scrimmage on Aug. 8 at Cleveland Browns Stadium.

See BROWNS Page 11

ANDRE JENNY

INSIDE: Historical wage hike datafrom ERC. Page 9

INSIDE: The most valuable naming rightsdeals in the NFL. Page 11■■ A year in, 92.3 The Fan makes up groundon WKNR in local sports radio. Page 9

Nunes


By BARBARA R. SNYDER

nyone who doubts the differ-ence a decade can make needonly look back to 2002.

In that year, United Airlinesfiled for bankruptcy, Palm and BlackBerrydominated the new smart phone market,and Mark Zuckerberg started his first yearat Harvard.

Today, United has the world’s largestnumber of airline destinations, iPhonesand Androids are all the rage, and Mr.Zuckerberg’s company, Facebook, boastsmore than 950 million active users.

For Ohio, 2002 stands out as the yearthe state launched Ohio Third Frontier,a model for economic innovation that hasbrought the state more than 80,000 newjobs and $6.6 billion in outside invest-

ments. The effort proved so successful that in 2010, more than 60% of voters endorsed a proposal to extend the state’ssupport for an additional four years.

Why tinker with an approach that hasattracted such acclaim and new dollars?Because the status quo is never static —especially in the current business climate.

Last month, I was among the membersof the Ohio Third Frontier advisory boardand commission who came together for a retreat to consider the program’s accomplishments and opportunities.Over two days of extensive conversation,several themes emerged:

■ Rapid results: Given the ever-accel-

erating pace of change, Ohio Third Fron-tier investments should focus more onshorter-term opportunities for returnson investment — that is, those within awindow of fewer than five years.

■ Strengths focused: The Ohio ThirdFrontier should direct resources to thoseareas where Ohio already has leadershiprelative to other states. Outside analysishas identified several industrial clustersthat meet this criterion, among them Advanced Materials, Software Applica-tions for Business & Healthcare, andMedical Technology.

■ Catalytic campuses: Revolutionaryadvances from the Internet to Googleemerged from universities, where facultymembers pursue the next “Big Idea”every day. By supporting the commercial-

Ms. Snyder is president of Case Western Reserve University and a member of theOhio Third Frontier Advisory Board.

In a discussion about business andwhat needs to be done to jump-startthe American economy, who wouldyou imagine decrying golden para-

chutes as lucrative financial payouts that“idiot CEO’s get when they get fired?”

Dennis Kucinich, you might guess.Nope.Some Occupy Cleveland pro-

tester?Nah.An overblown, talk-show

blabberer? Wrong again.The man uttering those words

was one of America’s most-respected former chief execu-tives, Lou Gerstner, the man responsible for the dramaticturnaround of IBM.

He and two others in his same category— former General Electric CEO JackWelch and Bob Wright, former head ofNBC Universal — gathered on NantucketIsland recently for a discussion withDavid Gregory, host of NBC’s Meet ThePress.

Particularly telling was that the men

— including Mr. Gregory — found it confusing that President Obama has nottried to build bridges with the Americanbusiness community. Had he done so,the Republicans might not have had somuch to yell about last week in Tampa.

This was all captured by syndicatedcolumnist William D. Cohan of

Bloomberg News, who quotedMr. Wright as saying — correctly— that it does no good to keeplooking back and blaming peo-ple for the financial mess, andthat our ongoing financial crisisdemands that we act, and actquickly.

Real business and politicalleaders, they said, need to sitdown together and work out aplan that begins right now. A

good first step would be to find thosereal leaders.

**** YOU’RE A BUSINESS OWNER and

realize that in order to grow, you need tofind new markets overseas. The problemis, you’re not quite sure where to start.

Or, you’re an executive of a local

company with years of experience sellingproducts to global markets. How do youplan for 2013 when the debt crisis andinstability in the eurozone continues todominate the world’s business newsheadlines?

And what could Northeast Ohio, evenwith its long history as a center of inter-national trade, do as a region to furtherhelp our local companies prosper throughexports?

Many of our companies have been active in Asia for years, if not decades. Whatwill the Asia slowdown mean to them?

On Sept. 27, business owners and executives will be able to get some ofthose questions answered while makingvaluable connections at Crain’s NEOWorld Trade Conference. Two powerfulkeynote speakers will be sandwichedaround four panel discussions probingthese questions and other issues, followedby a networking cocktail reception.

For more information on the event — tobe held at Executive Caterers at Lander-haven — or to register, visit www.crainscleveland.com/NEOWorldtix, or callChristian Hendricks at 216-771-5182. ■

44 CRAIN’S CLEVELAND BUSINESS WWW.CRAINSCLEVELAND.COM SEPTEMBER 3 - 9, 2012

Bad breaksE

lected officials in Columbus have talked agood game about reducing the number oftax breaks that businesses enjoy in Ohio, buthaven’t made headway in stripping them

from the tax code. Instead, they’ve added to theirnumber, causing us to doubt whether they’re seriousabout doing away with any of the tax giveaways,which in total cost the state billions of dollars in revenue each year.

As Crain’s government reporter Jay Miller wrotein a Page One story last week, a study by public policy nonprofit Policy Matters Ohio showed statelegislators and Gov. John Kasich in the last year hadapproved at least nine new or expanded “tax expen-ditures” — government-speak for tax credits, deductions and exemptions. These additions cameeven though lawmakers and the governor have given the impression through public comments thateven they believe there are needless tax loopholesthat should be eliminated.

Take remarks made last April on the floor of theOhio House by state Rep. Mike Foley, a ClevelandDemocrat and a member of a legislative study committee on taxes. Rep. Foley said many of the taxbreaks “probably help economic development inthe state of Ohio.”

“But,” he noted, “there are some out there thatare fairly silly and have been on the books for a longtime.”

Fairly silly? Try ridiculous.It’s absurd that the Ohio Department of Taxation

every two years goes through the exhaustive effortof creating its Tax Expenditure Report, which item-izes the cost to the state of each tax break, only tosee the document sit on the shelf. As the report itselfstates, the responsibility for evaluating each tax expenditure’s merit “belongs jointly to the GeneralAssembly and the Governor.” Yet once a tax give-away is added to the roster, it continues on and onand on, without a thorough examination by eitherthe Legislature or the governor’s office of whetherthe tax break’s benefit to Ohio’s economy is worththe revenue the state forgoes.

The failure of the legislative and executivebranches of government to do anything of valuewith the Tax Expenditure Report isn’t unique to thecurrent occupants of the Statehouse and governor’smansion. The state’s tax commissioner has been required since 1987 to produce the report as a supplement to the governor’s biennial budget.Twenty-five years and five gubernatorial adminis-trations later, the elimination of a tax break remainsabout as rare an event in Columbus as a sighting ofHalley’s Comet in the heavens.

Instead, the tax expenditures keep piling up — somuch so that they had reached 128 in the latest taxdepartment report.

Until Gov. Kasich and the Legislature actually begin to peel back — rather than add to — the number of tax breaks on the books, it’s hard to con-sider their talk about closing at least some of theseloopholes anything more than gratuitous lip service.

FROM THE PUBLISHER

PERSONAL VIEW

BRIANTUCKER

Look ahead, address the past messes

Revising Third Frontier plan appropriate

PUBLISHER/EDITORIAL DIRECTOR:Brian D.Tucker ([email protected])

EDITOR:Mark Dodosh ([email protected])

MANAGING EDITOR:Scott Suttell ([email protected])

OPINION

See VIEW Page 6

A

20120903-NEWS--4-NAT-CCI-CL_-- 8/31/2012 10:55 AM Page 1


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ANNE CARTERPepper PikeI think they’re still relevant, because itkind of puts a face on the party. It justkind of unifies the people in that party.They don’t influence my decision tovote, but that’s because I’m alreadydecided.

THE BIG ISSUE

NICK PETRAKISClevelandTo tell you the truth, in this day andage with everyone tweeting and Facebook and all the media — instantnews — you get all the information, allthe news breaking, on a daily basis.So they’re just repeating the facts, ifyou ask me.

ALEX MEYERSLakewoodI don’t think they have a great influ-ence on how people vote. I thinkthey’re still relevant, because it’s aplatform for them to at least talkabout the issues and their stance onthem, which is always going to get inthe public eye.

DANIELLE LIPPEClevelandI think they are important, but I thinkpeople have their opinions already inplace. So, personally, they do not influence how I vote.

Do you think political conventions are still relevant, and do they influence how you vote?


“They have a long historyand they have a stellarreputation in the (officefurniture) industry.” – Mark Gasser, president,Gasser Chair Co.


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ization efforts of our institutions ofhigher learning, the Ohio ThirdFrontier can ensure breakthroughsmake their way to markets far morequickly.

■■ Meaningful metrics: We requiremuch more rigorous collection andevaluation of metrics to determinethe actual impact of our initiatives.We have directed staff to explorewhat measures will provide the mostuseful information for determininghow best to proceed with regard toexisting and proposed programs.

Change is always challenging,particularly when an offering appearsto be going well.

Northeast Ohio companies, hos-pitals and my own university, CaseWestern Reserve, have benefitedtremendously from the foresight of

those leaders who first brought theOhio Third Frontier to fruition. Butthen I remember that it hasn’t beenthat long since we all thought that acell phone smaller than six incheswas pretty special.

A decade after the Ohio ThirdFrontier began, it’s time to assesswhether additional opportunitiesexist for Ohio. Just as in a universitylaboratory, we need to try additionalideas, assess their outcomes, andadjust based on that new information.

No program is perfect, and eventhe best-sounding proposals maynot prevail in practice. But we havean obligation to at least explore newoptions. Ohioans have entrusted uswith the responsibility of ensuringtheir future. Our task is to do all thatwe can to make it as promising as itcan be. ■

continued from PAGE 4

View: Time to evaluateother tech opportunities

Youngstown firm buysTaylor Chair’s assets196-year-old Bedford company closed doors inJune; Gasser will continue office furniture lineBy JAY [email protected]

The Taylor chair is on its way back. It will be made in Ohio, but not in

Bedford, its home for 196 years.Gasser Chair Co. of Youngstown

bought the name, chair designs, customer list and other proprietaryproperty at an Aug. 22 auction of theassets of The Taylor Cos., which foldedearlier this year.

Taylor was believed to be CuyahogaCounty’s oldest continuously oper-ating company; it called itself theoldest furniture manufacturer in theUnited States. The company special-ized in chairs for law offices, govern-ment buildings and other institutions.

Gasser president Mark Gasser said his company has yet to decidewhether Taylor’s highly regardedline of office chairs will be made atGasser’s Youngstown plant or itsMillersburg plant, both of which hedescribed as underused.

The company, which has morethan 110 employees, paid more than$100,000 for the package of Taylorintellectual property it bought, Mr.Gasser said.

Gasser will use its newly acquiredfurniture line to expand into themarket for office chairs. The 65-year-old company specializes in seatingfor restaurants, hotels and casinos. Itprovided the slot machine and gametable chairs for both the new Horse-shoe casinos in Cleveland andCincinnati.

“The attraction to us was the factthat Taylor Chair — they have a longhistory and they have a stellar repu-tation in the (office furniture) indus-try — was in a separate and differentmarket than we currently sell into,which is more of the hospitality andentertainment industries,” Mr. Gassersaid. “I don’t think we would haveconsidered getting into the officeseating business with anything lessthan that type of a name.”

He added, “It’s a very difficultmarket to build or pioneer a brandin, and Taylor has already done thatover many years.”

Mr. Gasser said he hasn’t been ableto assess yet how Gasser will marketand sell the Taylor chairs. But he saidthe two companies’ marketing styleswere similar, noting that both haveused independent sales representa-tives who sell for multiple manufac-turers.

Both chair makers also served whathe described as a middle market,selling to customers who may buy 50to 100 chairs at a time. He said hewasn’t planning to compete in themass market against companies suchas Steelcase Inc. or Herman Miller Inc.

Gasser Chair’s annual sales areabout $10 million, Mr. Gasser said.That’s about the same size as TaylorChair, which in 2006 — before therecession — had sales of $11 million,according to information suppliedby Thompson Auctioneers of Fair-born, which handled the disposal ofTaylor assets.

An end and a beginningJeff Baldassari, Taylor president and

CEO, said the company closed itsdoors June 8. The closing cost about50 people their jobs at the plant inBedford and at a second plant —Taylor Desk — in Lynwood, Calif.Taylor bought that California plantin the 1980s.

The closing also cost the jobs ofMr. Baldassari and executive vicepresident Brett Meals, who was amember of the seventh-generationdescendents of company founderBenjamin Fitch. Mr. Fitch openedthe business in Bedford in 1816.

Mr. Baldassari blamed the com-pany’s demise on the recession andthe failure to win a tax abatementfrom the state of Ohio for the 72,000-square-foot plant Taylor built inBedford in 2006.

Kent Jones of Thompson Auction-eers said the Aug. 22 auction cleanedout the Bedford factory, selling itemsranging from saws and sanders toscrap leather and corrugated boxes.He declined to say how much the salenetted for creditors or to disclosehow much is owed to creditors.

Meanwhile, the California factoryis being reborn.

A news release issued Aug. 23 byAlan Paull said A.J. Paull Office LLCopened for business on Aug. 1. Mr.Paull’s grandfather had sold EasternCabinet and Furniture Co. to Taylorin 1986. He then ran what becameTaylor Desk.

Taking a risk on historyMr. Baldassari, who said he may

consult with Gasser Chair, was opti-mistic that the chair business alsocan be restarted. He said he expectsGasser will focus on the 20% of theTaylor chair line that accounted for80% of the business.

“The good thing is, there aren’tmany American wood (chair) manu-facturers left,” he said. “They can getback in because there isn’t a lot ofcompetition in that sector.”

Mr. Gasser, too, is optimistic. Buthe conceded sentiment was a factorin the decision to buy Taylor Chair.

“This is an opportunity to keep thename alive,” he said. “I must admitthat, honestly, I couldn’t bear to seethe name and its history just evapo-rate. I thought it was worth the risk.” ■

WRITE TO USSend your letters to: Mark Dodosh, editor, Crain’s Cleveland Business, 700 W.St. Clair Ave., Suite 310, Cleveland, OH 44113-1230e-mail: [email protected]



Tornier N.V. of the Netherlands for $135 million. A few days later,trucking software firm TMW SystemsInc. of Beachwood said it will besold for $335 million to TrimbleNavigation Ltd. of Sunnyvale, Calif.,which makes technology to managemobile workers.

On the venture investment side,Northeast Ohio companies devel-oping medical devices, software,new materials and other high-techproducts raised a total of $114 millionin venture capital during the firsthalf of 2012. That figure didn’t set arecord, but it easily exceeded first-half totals of $83 million, $50 millionand $18 million in 2011, 2010 and2009, respectively, according to datafrom JumpStart Inc., a nonprofit thatassists and invests in young techcompanies.

Money is flowing partly becauseof improvements in both the econ-omy and the credit market. That’sespecially true for big acquisitions,which often involve debt financing.

But there’s another factor drivingdeals for tech companies in the region:They are reaching the point wherethey are ready to scale up or, in somecases, be sold, according to severalpeople interviewed for this story.

More tech deals are on the way, according to attorney Howard Bobrow, who advises private equityfunds, venture capital firms andyoung growth companies for theCleveland office of law firm Taft,Stettinius & Hollister LLP. He hasseen an increase in the number oftech companies ready for exits andis working with a few now.

Mr. Bobrow noted that improve-ments in the broader market formergers and acquisitions are helping,but he added that the region’s techsector is in a better position to takeadvantage of those improvementsthan it would have been a few yearsago.

“I absolutely think it means thatthe industry is showing signs of maturity,” he said.

Big hairy dealsThe acquisition deals for Ortho-

Helix and TMW Systems illustrateMr. Bobrow’s point.

The sale of OrthoHelix will markthe first exit for the company, whichis owned in part by Mutual CapitalPartners LLC, a growth-stage ven-ture capital firm in Cleveland. TMWfounder Tom Weisz sold his stake inhis business back in 2005, when thecompany was acquired by Peppertree

Capital Management Inc. of PepperPike and Wachovia Capital Partnersof Charlotte, N.C., for an undis-closed amount that he previouslysaid was less than $100 million.

Other tech companies that havestruck deals to be acquired for rela-tively large amounts so far this yearinclude U.S. Endoscopy, which is tobe sold for $270 million to medicalequipment maker Steris Corp., its next-door neighbor in Mentor,and Rolls-Royce Fuel Cell Systems(U.S.) Inc. of North Canton, whichfor $45 million sold a 51% stake initself to Korean conglomerate LG.

Of the eight local tech companiesidentified by Crain’s as strikingdeals this year to be acquired, some— OrthoHelix, the Rolls-Royce sub-sidiary, marketing software firmBrandMuscle Inc., wireless equip-ment provider Summit Data Com-munications Inc. and Onosys,which provides online food orderingsoftware for restaurants — are rela-tively young; all were formed since1999. The other three — U.S. Endo-scopy, TMW and electronic trans-action services provider ElectronicMerchant Systems — were formedin the 1980s and 1990s.

Although the number of acquisi-tions isn’t particularly high compared


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Tech: VC funds flow to local companies to previous years, the size of thedeals is, according to Mr. Bobrowand others who spoke with Crain’s.Mr. Bobrow noted how some acqui-sitions from previous years weresmall or involved companies thatwere not performing well.

Investments add upVenture capital dollars also appear

to be flowing readily into NortheastOhio, according to JumpStart’s figures. Granted, local companieswould need to raise more than $200million in the second half of 2012 toreach the record of $317 million inventure capital raised in 2007. How-ever, the sheer number of compa-nies receiving any amount of moneyfrom venture capital firms or indi-vidual investors has skyrocketed,according to JumpStart’s figures.

During the first half of 2012, 73companies received investments, anumber that beat annual figuresfrom most previous years.

The economy likely is a factor inthe overall increase in deals, but theincreasing number of quality com-panies in the region is another, saidLynn-Ann Gries, chief investmentofficer at JumpStart.

Ms. Gries said another reason isthe presence of the Ohio CapitalFund, a $150 million “fund of funds”that invests in venture capital firmsthat commit to financing companiesin Ohio. The 25 venture capital firmsthat have received money from thefund had invested $188 million in 66Ohio companies as of March 31.However, most of the fund’s moneyhas been committed to venturefirms, so if the state Legislaturedoesn’t pass a bill to renew it, theinvestments the underlying firmsmake could slow down, she said.

“The work the Ohio Capital Funddid in bringing additional venturefunds to the region has been prettymuch the shining star in how we’vebeen able to get our companies financed,” Ms. Gries said.

Entering ‘exit mode’

Among the venture firms thathave received money from the fund is Draper Triangle Ventures of Pittsburgh. Draper years ago madeearly investments into two localcompanies that recently went on toraise more venture capital: heartimaging technology developer CardioInsight Technologies Inc. ofCleveland raised $7.5 million earlierthis year, and appointment man-agement software firm TOA Tech-nologies Inc. of Beachwood raised$17 million last year.

The dollar amounts of local venturedeals will “continue to climb” in thefuture, and acquisitions of localtech companies will become morecommon, said Mike Stubler, manag-ing director at Draper. “We shouldstart to see more of those (compa-nies) going into exit mode,” he said.

Ralph Della Ratta Jr., managingpartner at Western Reserve CapitalPartners LLC in Cleveland, said heexpects acquisitions to rise. Thefirm lately has been working onmore deals that involve technologycompanies, and Mr. Della Ratta saidhe knows of three that will be soldor are hunting for buyers.

Although the improved creditmarket likely is helping drive acqui-sitions in Northeast Ohio, compa-nies looking for venture capitalhaven’t been helped by national investing trends. Venture investmentshave recovered somewhat from therecession but have been flat lately,according to the Pricewaterhouse-Coopers/National Venture CapitalAssociation MoneyTree Report.

Thus, any increase in venturecapital in Northeast Ohio can be at-tributed mainly to the achieve-ments of people in this region, saidJonathan Murray, managing part-ner for Early Stage Partners ofCleveland.

“Locally, we’ve gotten our act together,” Mr. Murray said. ■


The pay picture nationwide appearssimilar to the local snapshot pro-duced by ERC.

Mercer, an international consultingfirm, is projecting average pay raisesin the United States of 2.9% nextyear, up from 2.7% this year. Mercersurveyed 1,500 midsize and largeemployers.

One company that is exceedingthe average size of raises plannednext year is Fastener Industries Inc.,a Berea-based manufacturer withoperations that include Ohio Nutand Bolt Co. Fastener Industries willraise wages and salaries by 4% nextyear, a figure that matches the size ofincreases that were effective thisyear.

“We look at the Consumer PriceIndex and try to stay ahead of it, if wecan afford to,” said Patrick Finnegan,the company’s president and CEO.The CPI has risen 1.4% from July lastyear to July this year, according tothe Bureau of Labor Statistics.

Mr. Finnegan said business is onthe rise at the 190-employee company.The company is enjoying recordsales, partly because most of thebusiness units at Fastener Industriesare benefiting as the recession weeded out some of the company’s


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WKNR still No. 1 in sportsradio, but Fan closes gapData show year-old newcomer brings listenersto FM dial; ESPN affiliate’s boss undeterredBy JOEL [email protected]

To hear the principals involved,there is no sports radio competitionin Cleveland.

Those significant lineup changesat WKNR-AM, 850, better known asESPN Cleveland, after CBS Radio’sWKRK-FM, 92.3, “The Fan,” wentlive in August 2011? Nothing morethan gathering and applying feed-back from listeners.

And the slow but steady ratingsclimb at WKRK? All part of theprocess of building an audience.

According to data compiled byBaltimore-based Arbitron Inc.,which tracks radio listenership nationwide, WKNR remains the topsports dog in Cleveland. However,in Arbitron’s most recent PortablePeople Meters data, WKRK continuedto close the listener gap. Arbitrondoes not release its research pub-licly; a Cleveland-area media buyerprovided the data to Crain’s.

In terms of average quarterly audience, which measures the average number of people listeningin any 15-minute span, the averagedifference in July of 1,500 listenersbetween the two stations was thesmallest since The Fan beganbroadcasting on Aug. 29, 2011. In itsfirst four months on air, the averagemonthly difference in quarterly audience was 4,350; since April, thataverage difference has shrunk to2,100 listeners per month.

Meanwhile, in terms of cumula-tive audience — which is referred toby Arbitron as “cume” and is a mea-sure of the total number of people astation reaches in a month — WKRKalso has narrowed the gap. FromOctober through December last year,WKNR averaged 187,500 in cumeper month, with WKRK averagingonly 98,300. Since April, WKNR’scume has fallen 26% to an averageof 138,400 total listeners per month,while WKRK’s monthly cume hasmoved up 18%, to 116,200.

“The takeaway is that WKNR stillis No. 1 in the market, regardless ofthe demographic, but (WKRK) isslowly catching up,” said the mediabuyer who provided the data and hastracked it since The Fan debuted.

Heck with ratings Ratings numbers, though, matter

little at WKNR, according to GoodKarma Broadcasting president CraigKarmazin, who said the companythat owns the station isn’t a radiocompany, but rather a sports mar-keting company.

“Ratings don’t impact our businessmodel,” Mr. Karmazin said. “OurDNA is in marketing and events,helping execute for our partnersand delivering return on investmentfor them. Radio is an aspect of that,but not all of it.” The company’s list of capabilities includes remotebroadcasts, golf outings and invita-tion-only gatherings with on-airpersonalities and Cleveland sportsalumni, among other functions.

On the radio side, Mr. Karmazinacknowledges that The Fan’s pres-ence likely has taken away listeners.But the region’s second sports-talkstation has helped, too, in turning

more listeners and potential adver-tisers on to sports radio.

WKRK program director AndyRoth agrees. He said his station’sFM presence has opened sports talkto a group of listeners who eitherhadn’t thought of sports radio before or, if they had, had nevermade it to the FM side of the dial.

“That has been the most chal-lenging part — grabbing people andletting people know that there issports radio on the FM dial,” saidMr. Roth, who in a previous lifelaunched Major League Baseball’sInternet radio platform.

And as The Fan increases its audience, it, too, is moving into developing a more robust marketingpresence. As evidence, Mr. Rothcites the station’s partnership withthe Barley House in downtownCleveland on its new Browns tailgateparties, which he sees as a way to introduce even more people to thestation and expand its brand.

Head to headMr. Roth said WKRK is seeing

“substantial growth” in listeners oneach of its shows, referred to in radioparlance as “day parts.”

“At different times of the year,certain shows can be up or down,”Mr. Roth said. “But now, everyone isalmost near their high marks, andwe’re still going up.”

A source said WKRK’s morningdrive show, the often-controversial“Kiley and Booms,” often has out-paced the nationally broadcast“Mike and Mike in the Morning” onWKNR and even at times has chal-lenged the popular “Rover’s MorningGlory” on WMMS-FM, 100.7. TheArbitron data for July, though, showRover well ahead of the pack amongmales ages 25 to 54, with “Kiley andBooms” and “Mike and Mike” at anear dead heat.

WKNR’s midday show, “The Really Big Show,” with market vet-eran Tony Rizzo and Aaron Gold-hammer, outdraws WKRK’s showfeaturing local TV personalities AndyBaskin and Jeff Phelps. In the after-noon drive-time slot, WKNR’s “TheHooligans,” which features long-time Ohio State beat reporter BruceHooley, Cleveland sports radio vet-eran Greg Brinda and Chris Fedor,and WKRK’s “The Bull and The Fox,”featuring New York radio veteranAdam Gerstenhaber and formerOhio State defensive back DustinFox, are comparable.

In July, according to the Arbitrondata supplied to Crain’s, WKNR’saverage quarterly audience beatWKRK in the male 25-54 group,though WKRK’s cume was about4,000 listeners higher.

The WKNR lineup reflects mas-sive changes at WKNR since WKRKwent live. They include extending“The Really Big Show” an hour andmoving former Cleveland Cavaliersplay-by-play man Michael Reghiand his partner, Kenny Roda, to latenight from afternoon drive, where“The Hooligans” now reside.

Good Karma’s Mr. Karmazin,though, said the changes were a result of listener reaction and re-quests. “We really love our lineup,”Mr. Karmazin said. ■

ERC: Local survey mirrors national trend continued from PAGE 3

Research by Mayfield Village human resources group ERC show raises areexpected to increase by an average of3% in 2013. A look at past ERC raisesestimates and actual figures:

WAGE HIKES MAY GO UP

Year Projected Actual

2012 2.8% 3.0%

2011 2.8 2.8

2010 2.7 2.7

2009 3.3 3.1

2008 3.3 3.4

2007 3.3 3.5

2006 3.3 3.4

2005 3.3 3.4

2004 3.2 3.6

2003 3.0 3.3

competitors.Vitamix Corp., a food processing

products maker in Olmsted Town-ship, will raise employee pay from3% to 4% next year, a range thatmatches 2012 hikes, according to

Salvatore Indriolo, the company’sdirector of human resources.

Mr. Indriolo said the company,with 425 full-time employees, is enjoying strong demand from all themarkets it serves. Vitamix uses theCPI in analyzing compensation bud-gets, but it also takes into account internal and external benchmarks insetting pay levels, Mr. Indriolo said.

One service company, Chapmanand Chapman Inc. in Twinsburg, isplanning a combined base pay andbonus compensation package to average about 4% next year, similarto this year. CEO Walter Chapmansaid the benefits consulting firm wasunable to increase compensationtwo years ago. He said business con-ditions have improved since thenand the 27-employee firm also hasgained market share.

While the ERC compensationguide turned up signs of optimism,the improved outlook isn’t shareduniversally, according to the NationalFederation of Independent Business.Chief economist William Dunkel-berg said the group’s latest businessconditions report indicates small busi-nesses are concerned about highertaxes and are not in a mood to expand.The NFIB said optimism is “dis-turbingly low.” ■



13015 YORK-DELTA DRIVENORTH ROYALTON, OHIO JOB CHANGES

AUTOMOTIVEGANLEY BMW: Vince Cuffaro toclient adviser.

DISTRIBUTIONFLACK STEEL: David Feldstein todirector of risk management.

EDUCATIONCLEVELAND STATE UNIVERSITY:Paul Wolansky to director of advancement, College of Liberal Artsand Social Sciences. LAKE ERIE COLLEGE: Ruta Greinerto director of public relations and creative services; Kathryn Staats toassistant director, alumni and publicrelations; Joseph Kosch to digitalmedia developer.PADUA FRANCISCAN HIGHSCHOOL: Kimberly MerrymanSherer to director, marketing andpublic relations.

ENGINEERINGPROFESSIONAL SERVICE INDUS-TRIES INC.: Delvecchio Gray to senior roof consultant.

FINANCEFIFTH THIRD BANK, NORTHEASTERN

OHIO: Natan Milgrom to commercialmiddle market relationship manager. FIRSTMERIT CORP.: Michael G.Robinson to executive vice president,Wealth Management Services.

FINANCIAL SERVICECEDAR BROOK FINANCIAL PART-NERS LLC: David Anderson to chiefcompliance officer. RETIREMENT SOLUTIONS:Zachary Keberdle and Srdjan Demonjic to associate financial consultants.SS&G: Alicia Huffman, Kelli Millerand Nicole Benden to associates.SS&G HEALTHCARE SERVICESLLC: Darlene Steines, StephanieIrwin, Michael Zalenski, MonicaSwank and Karen Ann Wiecek tobilling specialists; LaDonna Kesslerand Tina Heatwall to practice man-agers.WESTERN RESERVE PARTNERSLLC: Justin A. Wolfort to vice president; Thomas P. Creegan toassociate. WALTHALL, DRAKE & WALLACELLP CPAS: Jen Witczak to supervisor;Janice Paul-Canfield to director,quality control; Jean M. Pavlin to director, accounting and audits.

HEALTH CAREUNIVERSITY HOSPITALS FERTILITYCENTER: Dr. Bryan Hecht to fertilityspecialist; Dr. Brooke Rossi and Dr.Bill Hurd to medical staff.

INSURANCEHYLANT GROUP: Jeffrey Belgraveand Michael Baumgartner to clientexecutives.

LEGALBUCKINGHAM, DOOLITTLE & BUR-ROUGHS LLP: David J. Lindner,Justin S. Greenfelder, Michael J.Matasich and Dustin J. Vrabel topartners.LITTLER MENDELSON: Inna Shelleyto associate. MCDONALD HOPKINS LLC:Matthew J. Samsa to associate.THORMAN HARDIN-LEVINE CO. LPA:Sara Verespej to associate; LauraGreene to client service manager.WELTMAN, WEINBERG & REIS CO.LPA: Jason K. Wright to Litigationand Defense Group.

GOING PLACES

REAL ESTATEJONES LANG LASALLE: A.J. Magnerto managing director, corporate accounts, industrial; Andrew Colemanto senior vice president, tenant repre-sentation.

RETAILAMBIANCE: Jeremy Ginsberg to e-commerce manager.

UTILITYFIRSTENERGY CORP.: Ty Pine todirector, state government affairs forOhio.

BOARDSGREATER CLEVELAND ASTD: LoriKlepfer to president; StephanieSteirn to executive director; ShannonHunt to president elect and vice presi-dent, programs; Sheri Mazurek tovice president, finance; Stan Gromekto vice president, membership and administration; Jenny Mayo to vicepresident, marketing. HOLDEN ARBORETUM: Paul R.Abbey (Fairport Asset Management)to chairman.PLAYHOUSESQUARE PARTNERS:Dawn McFadden (Jones Day) andBrent Pietrafese (Calfee) to co-chairs;Robert Lewis and Clayton Smith tovice-chairs; Carli Cichocki, ChristinaKlenotic, Matt Silla, Cristin Snod-grass, Ivana Vucenovic, GeorgeReider, Maurie Donnelly, SamMiller, Jennifer Jackson, KevinRopenus, Emma Bembridge andAmanda Hicken to committee co-chairs.

Send information for Going Places [email protected].

CreeganWolfortMilgrom

PineGinsbergSamsa

Most don’t feel informed about plan enrollment options

Employees lack benefit infoBy MATT DUNNINGBusiness Insurance

A majority of employees said theyaren’t receiving adequate enrollmentinformation about their company’sbenefit plans, according to a surveyby supplemental insurance providerAflac Inc.

About 52% of the more than 2,500employees who responded to Aflac’s2012 Open Enrollment Survey saidtheir employers have not distributedany information regarding comingopen enrollment periods. Thirty-ninepercent said they were only some-what prepared for open enrollments,while 26% said they were unpre-pared or very unprepared.

The survey’s findings offer a sharpcontrast to employers’ assessmentsof the effectiveness of their benefitscommunications strategies, outlined

in a separate Aflac survey releasedin April. In that study, 49% of the 1,800employers who responded charac-terized their benefits communica-tions as very or extremely effective.

Forty-eight percent of employeessurveyed said they are only “some-times” aware of changes made eachyear in their benefit plans, and 13%said they are rarely or never awareof changes made.

Exactly half of the employees sur-veyed somewhat or strongly agreedthat they would be better informedabout their health insurance choicesif they were given the opportunityto meet with an insurance consul-tant during open enrollment. ■

Matt Dunning is an associate editor with Business Insurance, asister publication of Crain’s Cleve-land Business.


confirmed that until Mr. Haslam officially takes control of the team,he would have no comment on naming rights possibilities. But whatMr. Haslam might encounter whenshopping the stadium’s most visiblereal estate to prospective suitors isthat the market for naming rightsdeals isn’t as robust as it once was.

In August 2011, MetLife boughtthe naming rights to New Meadow-lands Stadium, home of the NFL’sGiants and Jets, for a reported $17million to $20 million per seasonthrough 2036. But that price wasthought by marketing mavens to besomewhat low for two teams in thelargest media market in the world —and for a stadium that will play hostto the 2014 Super Bowl.

A better gauge of what marketingrights to Browns Stadium could fetchmay be found in New Orleans, wherethe Saints announced a deal last Sep-tember to rename the Superdome theMercedes-Benz Superdome, for $5million per year for 10 years.

The Houston Texans, by compar-ison, receive about $9.4 million a yearunder a 30-year deal with electric giant Reliant. But Reliant’s namewent on the then-new stadium in2002, when the economy was better.

“The Saints’ deal isn’t a record,but it’s not rock-bottom low, either,”said Michael Dietz, whose Farming-ton Hills, Mich., sports marketingfirm, Dietz Trott Sports and Enter-tainment Management, recentlyopened a Cleveland office headed byformer Mid-American Conferencecommissioner Rick Chryst.

Whether a company in Clevelandhas plenty of change to spare — orwould want to shell out big bucks fora team that, unlike the Saints, hasn’tcome close to playing in, much lesswinning, a Super Bowl — remains tobe seen. But Mr. Dietz said a nationalcompany looking to expand intoNortheast Ohio or the Midwest couldbe a possibility, as could regionalcompanies — especially banks —that are big in the Midwest.

No guaranteesThe Browns are 68-141 since

returning to the NFL in 1999, with oneplayoff appearance and 10 seasonswith 10 losses or more. That poorlevel of performance has limited theteam’s exposure on national televi-sion — they play one game, on Sept.27 at Baltimore’s M&T Bank Stadium,on national TV this season — whichwould limit the value of a namingrights deal for the team.

Mr. Dietz said a company consid-ering such a deal would enter into anagreement knowing the team’srecord won’t be perfect — but alsobelieving Mr. Haslam will set the organization in the right direction.

“Sponsors would need to believein the turnaround plan in place, andthe Browns should be selling the ideathat the future looks bright,” he said.“In my opinion, this is a good oppor-tunity to buy into a partnership be-cause the perceived value is so low.”

Then again, even franchises thatare riding high can ensnare sponsors— including those buying namingrights — in team or player scandals.

“The Browns should beselling the idea that thefuture looks bright.” – Michael Dietz, founder, DietzTrott Sports and EntertainmentManagement


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Browns: Stadium naming rights deals can carry risks for sponsorscontinued from PAGE 3 NFL NAMING RIGHTS DEALS

NEw Cleveland Browns owner Jimmy Haslam said last month he would marketnaming rights for Cleveland Browns Stadium. Here’s a look at the annual value forthe top NFL naming rights deals:

Sponsor Team Per-year value ExpirationMetLife Jets/Giants $17 million 2036

Reliant Texans 9.375 million 2032

Gillette Patriots 8 million 2031

U. of Phoenix Cardinals 7.72 million 2026

FedEx Redskins 7.59 million 2025

Bank of America Panthers 7 million 2023

Lucas Oil Colts 6.07 million 2027

The Saints since 1999 have beensuccessful on the field, with five playoff appearances and a SuperBowl victory. But Mercedes-Benzhas had to endure the team’s bountyscandal, in which coach Sean Pay-ton, general manager Mickey Loomis,former defensive coordinator GreggWilliams and current and formerplayers were suspended for varyingamounts of time for perpetuating apractice of offering players moneyfor knocking opponents out of games.

Blank slateOn the plus side for the Browns,

their stadium isn’t sponsored alreadynor does it have a catchy nickname.(Save your “Factory of Sadness”jokes.) Thus, a sponsor that buys

naming rights wouldn’t need tocompete with the nostalgia of alongtime name, as when auto insurerProgressive Corp. bought the namingrights to the former Jacobs Field in2008; some fans still call ProgressiveField “The Jake,” and a cottage industry of T-shirts — “It’s Still TheJake To Me,” for example — hassprung up.

Still, gaining first-time namingrights to a team’s home doesn’t assure a sponsor of success.

“The company purchasing thenaming rights really needs a strongpromise from the team that it willdo everything possible to help withthe rollout of the name and activa-tion of the partnership,” Mr. Dietzsaid. ■



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Price wars with Chinese sap energy from local solar industryInnovation will propel U.S. firms, advocates say installation company.

The price points are below whatmany U.S. manufacturers considercompetitive, which is troublesomebecause solar panels are treated likecommodities, said Neil Sater, CEO ofGreenField Solar Corp., an Oberlin-based solar cell fabricator.

“There’s little brand recognition,”Mr. Sater said. “That’s tough becausecompanies have to compete on price.”

The pricing woes have caused ashake-out among solar manufac-turers, including notable examplessuch as Solyndra, a California-basedsolar panel company that closed inAugust 2011 despite receiving a $535million loan guarantee from the U.S.Energy Department.

For Mr. Sater, the fierce competi-tion creates a “chicken-and-eggproblem.” Manufacturers need toscale up production to lower theirper-unit costs, but also need to beable to lower their prices to increaseproduction, he said.

The companies that will survivethe solar slump are those that aretechnologically advanced, said DaveKarpinski, vice president of Nor-Tech, a regional technology-basedeconomic development group. “Ithink we’re going to get back to whatwe’ve always known: The U.S. is going

to compete on innovation. We’renot going to compete on low cost,”Mr. Karpinski said. “It’s all aboutthe game-changing innovation.”

The innovation angle is one inwhich the 25-person GreenField Solar hopes to find its success. Thesolar cell equipment maker, whichstill is in the development phase,plans next year to market commer-cially its StarGen solar concentrators.The concentrators use mirrors to reflect intense sunlight onto smallstrips of solar cells.

Mr. Sater said he hopes not onlythe technology but also the appear-ance of the concentrators will dis-tinguish his company from others.StarGen concentrators look like ahybrid of a satellite dish and a solarpanel.

Survival strategyThe struggles of solar panel man-

ufacturers are creating ripples in thesupply chain.

Americarb, an Ashland-basedproducer of components for high-temperature furnaces used to makesolar energy equipment, in the last10 months has lost 95% of its solarbusiness, said Matt Reineke, presi-dent and CEO of Americarb.

As solar panel manufacturershave closed their doors, the demandfor new equipment dried up. And,as those shuttered companies soldtheir inventory to surviving manu-facturers, the replacement partsmarket also waned, Mr. Reinekesaid. The company was forced tocut the work force at its main man-ufacturing plant in Ashland by half,leaving Americarb with 70 workerslocally.

“What we’ve done to survive iswe’ve gotten into some other areas.We’ve diversified our business,” Mr.Reineke said. “We’re finding indus-tries and opportunities where we canuse our existing capital equipment.”

The company, which used to relyon solar orders for 75% of its busi-ness, now only fills solar orders ascapacity allows. It instead focuseson producing parts for furnacesused to make LED lights and onparts used in high-temperaturemining and aerospace equipment.

“It’s too cyclical to count on,” Mr.Reineke said about the solar industry.

Americarb’s sales are on track tofinish down 30% this year from the$55 million it generated in 2011, butMr. Reineke expects to see the diversification efforts the companystarted last year begin to pay off soon.

No ‘gravy train yet’While declining solar panel prices

are hurting U.S. manufacturers,they have had a positive effect oninstallers. The lower price helpsmake solar power more competitivewith electric power and lures morecustomers to purchase the systems,Dovetail Solar’s Mr. Frasz said.

Installations do appear to be onthe rebound. Photovoltaic systeminstallations in 2011 rose 109% fromthe previous year, according to a Solar Market Insight Report issuedby the Solar Energy Industries Asso-ciation and GTM Research, a marketresearch company. In fact, solar installations have steadily increasedeach year since 2007 when the SolarEnergy Industries Association firststarted collecting data.

Dovetail Solar this year is on paceto up its sales 50% this year from2011, when the company broke even, and already has hired sevenemployees. The 40-person companyalso on Aug. 1 opened a physical office in Cincinnati, giving it officesin four cities across the state.

But, as Mr. Frasz is quick to pointout, “It’s not a gravy train yet.”

Credit issuesDorothy Baunach, partner at Ener-

G Solution, a solar panel installer inMogadore, agrees.

In the absence of government incentives, solar installers rely onsolar renewable energy credits —credits awarded for each megawatthour of solar-generated electricitythat can be sold to utility companies— to defray the upfront cost of aninstallation, installers say. The cred-its, which can be used to satisfy an electric company’s solar power requirement, used to sell for $300per credit but now bring in $200 orless each, Ms. Baunach said.

The reason for the declining demand for the credits is a numberof the electric companies — theleading purchasers of the credits —already have satisfied alternativeenergy requirements mandated byOhio law. The state requires that allelectric companies must generate12.5% of their energy from renew-able sources by 2025, with at least0.5% of that total being from solar.

“The renewable energy creditmarket in Ohio is pretty soft,” Ms.Baunach said. “Credits have taken adive and you have to be able to securethe credits to make the financing work.”

In response, Dovetail Solar isturning to creative financing. Thecompany is trying to sell namingrights for the solar roof it’s installingon Cleveland State University’sWolstein Center to electric compa-nies in Ohio. ■

By GINGER [email protected]

Plagued by a loss of state and federal incentives and a shift in focus, at least within the state, to shaledrilling, Northeast Ohio companiestied to solar energy are fighting tomake a go of it as the luster has fadedfrom what seemed like a promisingindustry.

Of the 164 solar-related companiesin the state, 29% — or 47 companies— are in Cuyahoga and the six con-

tiguous counties, according to theSolar Energy Industries Association,a U.S. trade association for solar energy companies. It has been arough road to travel for those com-panies, especially those on themanufacturing side, which hasbeen hammered by Chinese rivalsundercutting prices.

Chinese competition has pushedthe price of solar panels down 60%in the past 18 months, said AlanFrasz, president of Dovetail Solarand Wind, a Cleveland-based solar


its Ohio facilities or in-state production, yetthat’s exactly what alreadyhas happened because ofthe shale gas industry here.One company alone,Chesapeake Energy, hasinvested more than $1.2billion to secure the mineralrights on roughly 1.3 mil-lion acres of Ohio land.

Other energy companies havespent billions more — money thatso far has gone toward payments toOhio farmers and other land andmineral rights owners willing tosell those rights for energy development. If you don’t think that’sbeing felt in the state’s economy,look at the want ads or talk to apickup truck dealer in a place likeCarrollton.

On top of what the energy companies arespending to get the gas,we’ve also already seenbillions more committedor planned for industrialdevelopment that willsupport this industry. Shellis planning to spend about$3 billion to build a gasprocessing plant just

across the Ohio River in Pennsyl-vania, largely to process gas thatShell believes will come from Ohio.

In Youngstown, Houston-basedV&M Star is spending $650 millionto build a new steel mill that willmake tubing for the oil and gas industry — while other mills inYoungstown, Canton and Lorainplan their own expansions, repre-senting more than $300 million in

additional steel plant expansionprojects. A billion in new steelplants? Sounds like China. Butpinch yourself: It’s Ohio.

These are not the forecasts ofstarry-eyed energy hounds. Theyrepresent real dollars already beingspent by real corporations thathave done their homework. And ifa billion dollars’ worth of invest-ment into Ohio steel mills doesn’tget your attention, you’re probablyreading the wrong newspaper andshould pick up a copy of the Weekly World News. Only Bat Boyor mutant aliens likely are to pro-vide more shocking headlines toanyone who grew up in this RustBelt state of ours.

But, there’s nothing like oil for alittle rust, right? So, for those ofyou sticking with Crain’s and reality,

we’ve still gotsome work todo.

This indus-try is still aninfant in Ohio, and we’veyet to see the real drilling begin. Barring some unforeseen majordevelopment, the months and yearsahead will be a flurry of activity asdrillers drill, pipeline companieslay new lines, processing facilitiesget built and, perhaps, an infra-structure emerges to begin usingnatural gas to fuel cars and trucksthe way that gasoline does today.

We’d love to tell you all about it,as it happens — we plan to writein this new Shale magazine aboutthe good, as well as any bad andugly that comes with this industry.

— Dan Shingler, editor, Shale

If you’re sick of hearing aboutshale gas, we’ve got some disappointing news for you:Our coverage of the topic is not

only increasing, but we’re rampingup to do even more with a newmagazine called Shale that willcome out in December.

Why?Because in the two years that

Crain’s Cleveland Business has beenwriting about shale gas and oil,we’ve become convinced that thiscould be the biggest economic newsto hit our state since the advent ofthe steel or automotive industries.

Yet, people still ask: Can it reallybecome that big?

It already has. It’s hard to remember the last

time a major corporation investedhundreds of millions of dollars into

Shale isn’t going away, so let us guide you through itDAN SHINGLER

FILE PHOTO/STEPHEN HERRON

For the past few months, there’s beenmuch speculation on what would become of the 337,000 acres that Chesapeake Energy put up for sale as

part of an effort to pay off a mountain of debtthat the company ran up to — among otherthings — buy the mineral rights on those lands.

But while that’s the single biggest bundle ofmineral rights likely to change hands in Ohio’sUtica shale gas play, it’s not the only one. Companies and investors alike still are jockeyingfor positions to profit from the Utica’s appar-ently vast deposits of natural gas, crude oil andliquids used in the petrochemical industry —and some observers say we’ve yet to see all ofthe energy companies that will eventuallyemerge to drill in Ohio.

“We are seeing new names pop up, smallercompanies with names we’ve never heard of,”said Mark Dolezal, president of the EasternGeauga Landowners, a group of about 300landowners in Geauga County that has put together 17,000 acres for which it hopes to sellmineral rights.

LET THE GAMESCONTINUEAs Chesapeake sells a chunk of its holdings, companies new and old jockey for position in Ohio’s rapidly developing Utica play

By DAN SHINGLER ■■ [email protected]

See GAME Page 16


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Industry suppliers may need API logo

By DAN [email protected]

Suppose there was a machineshop owner in Clevelandlooking for a new marketinto which to sell finely

tooled parts that he knows how tomake as well as anyone. A scan ofmost any paper in the state says:Shale gas!

Surely, this machine shop has allit takes to make and sell whateverthis new gas industry needs in theway of drill bits, valves, brackets,hardware, connectors or anythingelse made of metal:

Lathes? Check.CNC machines with varying

numbers of axles? Check.The know-how to work with any

tool or alloy? Double check.Rail and highway access? Check.ISO quality standards? Which

one? Got ’em all. Check.An API monogram? ... Uh-oh.A lot of Ohio manufacturers

don’t yet know what an API mono-gram is. But many in the oil and gasindustry say they should.

Manufacturers in Houston know— they have to, because API standsfor the American Petroleum Insti-tute, and without those three magicletters on their products, the energyindustry is about as interested inbuying their parts and pieces as it isin drilling dry holes.

That’s one reason there are 637Texas companies listed on the APIwebsite as participants in the insti-tute’s licensing and certification

Few Ohio businessescertified to make partsfor oil and gas drilling

programs. Ohio only has 25 on thesame list. And it’s why those Texascompanies dominate the industry’ssupply chain, even in Ohio.

The API certifies manufacturerswith an audit process similar towhat companies go through to getISO certifications, said Ed Durante,president of Houston-based TexasInternational Engineering Consul-tants and an API auditor. It’s aprocess that can take months toprepare for and up to a year tocomplete — but is worth it in orderto sell products to the oil and gasindustry, Mr. Durante tells prospec-tive supply chain participants.

Companies that go through theAPI certification process then canparticipate in the institute’s mono-gram program — meaning theycan put the API monogram ontheir products and sell them to theindustry with the institute’s stampof approval.

That monogram is becoming asvaluable in Ohio as it is in Houstonor Oklahoma City, said ChristinaPolesovsky, associate director ofthe Ohio Petroleum Council inColumbus.

“Many of our members won’tuse anything but API-mono-grammed products,” Ms.Polesovsky said.

Selective serviceTo be fair, not everything gas

drillers buy is subject to an APIstandard or certification.

“Not everyone who is a vendoror service provider needs all of this— it’s the companies active on thewell site,” notes Kristy Hawthorne,director of membership services forthe Ohio Oil and Gas Association,also in Columbus. For example, shesaid, road construction or landscapecompanies that prepare a well-sitebefore drilling begins often can doso without the certification.

But the standards come heavilyinto play for manufacturers whoproduce pipes, valves, fittings andother stuff that sits on top of orgoes down into a gas well. That’s inpart because the gas industry isstandards-oriented as it seeks toensure safe operations. Drillers sayif it’s a part that can fail and lead toa problem with a well, they’ll demand that it be API certified.

For folks such as machine shopowners, an API certification couldbe a must-have if they are to breakinto the oil and gas supply chaindeveloping right outside their doors.

“When companies like Chesa-peake are in the area, they’re onlygoing to buy from approved API licensees. They’re going to ask thatthe manufacturer stamp that mono-gram onto the equipment itself,”said Reid Porter, director of globalindustry services for the AmericanPetroleum Institute in Houston.

Here’s the catchAs it is, drillers say they still buy

most of their critical componentsfrom places such as Texas, wherecompanies already have the APImonogram in place and are wellversed in API standards. It’s stillearly as far as drilling goes in Ohio,and the supply chain here is onlybeginning to ramp up. Bothdrillers and local economic devel-opers say they’d like to see a betterlocal supply develop, so that Ohiocan take full advantage of its newshale gas industry.

The hitch is that it can take ayear to get API certification,

Messrs. Durante and Porter said. Ittakes several months for even themost organized company to pre-pare for an audit, Mr. Porter said.Then, nearly all companies havethings they must correct after theinitial audit. Plus, there’s still awaiting period once correctionsare made before a manufacturercan put the API monogram on itsproducts.

“We have a prerequisite thatsomeone cannot be a licensee un-less they have the quality systemup for three months,” Mr. Portersaid. “You can’t just turn on thelight and be done.”

There also is a wait for an auditor— because there are no API auditorsin Ohio. Across the world, API hasabout 140 auditors who will con-duct about 3,300 audits in 2012,Mr. Porter said. But 80% of thoseauditors are overseas, along withthe bulk of the world’s oil and gasequipment makers and serviceproviders.

“In the past, we have not had alot of activity in Ohio,” Mr. Portersaid. “The closest auditors we havefor the northern area right now arereally coming from Toronto.”

That situation means manufac-turers can’t just call up and ask foran audit and expect an auditor tocome out right away — they needto schedule their audit months inadvance of their readiness date ifthey want to get certified quickly,Mr. Porter said.

Get a move onSo far, however, there’s no pro-

gram to help manufacturers under-stand either the need for API certi-fication or the process of acquiringit. The Ohio Manufacturers’ Asso-ciation does not have a programaddressing API certification, thoughit may consider one in the future,said Ryan Augsburger, managingdirector of public policy servicesfor the association.

Likewise, API has not held anyworkshops on the topic for localmanufacturers or service providers,though it has sent Mr. Durante andothers to at least begin to make potential industry suppliers awareof the need for API certification atindustry conferences in the area.

What will it take to get such pro-grams in place — or, perhaps moreimportantly, to get auditors inOhio? Just ask, says Mr. Porter. Butso far, he says, no one has.

“If I knew we were going to haveinterest growing in Cleveland, itdoesn’t take a lot of effort on our partto do auditor qualifications,” Mr.Porter said. “We will definitely recruitif we need to put a hard charge ongetting additional auditors.”

Convincing API to mobilize anauditor recruitment effort mightrequire more action from economicdevelopers, policy makers and theOhio Manufacturers’ Association— and drillers say they hope thataction takes place. They’ll get by,whether it happens or not, but itwould be better for Ohio and theenergy industry if steps were takento bolster the local supply chain bygetting more API certifications inplace, industry insiders say.

“If there’s a message in your story that Ohio needs to under-stand, it’s that ultimately the bestthing for the supply chain to do …is force the OMA to engage” withthe Ohio Oil and Gas Association,one drilling company executivesaid privately. ■


For more information on our work in oil and gas, visit vorys.com/uticashale.Higher standards make better lawyers.®

FOR US, IT’S ALL ABOUT BREAKING NEW GROUND.

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Indeed, new players not only areentering the Ohio Utica, but arebeing formed to do so. Texas-basedBeland Energy Utica LLC, for one,was created in May by Beusa Energyprincipals, who have had successdrilling for shale gas in the Hay-nesville shale play, which includesparts of Arkansas, Louisiana andEast Texas, said Gregory Brown, thegeneral counsel for both Belandand Beusa. They hope to repeattheir success in the Utica, he said.

“The Utica is an interesting areaand an interesting play and peoplego where opportunities are,” Mr.Brown said. “And lots of people seepotential in the Utica.”

Mr. Brown declined to say howmuch capital Beusa, a privatelyheld company, has to spend onUtica leases or for drilling here, butsaid the company would like to initially acquire the mineral rightsto 15,000 to 20,000 acres here. Ifthose acres prove profitable, itlikely will try to buy more, he said.

That’s not going to be a cheapticket in at this point. Mineralrights in the Utica have skyrocketedin price in the last two years, andcurrently fetch between $2,000 and$5,000 per acre.

Even at the low end of that pricerange, the mineral rights alone on15,000 acres would cost $30 million— which does not include theroughly $6 million to $10 millionthat Utica drillers say they currentlyare spending to drill each new well.

A 15,000-acre parcel could supportabout 23 well pads, at 640 acres perpad, with each pad containing asmany as six wells, drillers say.

Crowded fieldAside from new ventures by

existing independent oil companiessuch as Beusa, the Utica also is attracting interest from other par-ties, ranging from private equitygroups in Houston that hope tobuy up rights and contract withother companies to develop wells,to Big Oil — companies such asBP, Exxon and Chevron that dwarfeven the Utica’s giant, ChesapeakeEnergy, in size and resources.

By far the largest leaseholder inthe Utica with 1 million acres under lease — even after it sells337,000 acres — Oklahoma City-based Chesapeake has a marketcapitalization of about $13 billion.Small potatoes compared to, say,BP, which has a market cap ofabout $134 billion — and a pimplecompared to Exxon Mobil’s moun-tainous market cap of more than$400 billion.

At least some of “the Bigs” areshowing increased interest in theUtica as well, said Tom Stewart,executive vice president of theOhio Oil and Gas Association inColumbus. Most notably, BP hasbegun to expand its interest, Mr.Stewart said.

“BP has moved out from aroundthe Youngstown area and TrumbullCounty areas,” Mr Stewart said. “Ihear they’re now (buying leases) in10 counties.”

BP’s Ohio spokesman CurtisThomas largely confirmed that,though he declined to say how muchacreage BP has now acquired inOhio, citing the Utica’s “extremelycompetitive environment” of late.

“BP has recently expanded ouracquisition efforts in Trumbull andeight other counties including Carroll, Columbiana, Guernsey,Harrison, Mahoning, Stark andTuscarawas,” Mr. Thomas told



Game: Major drillers enter the fray, for fear of losing out

interesting to seewhether (Big Oil is) here two yearsfrom now. These are companies thathave choices worldwide.”

They want to stay in the gameBig companies such as BP, Exxon

or Shell have more options, becauseof their size and international presence, Mr. Stewart explained.While even the Utica’s biggest current exploration companies arelargely confined to domestic pro-duction, Big Oil has the world tochoose from when it decides whereto invest and drill, Mr. Stewart said.

One need only look at recentheadlines to confirm his logic.Shell, for example, announced inAugust that it plans to invest $1 bil-lion a year in shale gas explorationin China, where it’s also building a$12.6 billion refinery and petro-chemical processing plant. Here,meanwhile, folks are waiting to seehow Shell proceeds with its plans tobuild a $3 billion processing planton the Ohio-Pennsylvania border.

Big Oil also tends to like bigacreage, Mr. Stewart said, and major producers are not as likely assmall, independent drillers to gohouse to house cobbling togetheracreage one small farm at a time.

But there still are some largeblocks of mineral rights available inOhio. Aside from groups such as theGeauga Landowners, of which thereare at least several, there also areprofessional marketers such asSteve Stengell working with groupsof landowners that include not onlyfarmers, but old-line energy companies that have spent decadesacquiring mineral rights in Ohio.

They often paid a pittance forthose rights — as little as $5 an acre,say some producers — and nowthey own rights to shale gas that requires high-tech and expensivedrilling techniques. So they sell thosedeep rights to other, larger drillers,explained Mr. Stengell, president ofKentucky-based Encore Energy anda longtime participant in Ohio’sconventional gas-drilling industry.

“My belief is that Big Oil is goingto continue to come into the play,because they want to make some

Crain’s in an email.But Mr. Stewart thinks the major

oil companies might be more inter-ested in the Utica if Ohio’s tax situ-ation was more predictable. He’s astaunch opponent of Ohio Gov. JohnKasich’s current effort to increaseseverance taxes on oil and gas production from the Utica shale.

“I don’t think some of the big com-panies are going to do a whole lot un-til they have regulatory and tax cer-tainty,” he said. “It’s going to be

OHIO COUNTIES AFFECTED BYCHESAPEAKE’S SALE OF UTICA LEASESThese 19 counties are affected by Chesapeake’smoves; the shaded area indicates the scope of theUtica shale, while the orange area indicates areasthat contains wet gas.

type of investment in the Utica,”Mr. Stengell said.

Major oil companies probablydon’t need the Utica to keep theirproduction levels up, and what theyproduce here would only be a smallpart of their global volume. But atthe same time none of them wantto be seen as missing out on a playas highly publicized as the Utica isin the U.S., he said.

“They don’t want to sit on thesidelines and then find out threeyears from now that the results arebetter than expected and the valua-tion is better than expected,” Mr.Stengell said.

Mr. Stengell, who is marketingleases on about 175,000 acres inOhio, said he’s aware of at least onebig producer that is hoping to buythe mineral rights on 100,000 acresin the Utica, though he declined toname the company. But that’s not abig deal in the world of Big Oil, no

matter how many headlinesit grabs in Ohio.

“That’s a $200 mil-lion to $300 million in-

vestment. But for a BP,that’s not something to even

write a press release about,” Mr.Stengell said.

Just the beginningThere are other ways that mineral

rights in Ohio might still changehands, Mr. Stengell predicts: via jointventures between companies or outright acquisitions of small compa-nies by larger ones that are buyingthem primarily for their Utica rights.

Some companies, includingChesapeake, already have donethis. In January, Chesapeake sold a25% stake in more than 600,000Utica acres to the French-based Energy company Total, for $2.3 bil-lion — recouping all it had spent toacquire rights on 1.3 million Uticaacres in that one transaction.

Mr. Stengell predicts that othersuper-independents — the termnow being used to describe the Utica’s large drillers — will engagein similar transactions that allowthem to access new capital withwhich to develop wells, while stillcontrolling their holdings.

Some companies will probably getoffers from larger rivals that they justcan’t refuse, Mr. Stengell predicts.

“A company comes out and acquires 1,000 acres, or 10,000 acres.Then, they drill 10 wells or 15 or 20and production looks really good ...then a big company like Anadarko(Petroleum) or even a major says,‘Let’s get in there,’ and buys themup,” Mr. Stengell said. “That’swhere the getting really gets good.”

Some companies already havegained their Utica acreage via suchdeals, and more will do so in the future, Mr. Stengell predicts.

But whether that happens, onething seems certain — we’ve not seenthe last of large lease transactionsamong energy companies in the Utica, nor have we likely yet seen thearrival of all of the drillers that eventually will try their luck in Ohio.

Mr. Stewart said he only has tolook to Shell’s decision to invest $3billion in a processing plant toprove to himself that the Utica is abona fide major oil and gas playand a major blip on the industry’sradar screen nationally.

“You’re not going to invest thatkind of money without some cer-tainty that the feedstock (the Uti-ca’s wet gas) is going to be there,”Mr. Stewart said. ■


SOURCE: PUBLISHED REPORTS; OHIO DEPARTMENT OF NATURAL RESOURCES; COMPANY WEBSITES* — DOES NOT INCLUDE 337,000 ACRES FOR SALE; ** — ESTIMATE

SEPTEMBER 3 - 9, 2012 CRAIN’S CLEVELAND BUSINESS 17

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UTICA SHALE’S MAJOR PLAYERS

OHIO/PENNSYLVANIA UTICA SHALE NET ACREAGESome names to know in termsof energy companies staking aclaim to the Utica Shale:

■ Chesapeake Energy: Based inOklahoma City, Chesapeake is thenation’s second-largest producer ofnatural gas and is the 800-poundgorilla in the Utica. The companymoved in early to begin buying upleases and as of the beginning ofthis year had acquired the mineralrights on 1.3 million acres in theplay. The company also ran up amountain of debt via this and other costly activities, causing it toattempt to divest its assets, includingthe mineral rights to 337,000 acresof Ohio land. Its CEO, Aubrey McClendon, has described the Utica play as “the biggest thing tohappen to the state economicallysince the plow.”

It still will have a million acres ofthe Utica under its control after itcompletes the sale of 337,000 acresto raise cash and pay down its debt.

■ EnerVest/EV Energy Partners:EnerVest is a Houston-based explo-ration company, and EV Energy

Partners is a unitformed by EnerVest in2006 for long-term

acquisition and development of gasand oil resources.

The group reportedly holds leaseson about 760,000 acres in the Uticaand has just begun drilling here,with one well completed in StarkCounty and another in CarrollCounty. So far, the company hassaid the wells have exceeded theirexpectations for oil and gas produc-tion.

■ Chevron: A “major” in theworld of Big Oil, Chevron controlsthe mineral rights on about 600,000Utica acres. However, the energy giant, with a market cap ofmore than $200 billion, has so farbeen more of a buyer than a drillerin Ohio. It plans its first well some-time in September, in HarrisonCounty.

■ Anadarko Petroleum: One ofthe so-called “super-independents,”Anadarko is big for an independentenergy company, bigger thanChesapeake even, with a marketcap of more than $34 billion. It reported on July 31 that it has threewells in production, three nearcompletion and one that was justbeing drilled. While optimistic, thecompany has said it will wait until2013 to further discuss its land position in Ohio. It owns or has astake in mineral rights for about300,000 acres in the play, includingabout 240,000 acres that it directlycontrols.

■ Hess Corp.: Another “super-independent” energy company,New York-based Hess has a marketcap of about $17 billion and enteredthe Utica with a splash in fall 2011,when it spent $593 million to acquirethe mineral rights to acquire a 50% stake in 200,000 acres thencontrolled by Consul Energy. Sincethen, Hess has reportedly upped itsstake in the Utica and today has mineral rights to about 185,000 acres.

— Dan Shingler

Here’s a look at various companies’ acreage positions in the Utica shale. The information represents known acreage posi-tions, as there are a number of other companies for which complete information is not available.

Company Number of acres Company Number of acresChesapeake Energy 1,000,000* Devon 157,000

EnerVest** 760,000 Total 154,750

Chevron 600,000 Consol Energy 100,000

Anadarko Petroleum 240,000 BP 84,000

Hess Corp. 200,000 ExxonMobil (XTO) 75,000

Range Resources 190,000 Rex Energy 72,200



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RESOURCES FORTHE FUTURE

Severance tax talks turn tough Kasich seeks addition to state’s take, but onegroup says he is ‘not negotiating anything’By DAN [email protected]

Ohio Gov. John Kasich appears to be going directlyto big oil and gas producersto negotiate some sort of

change in how the state taxes oiland gas, as relations between theKasich administration and the OhioOil and Gas Association seem tohave become sour, if not downrightacrimonious.

Or, as one statehouse observerwho asked to remain anonymoussaid: “It’s gotten ugly, and it appearsto be getting personal.”

Talking to either the governor’soffice or OOGA only bolstered thatclaim.

Asked whether the governor wasnegotiating with the industry orshowing any flexibility on the topicof raising severance taxes on oil andgas produced in Ohio, OOGA exec-utive vice president Tom Stewartscoffed at the suggestion that Gov.Kasich was in a bargaining mood.

“He’s not negotiating anythingwith anyone,” said Mr. Stewart,when asked of reports last monththat the governor was reaching outto the oil and gas industry to try tofind a compromise on the issue ofseverance taxes.

The governor wants to increaseseverance taxes on oil and gas tofund a decrease in the state’s income tax, while Mr. Stewart is opposed to new taxes that he says

would single out his industry andstifle a sector that is buoying Ohio’seconomy.

Mr. Stewart said he did not ques-tion Gov. Kasich’s motives. He saidhe thinks the governor wants totake action that will help the stateas a whole but does not understandthe ramifications of his proposedtax increase.

“They intend to raise $500 millionfrom that (tax increase), and it willhave no impact on drilling? Anyonewho believes that is someone whohas never made a risk investment intheir life,” Mr. Stewart said.

Up for negotiationThose are tough terms when

directed at a former finance indus-try executive such as Gov. Kasich,and the governor’s office had a response that was just as harsh. Kasich spokesman Rob Nichols saidthat Mr. Stewart was mistaken withregards to the governor not negoti-ating with anyone — he’s just notnegotiating with OOGA.

“There’s actually been quite a bit of conversation between the administration and some of the oiland gas companies,” said Kasichspokesman Rob Nichols. “It soundsas if Mr. Stewart is not as plugged inas he was perhaps before.”

So who then, is the governor talking to as he seeks advice and industry input on his plans for theseverance tax? BP, at least for one,said Terry Fleming, executive direc-tor of the Ohio Petroleum Councilin Columbus.

“I’m pretty sure the governor’sspokesperson is referring to BP,”said Mr. Fleming, noting that thegovernor’s office met with BP GroupCEO Robert Dudley when Mr. Dudley was visiting Ohio in July.

ON THE WEBFor an opinion piece on the

proposed severance tax by ThomasE. Stewart, executive vice presidentof the Ohio Oil and Gas Association,go to www.CrainsCleveland.com/againsttax.

Later this month, BP officials willmake a presentation to the governor’soffice, outlining what the companythinks would be some best practicesin terms of oil and gas taxation atthe state level, along with somepractices that the industry thinksare too complicated. BP’s senior director of government and publicaffairs for Ohio, Bruce Johnson, willspearhead the company’s commu-nications efforts on the issue, Mr.Fleming said.

Reached late last week, Mr. Johnson said BP regional presidentTim Harrington met with Gov. Kasich on two occasions and thatthe governor has asked BP for input,given its experience operating inmultiple states.

Messrs. Johnson and Flemingboth said that BP is not out to avoida tax increase altogether, but wantsany changes to result in a simple taxcode that won’t be a burden to comply with or be so expensive thatit makes it unprofitable to drill inOhio. It and other drillers also areopposed to a tax structure, such asthe one currently put forth by Gov.Kasich, that would tax different resources at different rates.

“We considered it not unwork-able, but very difficult. That’s themessage that went back to the administration. It’s too much likeArkansas — and in Arkansas, it’s

SEVERANCE TAX RATES IN PERCENTAGE TERMS

FROM CRAIN’S BLOGSA recent blog entry on Crains

Cleveland.com and Crain’s weekly Energy newsletter:

A Houston company, Hilcorp EnergyCo., since June has stepped up significantly its pursuit of oil and gas leases in eastern and southernMahoning County, according to a storyfrom The (Youngstown) Vindicator.

Of the 444 leases signed byHilcorp in Mahoning County, 433 ofthem — that is, all but 11 — havebeen filed in 2012, and most of thosehave come this summer, the newspa-per reports.

The expansion of the oil and gasbusiness into both Mahoning andTrumbull counties “is just a natural expansion of the industry to the north

of its current base in Ohio,” saidJoseph A. Stanislaw, founder of theadvisory firm The JAStanislaw GroupLLC, an independent senior adviser toDeloitte’s energy and sustainabilitypractice and a member of several energy-related boards.

“Companies are moving north to grabland that doesn’t already have holds,”Mr. Stanislaw told The Vindicator.

Greg Lalicker, president of Hilcorp,told the newspaper, “When you are inthe early stages of a play, companiesare really trying to get a sense ofwhat all is going on. … Whether thispotential turns out to be more liquidsor more gas will only be known oncewe have the results from drilling andproduction. That is why we are here— to figure that out.”



administration. It’s too much likeArkansas — and in Arkansas, it’sdifficult to determine who oweswhat,” Mr. Johnson said.

Instead of a tax scheme that hasone rate for gas, another for oil anda third for other hydrocarbons, BPwill urge the governor to insteadpush for a simple BTU tax, Mr.Johnson said. Such a tax would beimposed on the energy value of theresources taken from the ground inOhio, as expressed in BTUs — orBritish Thermal Units, a measure of thermal energy — whether theresource is dry gas, wet gas, oil or something else, Mr. Flemingsaid.

‘We’re not afraid to pay ourshare’

For its part, the Ohio PetroleumCouncil is not universally againstany tax increase on oil and gas pro-duced within the state, but believesit is too early to be able to calculatewhat the rate of any new tax wouldbe.

The industry needs to better understand both what other futuretax rates will be, in addition to theseverance tax, and also have a better handle on the profitability ofits Ohio wells.

With the taxes that all businessespay a subject of debate, and only 12shale wells producing in Ohio sofar, it’s simply too early for the industry to evaluate its position,Mr. Fleming said.

“We’re not anti-tax and we’re notafraid to pay our share, we justwant to know what we’re dealingwith,” he said.

As for OOGA, the relationship between it and the Ohio PetroleumCouncil is a good one, Mr. Flemingsaid, but the two groups representdifferent constituencies within theindustry. The Petroleum Council,part of the American Petroleum Institute, represents mostly big,multinational energy companies,while OOGA tends to representsmaller producers with a long his-tory in Ohio.

The governor’s proposed sever-ance tax increase would affect wellsbeing developed almost exclusivelyby larger companies, but the OOGAmembers have a definite stake inthose same wells, Mr. Fleming said,because many of Ohio’s small pro-ducers sold mineral rights to bigproducers. That allows companiessuch as BP to drill for shale gas andoil, while making royalty paymentsto the smaller producers who soldthem mineral rights — and putsthem both in the same boat interms of severance taxes.

“A lot of Tom’s members havesold their rights to my members,”

Register for Crain’s shale panel discussion Sept. 20

Crain’s Cleveland Business,in partnership with theCanton Regional Chamberof Commerce, is hosting a

panel discussion Sept. 20 analyzingthe tax issue as it relates to shalegas.

The event, “Shale Drilling andTaxes: What’s Fair?,” will be from7:30 a.m. to 10:30 a.m. at theMcKinley Grand Hotel in Canton.In addition to the panel discussion,it will include a breakfast and net-working portion and a keynotespeaker.

The keynote speaker will be Rep.Brian Ellis of the PennsylvaniaHouse of Representatives, who waselected in 2004. He currently

serves on the appropriations, consumer affairs, ethics, judiciary,liquor control and rules committees.

Rep. Ellis is the sponsor of Penn-sylvania’s shale well impact feelegislation, and he will talk aboutthat state’s shale development experience and how the legislationwas developed and discuss its current impact.

The panel discussion aims toprovide an array of perspectives infinding the proper balance betweena tax structure that benefits Ohiowhile ensuring a reasonable coststructure for shale oil businesses.

The panel will be moderated byDavid Kaminski, director of energyand public affairs for the Canton

Regional Chamber of Commerce. Representing the pro tax side on

the panel will be a representativefrom Gov. John Kasich’s office; onthe con side will be Jerry James,president of Artex Oil Co. and pres-ident of the Ohio Oil and Gas Asso-ciation. Serving as the neutral pan-elist will be Keith Bennett, Stark

County engineer.For more information, go to

www.crainscleveland.com/shaletax or contact Jessica D. Snyder,assistant events manager, at 216-771-5388 or [email protected]

Tickets must be purchased inadvance of the event; walk-ins willnot be accepted.

Ellis Kaminski James Bennett

Get Crain’sshale coveragein your inbox

Each Tuesday, Crain’s ClevelandBusiness distributes its “Ohio Energy Report” e-newsletter, andyou can receive it for free.

We include news from Crain’sand our sister publications, linksfrom across the state and blogitems from guests — includingCleveland-area scholars — andmanaging editor Scott Suttell.

To sign up to receive the newslet-ter, visit www.CrainsCleveland.com/register.



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Drillers in Ohio face tight regulations, relaxed taxesReport: Some states with higher rates stilllure producers; industry opposes increaseBy DAN [email protected]

Ohio has some fairly strictregulations, but very lowtaxes, when it comes tohow it’s handling the

growing shale gas industry in com-parison to other states, a recent report finds.

But all states are not the same interms of their geology, the need toprotect local populations and theway they approach and justify theirtax environments, say the report’sauthor and a representative of theOhio Oil and Gas Association.

“Conditions are different in dif-ferent states,” said Nathan Richard-son, a lawyer and resident scholarat the Washington, D.C.-based non-profit Resources for the Future,and one of the authors of the Julyreport. “Let’s say you are looking athow deep a well casing has to go toprotect groundwater — what youmight be looking at could just reflect how deep the groundwateris in different states.”

Mr. Richardson and his colleaguesset out to compare taxes and regu-lations across the states, with anemphasis on those that are partici-pating in the nation’s so-called shalegas boom. They released their initialfindings in July, updating them atthe end of that month to includethe provisions of Ohio’s latest leg-islation on oil and gas drilling, Sen-ate Bill 315, which took effect Aug. 1.

Geological variations aside, thereport shows that Ohio has caughtup with many other major gas-pro-

ducing states, at least in terms ofits regulations. For example, Ohiojoined many other producing statesby requiring that groundwater be tested for methane and othercontaminants, the report finds.

In some areas, Ohio appears tohave adopted even more stringentregulations than some other states.For instance, while nearly all statesrequire that drillers encase theirwell bores in steel and cement nearthe surface and down through fresh-water aquifers, Ohio also requiresthat drillers use casings on theirwell bores for 1,000 feet at the bottom of the well. That’s twice asmuch as the 500 feet of casing required in Pennsylvania, Louisianaor California, the report finds.

Also, in the area of disclosure,Ohio is one of only five states thatrequire drillers to disclose both thevolume and the concentrations ofchemicals they use in their frack-ing fluid — the mixture of water,sand and chemicals that drillerspump at high pressure into a wellto fracture the shale and release itsnatural gas, oil and other valuableresources.

“If you think disclosure is a goodidea, then Ohio is ahead of mostother states,” Mr. Richardson said.

Ohio also has among the lowestnumber of wells per state inspector.Each Ohio inspector is responsiblefor overseeing between 31 and 140wells. In some other producingstates, such as Texas and Oklahoma,one inspector monitor more than1,000 wells, the report stated.

That’s not just because Ohio has

yet to really begin drilling its newshale gas wells in earnest, either,Mr. Richardson said. The studycounts all of Ohio’s wells, even con-ventional wells that have beendrilled in Ohio for about the last100 years. Including those in themix, Ohio already has nearly 35,000wells to monitor, the report found.

Taxing issuesIn the area of taxes, however, the

report seems to indicate that drillersare getting a very good deal in Ohio,which currently taxes the produc-tion of gas at 2.5 cents per thousandcubic feet (mcf) of gas produced, orabout 1% of the gas’ market value.That’s much less than the 18.45cents per mcf, or 7.5%, that Texascharges with its severance tax, orthe 17.2 cents per mcf (7%) that Ok-lahoma charges, the report found.The study used a price point of$2.46 per mcf in order to convertabsolute taxes to percentages.

Drillers, who are fighting OhioGov. John Kasich’s ongoing effortsto increase severance taxes in Ohio,have argued that a tax increase wouldhave a chilling effect on drilling in thestate, pushing companies to movetheir rigs to other states.

However, the report shows thatsome states with the highest sever-ance taxes also have the highestnumber of wells drilled.

Texas has among the highestoverall tax rates on oil and gas pro-duction but leads the nation withmore than 95,000 total gas wellsand twice the shale gas productionof any other state. But Texas is avery large state in terms of its landarea. But even relatively small WestVirginia, with a tax rate of 12.3 centsper mcf, or about 5% of the totalproceeds from the sale of its gas,has more than 52,000 gas wells, allof them old-style conventionalwells, data in the report show.

Oklahoma, similar in size to Ohioand with taxes about seven timeshigher, still has 44,000 gas wells andis the third-largest producing statein terms of shale gas, the report finds.

Data like that might be helpful tostate legislators as they try to decidewhether to back their governor’s taxrequest. But both Mr. Richardsonand Tom Stewart, executive vicepresident of the Ohio Oil and Gas Association, warned that comparinghow states tax gas drilling isn’t alwaysas simple as just comparing rates.

“There may be a lower tax on ini-tial production in some states (suchas Texas),” Mr. Richardson said.“The problem with that is, on shalegas wells, that’s a substantial part ofyour tax revenues.”

He said that’s because shale gaswells tend to produce more gas perday initially, right after they aredrilled and production has begun,than they do months or even daysand weeks afterward.

Scratching the surfaceMr. Stewart said he’s looked at

several other states that, on the sur-

face, have higher taxes than Ohio —and found that there are mitigatingcircumstances in many of thosestates that result in taxes that areeffectively lower, especially for hor-izontal drilling of shale gas wellsthat produce gas only after they arefracked, like the wells in Ohio.Texas, for example, charges its basetax rate on drillers accessing con-ventional deposits of oil and gas,but discounts the rate significantlyfor high-cost shale gas, he said.

Other states have similar mitigatingcircumstances, Mr. Stewart said.For example, Michigan has a taxrate of 5%, which is about five timeshigher than Ohio.

“But, what we don’t often read isthat a producer paying that 5% inMichigan gets to offset that againsthis normal state business taxes. …So it’s a fair deal,” Mr. Stewart said.

Other states should not be usedas examples, because their taxstrategies aren’t working, he said.

“Arkansas put in a severance taxin 2008, gave a small abatement period of a couple of years — andever since then, the drilling rate hasdropped by as much as 50%,” Mr.Stewart said.

“And West Virginia? I’m not surewhy anyone in Ohio public policywould want to mimic the state ofWest Virginia,” he said, noting thatdrillers are ignoring parts of WestVirginia, while drilling in nearbyPennsylvania is going strong.

Pennsylvania charges drillers animpact fee to compensate localgovernments for wear and tear ontheir infrastructure but has no sev-erance tax, he said. “That reallyhasn’t worked out for the greatstate of West Virginia,” Mr. Stewartsaid.

Mr. Stewart said he’s fine withOhio’s regulations. Indeed, he con-tends, they are the result of about acentury of drilling in Ohio and rep-resent challenges that were metalong the way with new laws thatoften were supported by the oil andgas industry.

But higher taxes are somethingthe industry remains dead setagainst, he said. A tax of just a fewpercentage points on a drillers’ grossreceipts could end up being a taxon as much as half of their profits,because margins are tight, Mr.Stewart said.

“And anyone who believes that taking half of the net profits won’thave an impact on the drilling rateis nuts,” he said. ■

EVERYTHING’S BIGGER IN TEXAS, INCLUDING GAS TAXThe oil and gas industry says

raising taxes on drillers could slowthe pace of exploration in Ohio. How-ever, a recent report from Resourcesfor the Future, a nonprofit in Washing-ton, D.C., shows that some stateswith high gas taxes are big oil andgas producers.

■ Texas charges 18.45 cents perthousand cubic feet (mcf) of naturalgas produced. At $2.46 per mcf, that

equals a 7.5% tax. Texas producesmore shale gas than any other state.

■ Oklahoma charges 17.2 cents,or 7%. The state has 44,000 gaswells and is the third-largest producerof shale gas.

■ West Virginia charges 12.3 centsper mcf, about 5%. The state has52,000 conventional gas wells.

■ Ohio charges 2.5 cents, about1% of the gas’ market value.



Calfee, Halter & Griswold LLP

Cleveland | Columbus | Cincinnati | Calfee.com

We kknow tthe bbusiness.Calfee has decades of experience representingexploration and production companies, oil fieldservice providers, pipeline companies, propertyowners and other industry participants in theAppalachian, Arkoma, Anadarko and Williston Basins.

Our Energy & Natural Resources team includesattorneys experienced in energy, exploration andproduction, regulatory and environmental law,real estate and government relations. Calfee assistsclients in meeting the legal challenges presented bythe dramatic growth in drilling to and producingfrom the Marcellus and Utica Shales.

Obama, Romney laud potential, but EPA action uncertainBy TERRY [email protected]

Because Ohio is a swingstate in the 2012 presidentialelection, both Republicannominee Mitt Romney and

President Barack Obama will continue to visit the state regularlybetween now and Election Day.

And while they may speak of thenational energy security benefitsthat responsible development ofthe Utica shale field can bring, itmay not be until after the electionthat Ohioans find out if the U.S.Environmental Protection Agencywill begin to regulate more directlythe hydraulic fracturing processvital to shale field development.

During his 2012 State of theUnion address, President Obamabacked natural gas drilling as aclean energy source. Shortly after,he signed an executive order thatled to a mid-April announcementfrom the EPA on rules to be imple-mented in two years to controlemissions from wells as the frackingprocess ends. To date, there hasbeen no announcement on EPAregulation of fracking chemicals.

Both presidential candidatesspeak glowingly of the prospect ofUtica shale oil and gas enteringthe U.S. energy picture.

Mr. Romney’s recently releasedenergy white paper, titled “For aStrong Middle Class: Energy Inde-pendence,” lists a number of quo-tations from recent news articles

about the positive opportunitiesfrom shale development and itsimpact on manufacturing, althoughthe plan has no specifics on theMarcellus or Utica shale fields.

It does proclaim, “America’snatural resources can be a long-term competitive advantage forAmerican manufacturing and theirdevelopment is the key to a rein-dustrialization of the U.S. economy.”

The Romney position paper doespropose a “State Energy Develop-ment Council, where states canwork together … to share expertiseand best management practices.”

President Obama early in 2012released a jobs report with a sectionthat credited the growth in naturalgas production resulting fromshale field development with therebound in U.S. manufacturing.The section noted that with appro-priate regulation, shale field devel-opment could be of significantbenefit to the U.S. economy. Thereport remains among the few spe-cific comments from the adminis-tration on shale gas development.

One of the more controversialaspects of the Romney energy planis his desire to give states moreregulatory authority on energyproduction on federally owned land.

The Obama administration hasreduced the number of acres of federal land available for energy ex-ploration by more than 15%, includ-ing at one point more than 3,000acres of southern Ohio’s Wayne Na-tional Forest that were withdrawn

from auction in December. However, the U.S. Forest Service

announced last week it is lifting thefracking ban in the Wayne NationalForest. Thirteen sites in the forestwill be auctioned later this year fordrilling by 2016. Ohio shale expertsnote the forest is not a “hot” area forshale development right now.

The Obama administration alsohas made plans to open more offshore tracts for drilling, albeitnot until 2017. Drilling in Lake Eriecontinues to be banned on theAmerican side by federal and statelaws. No candidates have discussedreversing those bans. Natural gaswells have been drilled on theCanadian side of Lake Erie since thelate 1950s and produce approxi-mately 30 million cubic feet (MMcf)per day. (During a normal January,the average Ohio home uses about18 MMcf of natural gas.)

But the rumor of federal EPA regulation of fracking — the processof piping water, sand and chemicalsat extremely high pressure into wellsto fracture the shale rock thereby releasing the oil and gas — contin-ues to go unanswered by the Obamaadministration.

Mr. Romney’s plan doesn’tspecifically address EPA frackingchemicals regulation issue either,but says a Romney administrationwould “strengthen environmentalprotection without destroyingjobs, paralyzing industry, or barring the use of resources likecoal.” ■

More at stake in Brown, Mandel raceBy TERRY [email protected]

Development of the Uticashale field and relatedregulatory issues are ofmore intense debate in the

U.S. Senate race between incumbentSherrod Brown, a Democrat fromAvon, and his Republican chal-lenger, Ohio Treasurer Josh Mandel.

Both candidates acknowledgethe huge economic and energy advantages of Ohio’s geology.

“Everywhere I travel in the state,residents are telling me how ourleaders need to make sure we takeadvantage of the shale opportunitywhile protecting our air, water andland. I know, and they know, responsible development can improve our tax base, lower ourenergy costs and improve our national security,” Mr. Mandelsaid in an interview.

Sen. Brown’s focus has been tofind ways to use the shale opportu-nity to create more Ohio jobs.

In a visit this summer to theEastern Gateway Community Col-lege in Jefferson County, he talkedwith officials and students abouttheir government-funded ShaleNetjobs training program and discussedhis legislation to aid Ohio’s unem-ployed workers to get retrained forjobs in the shale industry.

What is not clear is whether a

second Obama administrationwould lead to U.S. EnvironmentalProtection Agency regulation ofhydraulic fracturing, which wouldtake the responsibility away fromthe states.

Challenger Mandel of Lyndhurstis very specific: “I will do everything Ican in Washington to keep bureau-crats out of the way. I trust the stateof Ohio more than I do the federalgovernment.” Sen. Brown’s officedid not respond to a question abouthis position on EPA regulation offracking.

If the shale development pansout, Mr. Mandel said, “Twentyyears from now, Ohio will be oneof the leading states in the countryfor energy exploration and produc-tion. And it will have revitalizedour manufacturing industry, as weare already beginning to see in thesteel category with V&M and U.S.Steel.”

In Sen. Brown’s view, “As shaledevelopment moves forward, wemust protect our water supplies,ensure that local communities areconsulted, and take every precau-tion to safely dispose of waste. Weneed to be sure that local andcounty governments aren’t stuckwith the tab for roads or cleanup.But make no mistake, these jobscould be a real boost to Ohio’seconomy,” he said in a writtenstatement. ■


restrict oil and gas drillingthrough zoning, noise or other measures. That year, however,the state Legislature took awaylocal control over the permit-ting process, and, because of a 1965 law, that opened up urban and suburban areas for

drilling. Depending on the depth of a

proposed well, drillers need mineralrights to a footprint of as much as40 acres around a well before theycan start pumping. When PEPDrilling realized it was going to godeeper than planned on its Stowwell, it sought to expand its foot-print with the 0.3-acre parcelowned by city of Stow.

Though Stow has turned PEPDrilling down, the company has the1965 law — known as the mandatorypooling law — on which to fall back.

Under the law, if a driller con-tracts with the owners of at leasthalf the required acreage, a singleproperty owner, or even severalproperty owners, can’t stop thedrilling by refusing to join the pool.Instead, if a landowner balks, theproducer can ask an Ohio Depart-ment of Natural Resources advisorypanel to force the pooling, givingthe driller the mineral rights andpaying royalties to the balkingproperty owner.

The law was enacted to control aproliferation of drilling into thesame underground pool.

With Stow city council’s refusalto sell its mineral rights, PEPDrilling now must decide whetherto seek mandatory pooling.

— Jay Miller


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SHALE’S RIPPLE EFFECTSYou would be hard-pressed to find an

industry or sector that has not felt the effectsof the region’s shale boom in some way.

From real estate and manufacturing to mar-keting and technology, opportunities in shale

abound for those doing business in NortheastOhio.

Here’s a look at just a handful of the waysthat shale is having a ripple effect throughoutthe region’s economy.

FINANCE

Theirs is the industry that han-dles the most anticipated by-prod-uct of the Utica shale play: cash.

Bankers, financial advisers andwealth managers are hosting freeworkshops and, in some cases, goingdoor to door to attract deposits andmarket themselves as the expertslandowners and companies need tomanage new wealth.

Even as bank and credit union executives work to rake in deposits,some institutions, particularly smaller ones, are challenged whenthat actually happens because deposits are liabilities, and a delugeof them can create capital ratio issues that raise red flags forregulators.

“It’s not going to be easy to getthose (dollars) turned around inloans to the community,” saidPatrick Harris, an Ohio Credit UnionLeague spokesman. He cited as anexample one $20 million-asset institution whose top executive expects as much as $3 million tocome through the door in the nextfew months.

Bankers anticipate that com-mercial loan growth will catch upwith deposits as businesses seekthe means to build infrastructureand buy equipment to get oil andgas to the market, said JamesThurston, spokesman for the OhioBankers League.

But until things even out, capitalplanning is a bigger job, said JeffQuayle, senior vice president andgeneral counsel for the bankersleague.

“Certainly it’s a good problem tohave, that you’re growing to thepoint that you have to think aboutbank capital and what’s the most

efficient way to deploy that capitalinto your market,” he said.

The Ohio Credit Union League isplanning a seminar this fall to assist credit unions in developingways to deploy these large deposits,Mr. Harris said.

Another in the finance sectorwhose oil and gas-related businessis building is Cleveland investmentbanking firm Western ReservePartners LLC, which is advisingmore companies that make andservice equipment necessary tofind, pump, transport and processthe gas, said Mark A. Filippell,managing director.

“People sell businesses for tworeasons: greed and fear,” Mr. Filippell said. “Greed is whenthings look very good, and rightnow for many of these companies,things look very good.”

Western Reserve is advising sever-al energy-related companies now,but those deals remain confiden-tial. — Michelle Park

HIGHEREDUCATION

The Ohio oil and gas rush hashad an unwanted impact on manylocal communities, places that are used to regulating who gets tobuild what, and where, within theirboundaries.

Take Stow, where drilling for oiland gas — vertically — has been anuncontroversial fact of life aroundthe Summit County community fordecades. But now, the city has decided it rather would forgo a$20,000 signing bonus and futureroyalties on land it owns than allowanother well to start pumping.

After several heated city councilmeetings, the city has decided notto give PEP Drilling of Mount Vernon, Ill., land it needs to startpumping gas from a horizontal wellit drilled on the land of a Stowchurch near the city’s land, saidCouncilman Michael Rasor.

“I really don’t have a problemwith (drilling),” Mr. Rasor said in atelephone interview. “But one thingI wanted to get was indemnity on theenvironmental liabilities, and thedriller didn’t offer it to us.”

Others in the community worried about noise and increasedtruck traffic. So, on Aug. 6, the citysaid no to PEP Drilling.

However, Stow’s mayor and citycouncil may not have the last word.

Until 2004, communities could

The complicated business of exploring and drilling for naturalgas in the region’s shale formationshas ignited a wave of interestamong Northeast Ohio’s institutionsof higher learning.

While those in the higher education sector admit it oftentakes years for colleges to respondto what’s happening with the econ-omy, the job prospects and researchopportunities offered by the shaleboom have a number of local insti-tutions scrambling.

Case Western Reserve Universityin Cleveland, for one, is banding together several researchers underan umbrella known as the Centerfor Shale Energy Research and Education to study multiple facetsof the region’s shale rush, rangingfrom its impact on the economy toits effects on public health and theenvironment. The center involvesmore than 30 faculty membersfrom the private university’s engi-neering, medical, business, law andscience programs.

Also, the university is in talkswith several companies entrenchedin the shale industry about working with the center, but thoseinvolved with the project said it wastoo early to disclose any by name.The center’s leadership also is grap-pling with how it best can interactwith businesses in the industry, especially if the center is to main-tain its independence.

“As an independent university,we feel that we have a major role toplay because we are not funded byone side or another,” said Xiangwu

“We feel that we have amajor role to play becausewe are not funded by oneside or another.”

– Xiangwu “David” Zengchairman, department of

civil engineering, Case Western Reserve University

GOVERNMENT

“David” Zeng, chairman of CWRU’sdepartment of civil engineering andone of the faculty members involved with the initiative.

Youngstown State University lastfall unveiled its own research insti-tute — the Natural Gas and WaterResources Institute — focusing on thestudy of the water used in the shalegas extraction process. This spring,the institute also will offer a minorunder the same name.

Jeffrey Dick, the institute’s director, said the minor largely isgeared toward those in the STEMfields — science, technology, engi-neering and mathematics.

While other colleges and univer-sities haven’t made as bold a com-mitment as CWRU or YoungstownState, faculty at several local institu-tions have incorporated aspects of the shale industry into theircoursework. Also, researchers atCleveland State University’s MaxineGoodman Levin College of UrbanAffairs have studied the economicimpact of the shale rush.

Still, higher education adminis-trators hint that other programsand research clusters could well be on their way. Staffers at the University of Akron’s Wayne Collegein Orrville, for example, are holdingmeetings to determine whether thecollege could offer any continuingeducation programs to meet the industry’s needs.

— Timothy Magaw


“The shale story in NortheastOhio is counterintuitive. It’shard for reporters to believe it’shard to find rooms in Youngs-town. That is an eye-opener.”

The shale conversation servesas a natural entry point in dis-cussing the region’s strong man-

ufacturing base and its efforts inwind and renewable fuel cell ener-gies, said Mr. Batyko, who regularlytravels to New York City to promoteNortheast Ohio to national mediaoutlets like The New York Times.

Gregg LaBar, senior vice presidentat Dix & Eaton, a Cleveland-based integrated communications consul-tancy, notices a growing prominenceof the region in the national con-sciousness thanks to the shale boom.

“Ohio and Northeast Ohio have

facturing,” Mr.Colm said. “We’restill on the uphillside of the growthcurve.”

Already, out-of-state companies aredeveloping process-

ing plants, distribution infrastructureand are buying up oil and gas leases,injecting hundred of millions of dol-lars into the state economy. And localcompanies are keeping pace.

Take Canton-based Timken Co.,which makes bars and tubes used inthe horizontal drilling equipmentneeded to extract shale. In the pasttwo years, the producer of bearingsand steel has announced capital expenditure projects totaling morethan $310 million in Northeast Ohio.

Because Timken equipment is


Ironically, lawyers expect to bekept busy for years by both sides ofthe shale play debate — those withthe desire to drill, baby, drill, andthose already suing over the envi-ronmental and health impacts.

A number of regional law firmshave formed in recent monthsshale-centered practice groups focused on serving clients rangingfrom single landowners who needland leases to large corporationsthat want to strike up joint operatingagreements with other companies.

Cleveland-based Thompson HineLLP started its Team Shale in fall2011. Asked about the group’s activi-ty, Michael L. Hardy, who leads theteam, noted that a year ago, the firmhad no shale-related work. Today, itis evaluating easement documentsand rights of way for a midstream exploration company and negotiat-ing leases on behalf of “significantcorporate clients,” he said.

“It takes a while to develop ourpenetration into the various sectorsin the market,” Mr. Hardy said.“That’s no different than the levelof involvement it takes to get involved in other practice areas.”

Attorneys who handle leases andtitle searches have been “extremelybusy,” and while that high level ofleasing activity is subsiding, workwill continue at a different pace,said Glenn Morrical, co-chair of the

The shale drilling boom is reinvigorating Northeast Ohio’smanufacturing industry, bringinghundreds of millions of dollars ofinvestment and direct and indirectjobs to the region, according toJohn Colm, president and executivedirector of Wire-Net, a Cleveland-based manufacturing advocacygroup.

At all levels, from upstream tomidstream to downstream, the Utica shale activity is having a “sig-nificant positive impact on manu-

used for shale drilling across thecountry, all of its investments arenot directly tied to the local Uticashale boom. Rather, the company isbenefiting from the overall strengthof the oil and shale business.

Shawn Seanor, vice president ofoil and gas engineered steel solu-tions for Timken, said that while anumber of companies are movingdistribution centers, warehousesand support services to Ohio, theylargely aren’t moving manufacturingfacilities to the region. But he seesthat as a likely possibility.

Timken’s customers are startingto see the advantages of movingmanufacturing operations to Ohio,which is near both the source ofsteel and the end location wherethe components will be used, Mr.Seanor said. — Ginger Christ

The shale boom is putting North-east Ohio on the map, particularlyin the eyes of the national media,officials say.

Groups such as the ClevelandPlus Marketing Alliance are usingthe attention given to the region because of shale drilling to raise thelocal profile.

“It opens the door for us to talkabout the region’s other assets,”said Rick Batyko, executive directorof Cleveland Plus Marketing Alliance.

much more credibility in terms of en-ergy,” he said. “When we go out andpitch what we do, we have muchmore to talk about in Cleveland.”

The problem, however, is intranslating the region’s shale boominto direct jobs for the local mar-keting community, Mr. LaBar said.

The bigger drilling companiesmoving to Ohio typically bring theirown marketing resources and, forthe most part, aren’t hiring localrepresentatives, he said. Yet.

However, Mr. LaBar sees oppor-tunity for those in the local marketingindustry to find a way into the shaleindustry through networking. Newcompanies likely will look to findlocal representation after they’veestablished themselves and grownin the region. — Ginger Christ

LEGALAFFAIRS MANUFACTURING

MARKETING

oil and gas practice group formal-ized earlier this year at Tucker EllisLLP in Cleveland.

Other legal work will arise overexisting lease rights and the rightsof way and real estate negotiationsnecessary as people seek to laypipeline for transporting gas andgas liquids, Mr. Morrical said.

Responding to the interest, theCleveland Metropolitan Bar Associ-ation in mid-September will host aconference titled “Utica Shale: Issues in Law, Practice and Policy,”which will provide an overview ofthe legal issues presented as peoplework to extract oil and gas.

“It will clearly taper off at somepoint,” Mr. Morrical predicted ofattorneys’ shale-related workload.“How far off, that is difficult to say. Ithink there’s going to be a lot ofwork for quite a while.”

Richard H. Nemeth of Nemeth &Barrett LLC started taking on oiland gas clients about a year and ahalf ago to supplement his firm’sbankruptcy work since consumerbankruptcies are down.

But he’s no newbie: He has geology and law degrees, and in1984 he was hired by an oil and gascompany to handle leasing andright-of-way issues before the industry waned in the late 1980s.

Now, Mr. Nemeth’s firm isputting together a website about itsoil and gas work, which he hopes tolaunch in the next month or so, andhe’s spreading the word through renewed memberships in oil andgas law organizations.

“This was a nice skill to be able tofall back on,” he said.

— Michelle Park


glass-like material designed toclean contaminated water,which is produced in largequantities when oil and gaswells are drilled.

Other young companies aimto break into the industry, too.For instance, MesoCoat Inc. of

Euclid plans to market its PcomPmetal coating system to companiesdrilling in the Marcellus and Uticashale areas. The company is workingwith partners in Houston to try tofind its way into the supply chain,said CEO Andy Sherman, addingthat he expects companies to usemore local suppliers as the amountof drilling in the Midwest grows.

Bigger companies also are devel-oping new products for the shalegas market, said Mr. Karpinski, ofNorTech. For example, specialtymaterials supplier Fairmount Minerals of Chardon is about toopen a new $5 million research anddevelopment center in Sugar Land,Texas, to capitalize on growing demand for specialty sands, resinsand other materials used in thefracking process.

There are lots of opportunitiesfor companies to develop productslocally, too, Mr. Karpinski said. Theoil and gas industry always needsbetter equipment and moredurable materials — stuff thatNortheast Ohio companies knowhow to make, he added.

“There’s room for small and bigcompanies up and down the (supply) chain,” he said.

— Chuck Soder


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In the decades since the end ofWorld War II, a half-century ofbusiness departures and two generations of population declinesnarrowed Northeast Ohio real estate to a zero-sum game. When abusiness or person moved withinthe region, it was at the expense ofanother location.

Shale’s rising significance in theregion already promises to reversethat trend. A raft of new businesses,such as Halliburton of Houston,which recently committed to estab-lishing an oil field supply unit inZanesville, and other suppliers ofservices to drillers already are givingnew purpose to long-empty existingbuildings and spawning new onesin neglected industrial parks.

A North Dakota or Pennsylvania-like population spike may be yet tocome, but the influx of businessesalready is palpable to commercialreal estate owners and commission-calculating brokers. Not countedamong that group are farmers andother land owners reaping bigbucks from selling mineral rights.

Consider two recent examples ofbrokerages that reaped rewardsfrom tenants entering the region tosupply its nascent shale industry.

At NAI Cummins, an Akron-basedcommercial brokerage, the father-son team of Bob and Scott Raskowrepresented Baker Hughes OilfieldOperations Inc. of Houston in the$3.3 million purchase of 108 acresin Massillon. Baker Hughes plans tobuild a hub to serve oil companiesand drillers that will exploit the region’s Utica shale formation.

Likewise, George Pofok, a seniorvice president at the Cresco brokeragein Independence, in May represented

Not even Texas is big enough todevelop all of the technologies thatoil and gas companies need to efficiently extract, process andtransport the natural gas buried beneath shale rock formations.

Some Northeast Ohio companiesalready are making pieces and partsthat go into machinery used in thefracking process and at other pointsin the supply chain, according toDave Karpinski, vice president oftechnology innovation at NorTech.Others are working on new productsright now.

“It’s definitely not all in Houston,Texas or Louisiana,” he said.

NorTech aims to help out thoselocal companies. The nonprofit,which works to promote technology-based economic development inNortheast Ohio, earlier this year decided to start helping workersand suppliers capitalize on the risein shale gas drilling. It eventuallyplans to do more to assist localcompanies developing advancedmaterials, industrial control systemsand water technology for the shaleindustry.

ABSMaterials Inc. of Wooster already has staked out a spot in theoil and gas industry: Founded in2008, the company has developed a

REALESTATE

TECHNOLOGY

a Boston-based industrial propertyowner in the $3.4 million sale of aYoungstown building to ArtificialLift Systems Inc., yet another oil andgas vendor.

Another deal reeks of the trans-forming influence oil money willhave on the region, and is close tohome. Beck Energy, a natural gasexploration and drilling companylong rooted in Ravenna, acquiredan office building in Independencefor $6 million as an investment inJune.

Terry Coyne, an executive managing director at the Clevelandoffice of the Newmark GrubbKnight Frank real estate brokerage,puts the resurgence of activity inthis region in historic terms.

“John D. Rockefeller helpedmake Northeast Ohio what it is byconsolidating Cleveland-area refineries serving the Oil City, Pa.,oil boom,” Mr. Coyne said. “Thesame geography and geology willmake us rich again.”

Beyond the emerging supplierbusiness, area companies thatmake pipe used in wells also arethriving — and expanding. More-over, Mr. Coyne said he believes thepush for mineral rights to exploitshale will push farther north inNortheast Ohio than expected.

His reason? “I’m fielding callsfrom people looking for largeparcels of land for farming. Theydon’t care if there are buildings onit. You can’t farm where there arebuildings. It’s something else,” Mr.Coyne said.

The “something else,” he surmises,is mineral rights.

One property that’s netting calls— for which the mineral rights arenot for sale — speaks volumes aboutthe ability of shale to reinvigorate aregion weakened by industrial decline: It is the 167-acre formersite of the Chrysler plant in Twins-burg, which Mr. Coyne representsas a new industrial park.

— Stan Bullard

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Fracking advocates, opponents push their messagesSides seek edge in tense public relations battleBy CHRISSY [email protected]

Ohio appears to be aperennial battlegroundstate.

This time, though, it’swhat’s underground that is thesource of an energy-rich, fuel-driven debate — one that has created a deep chasm of politicaland public discourse.

High-volume, horizontal hy-draulic fracturing — commonlycalled fracking — is a controversialand relatively new drilling technol-ogy that is being used to extract oiland gas from Utica shale depositsin the Buckeye State.

This practice has dredged a wellof opposition from environmental-ists and citizens groups worriedabout the lack of regulation andgroundwater contamination. Pro-ponents in the petroleum industryand big business organizations,however, gush about its powerfuleconomic impact and job creationin some of the most impoverishedareas of the state.

This tug-of-war of facts, projec-tions and environmental impactssurrounding the issue of frackinghas resulted in dueling public relations campaigns. And whileneither side will put a dollar figureto their campaigns, it’s easy to saythat millions of dollars are goingtoward swaying public opinionand political will.

“Both sides have issues to wrestle with,” said Edward “Ned”Hill, dean of the Maxine GoodmanLevin College of Urban Affairs atCleveland State University, whowas part of the research team thatcompleted an economic impactstudy for the Ohio Shale Coalitionin February.

“The environmentalists, who arehighly skeptical of developingshale, and the industry, whosevested interest is pretty wellknown,” he said. “Unfortunatelyfor the oil and gas industry, everyonehas watched bad John Waynemovies, which have gushing oilderricks in the background, sothere is a lot of skepticism. Nobodyis going to believe anybody.”

Dueling messagesFracking is a hot-button issue

that is easy to sensationalize, Mr.Hill said. “But if both sides don’ttry to get their message out, theyare just going to get drowned.”

For the opposition, you havegroups like Don’t Frack Ohio andNetwork for Oil & Gas Account-ability & Protection (NEOGAP).

Vanessa Pesec, president ofNEOGAP, said her organizationrepresents as many as 20 to 30groups around the state that wantfracking banned “until such timethat the industry can prove, throughpeer-reviewed scientific studies,that this relatively new, highly industrial and invasive extractionmethod is safe,” she said.

To get their messages across,these grassroots groups often postyard signs with messages like:“Keep Our Community Healthyand Safe … Stop Fracking.”

They make copies on their homecomputers or at the local store,and every once in a while take anadvertisement out in the paper. Ina beefed-up effort to get the message

out, billboards that are 10 feet by20 feet have appeared in six com-munities.

“Our budget is basically zeroand the industry for a year or morehas spent millions and millions ofdollars trying to persuade Ohioansand Americans that this is safe,”Ms. Pesec said. “And I think thatthe reason that they need to spendso much money is because theyare trying to prove something thatis not true, and Americans know it.”

Meanwhile, prosperity and investment, especially in areas ofthe state that have had little atten-tion since the mid-1950s and early’60s, is one of the key messagesfrom the pro-fracking front, whichincludes industry leaders like theU.S. Chamber of Commerce.

It also includes the Ohio ShaleCoalition, a broad-base group organized to assist businesses incapitalizing on opportunities created by the shale industry,which by some accounts is expected to bring more than65,000 jobs to the state by 2014.

Weapons of choiceThe U.S. Chamber of Commerce

in July launched “Shale Works forUS,” a multistate, multimillion-dollar campaign that includes radio and newspaper ads focusedon advocacy and education. Theeffort’s goal is to weave a nationalnarrative about the widespreadpositive economic effects of shaledevelopment.

Christopher Guith, vice presidentfor policy at the U.S. Chamber’sInstitute for 21st Century Energy,said the petroleum industry hasdone a “phenomenal” job of edu-cating the public in the past yearand of trying to “demystify some ofthe hyperbole that has come out ofthe anti-fracking crowd.”

“This is an issue that is trans-forming the country, and it’s sohard to stand in the way of it,” Mr.Guith said, adding that the U.S.Chamber wanted to join the move-ment to help tell the positive storysurrounding fracking.

“Our biggest asset is our credi-bility to the average American. Wehave such broad-base support andwe represent every aspect of business, not just oil and gas,” Mr.Guith said.

“Obviously, we support hydraulicfracturing, but that is not necessarilywhat we are trying to debate here,”he said. “There is a much broadereconomic perspective and wewant Americans, and we wantOhioans and we want businessesthroughout the country to under-stand this other side of the storythat hasn’t gotten near the amountof coverage that the controversysurrounding the operations has.”

Don’t Frack Ohio harnesses adifferent kind of currency in theirPR campaign against what its supporters believe is a drillingpractice of earth-shaking propor-tions.

“One thing in Ohio that reallywoke people up was the earthquakein Youngstown on New Year’s Eve(2011),” said Daniel Kessler,spokesman with Don’t Frack Ohio,a coalition effort of more than adozen other organizations, spear-headed by 350.org, a movementfocused on climate change. “Whenyou start shaking the earth and

having a 4.0 earthquake that has atendency to shake up people’s per-spective.”

In June, Don’t Frack Ohio mobi-lized 1,200 anti-fracking supportersto descend on the Ohio GeneralAssembly in Columbus to sign apeople’s bill banning fracking inthe state.

“What you are seeing is a well-organized, well-funded machineput on by the fossil fuel industryversus essentially a different cur-rency, which is people power,” Mr.Kessler said. “What we can do isorganize and try to demonstratepower by numbers … to createsuch a strong anti-fracking forcethat the legislature would have nochoice but to unwind some of thework that they did (last year).”

Two battlegroundsIn many ways, there are multiple

PR campaigns taking place in thestate, Cleveland State’s Mr. Hillsaid: one tailored to those immedi-ately affected by fracking, and onefor a larger statewide and national audience.

“If you go into shale country itself,it’s an area which is anxious for jobsand anxious for royalty incomes soit’s a very easy PR campaign,” saidMr. Hill, who adds that he is neitherpro nor anti-shale. “I just thinkyou’d be foolish not to develop theresource in a responsible way. … Iwould love it if extremists on bothsides would just shut up.”

Trent Dougherty, director of legal affairs for the Ohio Environ-mental Council, said while his organization believes the countryneeds to break its addiction to fossil-fuel powered energy, it realizes that the shale gas play is areality in Ohio.

“If it continues to move forwardit needs to be done in the most responsible manner. We need tohave regulations put in place toprotect the environmental and human health and safety,” Mr.Dougherty said.

He said it’s disappointing the issue has become so contentious.

“Both sides have had to unfortu-nately take their corners like rabiddogs and really fight a battle that Idon’t think is healthy,” Mr. Dougher-ty said. “It has been portrayed as anyone who is not 100% for drilling,the ‘Drill baby, drill!’ as much as wecan, then you must want to completely ban it and never have anyhomegrown energy sources period.”

Some might say that industry iswinning the PR battle. But LindaWoggon, executive director of OhioShale Coalition, said public supportand understanding of fracking iscritical to make the most of the jobsthis industry will create.

“We don’t have a really good poolof talent, skilled people ready forthe jobs that this is going to resultin so it’s important that people un-derstand it so they can make deci-sions about training they can get inorder to be prepared for thesejobs,” she said. ■

“I just think you’d be foolish not to develop the resourcein a responsible way. ... I would love it if extremists onboth sides would just shut up.”

– Ned Hilldean, Maxine Goodman Levin College of Urban Affairs,

Cleveland State University



A DAY ON THE DRILLING SITESo what’s it like on a shale gas

drilling site? We’ve spent a few days in the rich

areas to the south and east of Cleve-land, and here’s a little of what we’ve found.

STEPHEN HERRON PHOTOS

A segment of drilling pipe is about to be changed so drillers can add another section to go deeper at Chesapeake’s firstwell in Stark County, near Canton. The shale that holds the gas and oil that drillers seek is more than a mile below.

ABOVE: Behind the well bore on a well pad developed by Chesapeake Energy inStark County, giant winches handle steel cable used to support the drilling rig.They are surrounded by equipment and tanks that drillers use to store and manage some of the water, sand and chemicals involved in fracking. BELOW:Fracking operations under way at a rig site near Mineral City, Tuscarawas County,Ohio.

A top motor is seen from the rig floor of a drilling operation near Canton. Themotor, suspended by cables, turns the pipe that holds the drill bit. The weightof the motor and pipe help to drive the bit through thousands of feet of sand-stone and other material on its way to the Utica shale below.



LARGEST GRANTMAKING FOUNDATIONSRANKED BY AMOUNT OF 2011 GRANTS

Rank

NameAddressPhone/Website

2011 grants(millions)

2010grants

(millions)

2011assets

(millions)2011 largest

grant ($)

2011smallestgrant ($) Largest grants

Yearfounded

Totalstaff

Top executiveTitle

1Cleveland Foundation1422 Euclid Ave., Suite 1300, Cleveland 44115(216) 861-3810/www.clevelandfoundation.org

$78.7 $94.1 $1,816.9 3,100,000 44Suite 1300 Services Inc., Case Western ReserveUniversity, Cleveland State University, NeighborhoodLeadership Institute, BioEnterprise Corp.

191469

Ronald B. Richardpresident, CEO

2The George Gund Foundation45 Prospect Ave. West, Suite 1845, Cleveland 44115(216) 241-3114/www.gundfoundation.org

$16.6 $23.6 $422.3 2,000,000 500The Foundation Fighting Blindness, Cleveland Institute ofArt, County of Cuyahoga-Invest in Children, TheCleveland Foundation-Portfolio of Excellent Schools

195212

David T. Abbottexecutive director

3Lerner Foundation(1)26500 Curtiss Wright Parkway, Highland Heights 44143(440) 891-5000

$16.3 $18.6 $10.5 10,001,000 50Cleveland Clinic Foundation, Hospital for SpecialSurgery (New York), Cleveland Orchestra, JewishCommunity Federation

1993NA

Norma Lernerpresident, treasurer

4The Timken Foundation of Canton(2)200 Market Ave. N., Suite 210, Canton 44702(330) 452-1144

$13.3 $7.4 $221.6 476,000 6,450Stark State College Foundation, Town of Sosnowiec(Poland), University of Akron Foundation, Habitat forHumanity (Bucharest, Romania)

1934NA

Ward J. Timkenpresident, trustee

5KeyBank Foundation800 Superior Ave., Cleveland 44114(216) 828-7349/www.key.com/foundation

$12.6 $12.7 $35.9 1,500,000 10,000Cleveland Orchestra, United Way of Greater Cleveland,Case Western Reserve University, Cleveland ClinicFoundation, Susan G. Komen Breast Cancer Foundation

19693

Margot James Copelandchairman, CEO

6Saint Luke's Foundation of Cleveland4208 Prospect Ave., Cleveland 44103(216) 431-8010/www.saintlukesfoundation.org

$9.6 $7.6 $170.6 1,000,000 500MetroHealth Foundation, Neighborhood Progress Inc.,Friends of Breakthrough Schools, CWRU School ofDental Medicine

19978

Denise San AntonioZemanpresident, CEO

7Stark Community Foundation400 Market Ave. N., Suite 200, Canton 44702(330) 454-3426/www.starkcf.org

$8.1 $5.5 $156.1 NA NAStark Education Partnership, United Way of GreaterStark County, Aultman Hospital Compassion CareCenter, The Wilderness Center, Canton Museum of Art

196310

Mark J. Samolczykpresident

8Eaton Charitable Fund1111 Superior Ave., Cleveland 44114(216) 523-5000/www.eaton.com

$8.1 $7.3 $2.3 520,034 50United Way of Greater Cleveland, University Hospitals ofCleveland, National Merit Scholarship Foundation,United Way of Asheville & Buncombe Count

19530

William B. Doggettsenior vice president,Public & CommunityAffairs

9Kelvin & Eleanor Smith Foundation30195 Chagrin Blvd., Suite 275, Cleveland 44124(216) 591-9111/www.kesmithfoundation.org

$7.5 $6.5 $140.0 1,000,000 2,500 NA 19553

Ellen Stirn Mavecpresident, chairman

10Mt. Sinai Health Care FoundationAllen Med. Library Bldg., 11000 Euclid Ave., Cleveland44106-1714(216) 421-5500/www.mtsinaifoundation.org

$6.7 $6.5 $121.0 2,000,000 NAJewish Federation, Case Western Reserve UniversitySchool of Medicine, Cuyahoga County Invest in Children,Fund for Our Economic Future/BioEnterprise

19944

Mitchell Balkpresident

11Akron Community Foundation345 W. Cedar St., Akron 44307(330) 376-8522/www.akroncommunityfdn.org

$6.3 $6.0 $140.7 497,500 25Akron Art Museum, City of Akron NeighborhoodPartnership, Akron Metropolitan Housing Early LearningProject

195515

John T. Petures Jr.president, CEO

12Community West Foundation20545 Center Ridge Road, Suite 448, Rocky River 44116(216) 476-7060/www.communitywestfoundation.org

$5.5 $3.4 $80.6 830,000 250Case Western Reserve University, Cleveland Food Bank,Fairview Hospital, Lutheran Hospital, Malachi House,University School

19978

David T. Dombrowiakpresident, CEO

13Weatherhead Foundation25825 Science Park Drive, Beachwood 44122(216) 292-7100

$5.0 $5.0 NA NA NA Tulane University, Harvard University, ColumbiaUniversity, University of Texas

1953NA

Celia J. Weatherheadpresident

14GAR Foundation277 E. Mill St., Akron 44308-1735(330) 576-2926/www.garfoundation.org

$4.7 $5.7 $138.3 450,000 1,000United Way of Summit County, Summit EducationInitiative, Center for Nonprofit Excellence, GreenleafFamily Center

19674

Christine Amer Mayerpresident

15Nord Family Foundation747 Milan Ave., Amherst 44001(440) 984-3939/www.nordff.org

$4.6 $4.0 $92.8 450,000 25Amherst Historical Society, Community Foundation ofLorain County, Cleveland Scholarship Programs Inc.,Nurturing Center

19885

John Mullaneyexecutive director

16Parker Hannifin Foundation(3)6035 Parkland Blvd., Cleveland 44124(216) 896-3000

$4.3 $4.0 $6.2 650,000 100Cleveland State Univ., United Way, Great Lakes TheatreFestival, Helen Moss Cancer Research FoundationProfessorship, Ohio Foundation of Independent Colleges

1953NA

Don Washkewiczpresident, trustee

17The Youngstown FoundationP.O. Box 1162, Youngstown 44501(330) 744-0320/www.youngstownfoundation.org

$4.1 $4.0 $80.0 454,000 1,000Easter Seal Society, United Way of Youngstown/Mahoning County, Compass Family & CommunityServices, Visiting Nurses Association

19182

Janice E. Strasfeldexecutive director

18Community Foundation of Lorain County9080 Leavitt Road, Elyria 44035(440) 984-7390/www.peoplewhocare.org

$4.0 $3.9 $80.0 362,443 250 Community Health Partners Foundation, Lorain PalaceCivic Center, Common Ground

198010

Brian R. Frederickpresident, CEO

19H. C. S. Foundation(4)1801 E. Ninth St., Suite 1105, Cleveland 44114(216) 781-3502

$3.8 $4.7 $95.5 200,000 1,000Catholic Relief Services (Baltimore, Md.) LakewoodHospital Association, Ohio Dominican University,Cincinnati Museum Center

1959NA Board of trustees

20The Lubrizol Foundation29400 Lakeland Blvd., Wickliffe 44092(440) 347-1797/www.lubrizol.com

$3.7 $2.5 $17.5 1,000,000 1,000Friends of Breakthrough Schools Citizens Academy II;United Way of Greater Cleveland, United Way of LakeCounty, The University of Akron

19522

David J. Enzerrapresident

21Nordson Corp. Foundation28601 Clemens Road, Westlake 44145(440) 892-1580/www.nordson.com

$3.7 $2.6 $15.7 250,000 1,250The Power of Three, CWRU-SHAEP program, Boys &Girls Club of Lorain County, CollegeNow, El Centro deServicios Sociales, Lorain City Schools

19884

Cecilia H. Renderexecutive director

22Fairmount Minerals Foundation11833 Ravenna Road, Chardon 44024(440) 285-3132/www.fairmountminerals.com

$3.6 $1.4 $8.7 150,000 10University Hospitals, Cleveland Central Catholic HighSchool, America SCORES Cleveland, Aqua ClaraFoundation, Cleveland Botanical Garden

20080

Jenniffer D. Deckardpresident

23Elisabeth Severance Prentiss Foundation(4)PNC Bank, Box 94651, Cleveland 44114(216) 222-2760/www.esprentissfoundation.org

$3.6 $4.2 $74.1 1 5,000University Hospitals of Cleveland, Cleveland ClinicTaussig Cancer Center, Free Clinic of Cleveland,MetroHealth, Providence House

1939NA

Richard W. Macksecretary

24Martha Holden Jennings Foundation1228 Euclid Ave., Suite 710, Cleveland 44115(216) 589-5700/www.mhjf.org

$3.3 $3.8 $60.1 160,000 330Cleveland Municipal School District, LiteracyCooperative, Cleveland Clinic Foundation, MiamiUniversity, Ohio Department of Education

19594

William T. Hillerexecutive director

25The Raymond John Wean Foundation147 W. Market St., Warren 44481(330) 394-5600/www.rjweanfdn.org

$3.2 $4.6 $75.1 500,000 500Mahoning Valley Organizing Collaborative, YoungstownNeighborhood Development Corp., TrumbullNeighborhood Partnership, Community Solutions Assoc.

19494

Jeffrey M. Glebockipresident

26William J. and Dorothy K. O'Neill Foundation30195 Chagrin Blvd., Suite 106, Cleveland 44124(216) 831-4134/www.oneillfdn.org

$3.1 $3.0 $72.8 100,000 100 Fund for our Economic Future, Notre Dame College,Dutchess Land Conservancy, Holy Cross Mission Center

19873

Leah S. Garypresident, CEO

27The Burton D. Morgan Foundation22 Aurora St., Hudson 44236(330) 655-1660/www.bdmorganfdn.org

$3.1 $5.2 $119.5 542,234 250BioEnterprise Corp., Blackstone LaunchPad Initiative,Entrepreneurship Education Consortium, Invent Now,Junior Achievement of North Central Ohio

19677

Deborah D. Hooverpresident, CEO

28Forest City Enterprises Charitable Foundation Inc.(5)50 Public Square, Suite 1100, Cleveland 44113(216) 621-6060

$3.0 $2.9 $0.2 500,000 150Jewish Community Federation, United Way Services,Cleveland Metropolitan School District-STEM Program,Case Western Reserve University

1977NA

Charles A. Ratnerpresident

29Reinberger Foundation30000 Chagrin Blvd., Suite 300, Cleveland 44124(216) 292-2790/www.reinbergerfoundation.org

$2.9 $2.5 $61.4 500,000 2,000Great Lakes Science Center, Power of Three, Fund ForOur Economic Future, Kent State University, LutheranMetropolitan Ministry, Flying Horse Farm

19681

Karen R. Hooserpresident

Source: Information is supplied by the companies unless footnoted. Crain's Cleveland Business does not independently verify the information and there is no guarantee theselistings are complete or accurate. We welcome all responses to our lists and will include omitted information or clarifications in coming issues. Individual lists and The Book ofLists are available to purchase at www.crainscleveland.com. (1) Information is from the 2011 990-PF. (2) Information is from the 2010 990-PF for tax year ending Sept. 30,2011. (3) Information is from the 2010 990-PF for tax year ending June 30, 2011. (4) Information is from the 2010 990-PF. (5) Information is from the 2010 990-PF for tax yearending Jan 31, 2011.

RESEARCHED BY Deborah W. Hillyer



RENDERING PROVIDED

The second phase of the Cleveland Institute of Art spans 91,000 square feet.

break ground this fall, is a 91,000-square-foot building that will beconnected to the former Ford plant.That structure is slated for comple-tion by early 2014.

The art of developmentThe new building will replace the

college’s aging main building, whichis located on East Boulevard lessthan a mile from the new Euclid Avenue site. The college plans to sellthe building, though Mr. Nunes declined to disclose any interestedbuyers.

Chris Ronayne, president of Uni-versity Circle Inc., which overseesdevelopment plans and manage-ment of the area, characterized themystery of who ultimately wouldbuy the soon-to-be vacated artschool building as the “$64,000question” involved with the area’sdevelopment. The move opens up aroughly four-acre site across fromthe Cleveland Museum of Art andCase Western Reserve University.

“You’ve got a signature site that isarguably on one of the greatest sitesbetween Chicago and New York because of its proximity to these artsinstitutions,” Mr. Ronayne said. “It’shigh on everybody’s radar.”

CIA: Expansion allows school to increase its enrollment

The Cleveland Institute of Art’sinitial investment in 2010 at its Euclid Avenue site was the first ofseveral development projects totake shape in the University Circleneighborhood. Work started earlylast year on the nearly $27 millionMuseum of Contemporary Art Cleve-land, for example, and Case WesternReserve University is building a $50million student center.

The art school’s investment alsospurred well-known philanthropistPeter B. Lewis, chairman and former CEO of Progressive Corp., todonate $5 million toward the unifi-

cation project — his largest gift to anarea institution in nearly a decade.

“You can argue (the Cleveland Institute of Art expansion) was acatalyst and kick-starter overall in avery difficult economic climate,”Mr. Ronayne said. “To accomplish thisreally just speaks to the confidencepeople have in this institution.”

Rightsizing the schoolWhile the immediate goal of the

expansion project was to unify theCleveland Institute of Art campus,Mr. Nunes said it also created theopportunity for the school to increase

its enrollment to a number thatwould allow the institution “toachieve financial sustainability overthe long term.”

At present, the college’s studentbase hovers at about 520, but Mr.Nunes said an enrollment of 625 to650 students would be the appropri-ate size for the college if it’s to bringin enough revenue to sustain its operations comfortably. Tuition atthe Cleveland Institute of Art isabout $33,000 a year.

To accommodate that growth, thecollege tweaked its plans for the newbuilding on Euclid by increasing thescope of the project by 36,000 squarefeet. That’s 65% larger than the originalplans, which called for a complex thatcould accommodate 583 students.

Over the last three years, theCleveland Institute of Art stomachedthree of its largest freshman classesin the school’s history. Part of thereason for that growth has been theschool’s ability to transcend its rep-utation as a “regional school with a

national reputation” by broadening itsrecruitment efforts, according toRobert Borden, executive director ofenrollment and financial aid.

“As population in Northeast Ohioand the Northeast generally hasstarted to go down, that started tohave an effect on our (enrollment)strategy,” Mr. Borden said. “It becameapparent as an institution we couldn’trely on what was coming to us fairlyeasily from Northeast Ohio.”

Mr. Borden said the college hastargeted its recruitment efforts withina 500-mile radius of its campus,though it also has found particularsuccess in recruiting from pockets of Texas, California and Florida. The$66 million investment in the college’s physical facilities enhancesits pitch.

“Once the buildings are complete,we’ll have the facilities to match the quality of our faculty,” Mr. Bor-den said. “When that starts to synctogether, that will be in everyone’sbest interest.” ■

Key: One local broker callsmove ‘part of the dance’ discuss the subject publicly.

A second development source,who asked not to be identified forthe same reason, said he knowsKeyCorp’s headquarters proposal is circulating among a small circle ofprospects that he would not identify.

KeyCorp downplayed the signifi-cance of its contacts with develop-ers.

In a written statement, DavidReavis, senior vice president and external communications directorat KeyCorp, said, “Key continuallyreviews its corporate real estate assets to ensure our investments arealigned with our needs and marketconditions.

“This includes looking for oppor-tunities to eliminate excess real estate space as our needs and marketconditions change,” Mr. Reavis stated.

Mr. Reavis declined to commenton follow-up questions, citing KeyCorp’s policy to refrain fromdiscussing talks with any vendor.

Start of the dance?While the potential of a skyline-

altering building is intriguing, bro-kerage insiders doubt KeyCorp willexit Key Tower, which one describesas “the best space in town.” Instead,they see KeyCorp using the specterof a new building as leverage inlease negotiations.

Real estate data provider CoStarsays KeyCorp’s lease at the towerexpires in 2017. Although CoStardoes not report a rent figure forKeyCorp, it says the average rent inthe building is $27.46 a square foot,at the top of the Cleveland market.

Among those brokers who seeKeyCorp’s potential move as a negotiating ploy is Robert Nosal, executive managing director in theCleveland office of Newmark GrubbKnight Frank.

“It’s the right time to do this,” Mr.Nosal said. “To beat up on the

landlord, you would go out (seeking proposals) on a building years in advance. They can threaten to leaveto get a lower rate and less space inreturn for a long-term renewal ifthey need less space.”

He issued a prediction: “At theend of the day, they will stay. It’s agreat building, a great position. It’scheaper to stay there than to move.But you’ve got to go through thedance.”

Nonetheless, a search of the marketby an anchor tenant at times canproduce unexpected and far-reachingresults.

Eaton’s specterA similar market review by Eaton

Corp. three years ago of its spaceneeds and the office market set inmotion the diversified manufacturer’spending exit from downtown Cleve-land to its new office campus that’snearing completion in suburbanBeachwood. That search was led bythe Cleveland office of Jones LangLaSalle — the same company that’shandling the headquarters inquiryprocess for KeyCorp.

A Jones Lang spokeswoman declined comment on the KeyCorpsituation.

Key Tower was built by Westlake-based Jacobs Group but was sold ina two-step process completed in2010 to an investment fund operatedby Wells Real Estate Funds Inc. ofNorcross, Ga. Jacobs Real EstateServices still manages and leasesthe building on Wells’ behalf. Noneof three Jacobs executives contactedby Crain’s returned messages byFriday afternoon.

KeyCorp has 11,000 employeesthroughout its multistate footprintand $86.5 billion in total assets as ofJune 30, according to a Securitiesand Exchange Commission filing. ■

Reporter Michelle Park contributedto this story.



“Once the buildings are complete, we’ll have the facilities to match the quality of our faculty.” – Robert Borden, executive director of enrollment and financial aid, CIA



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Volume 33, Number 34 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for com-bined issues on the third week of May and fourth week of May, the fourth week of June and first week of July,the third week of December and fourth week of December at 700 West St. Clair Ave., Suite 310, Cleveland,OH 44113-1230. Copyright © 2012 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio,and at additional mailing offices. Price per copy: $2.00. POSTMASTER: Send address changes to Crain’sCleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-824-9373.

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the drug, the health system insteadpurchases an alternative that costsupwards of $10 a dose, according toScott Knoer, the system’s chief phar-macy officer.

“Every hospital is working on this, and most of the public never evenknows how much work goes intohandling the problem,” said Mr.Knoer, who has a full-time staff mem-ber devoted to managing the issue.

The reasons for the drug shortagesare wide-ranging. Several drug man-ufacturers have closed or consolidatedoperations in the face of shrinkingprofit margins, a trend health careobservers say has suffocated thesupply chain.

In addition, the U.S. Food andDrug Administration contends morethan half of the shortages are a resultof quality issues that forced regula-tors to shutter, either permanentlyor temporarily, drug manufacturingplants. That was the case at BenVenue Laboratories Inc., which lastyear halted production operations atits headquarters in Bedford aftermultiple inspections turned updozens of quality control issues.

Ben Venue’s shutdown led to acritical shortage of injectablemethotrexate, a drug used to treatleukemia in children and rheuma-toid arthritis in adults.

“It’s going to take a long time tofigure this out,” said Dr. Michael Anderson, chief medical officer atUniversity Hospitals Case MedicalCenter, in talking about how to address the shortage. “It’ll take a longtime to find the right balance betweenthe needs of companies and theneeds of patients.”

A lobbying effortIt wasn’t until this summer —

thanks to a lobbying effort in Con-gress led by the Cleveland Clinic —that larger health systems by law couldrepackage certain drugs into smallerdoses and share them among hospi-tals within their system. Previously,the Clinic only could repackagedrugs and share them on its maincampus; it was barred, for example,from sharing them with HillcrestHospital, just 10 miles east in May-field Heights.

Still, the Clinic’s Mr. Knoer esti-mates the repackaging legislationwill help extend the life of only about10% of the drugs on short supply.The new provision doesn’t apply to controlled substances. It’s also unclear how the provision might affect hospitals loosely affiliated withone another, instead of those thatare wholly owned.

Drugs: In some places, shortages force docs to tweak treatmentcontinued from PAGE 1

On the plus side, the FDA now requires drug manufacturers to provide six months’ advance noticeof decisions to discontinue certaindrugs, so that hospitals and the marketcan react accordingly. Such disclo-sures in the past were voluntary.

“This has been a problem that’sbeen brewing for a while,” UH’s Dr.Anderson said. “It’s reassuring to meas a leader to see the FDA and Con-gress taking it seriously.”

Locally, the Center for Health Affairs,an advocacy group for NortheastOhio hospitals, has decided to stepup its lobbying efforts at the state levelafter surveying its member hospitalsto gauge the breadth of the problem.

“The hospitals basically validatedthat they felt the shortage was some-what severe,” said Lisa Anderson, aregistered nurse and the Center forHealth Affairs’ vice president ofmember services. “Years ago, it wassporadic. Now it’s more of a chronicproblem.”

The group is looking to ease restric-tions on drug compounding — themethod by which drugs are concoctedfrom raw materials at hospitals’ in-house pharmacies. At present, theOhio State Board of Pharmacy per-mits hospitals to compound drugson a patient-by-patient basis, ratherthan stockpile compounded drugs inanticipation of need. State regula-tions also limit the transfer of com-pounded drugs between a healthsystem’s member hospitals.

The Center for Health Affairs alsoplans to lobby state lawmakers insupport of legislation that would forbid pharmacies from selling drugsin short supply to wholesalers, whoin turn resell them to hospitals athigh markup.

The new normal?

Hospital officials say it’s still tooearly to tell whether measures tocurb the problem will have a lastingimpact. Wiggle room, maybe, but acure-all appears nowhere in sight.

“It’s bad,” said Stacey Zorska, director of pharmacy at SouthwestGeneral Health Center in Middle-

burg Heights. “It’s a daily struggle,and we really can’t anticipate whatthe next crisis is going to be. I thinkour team has gotten very good atwhat to do no matter what theshortage is, but it’s a struggle.”

Kevin Zupancic, director of phar-macy at Parma Community GeneralHospital, said he’s reminded of theshortage daily. He has had to buy a

second dry-erase board to keep trackin his pharmacy of the mountinglist of drugs on short supply.

Local hospital officials acknowl-edge the drug shortages often forcethem to tweak patients’ treatmentplans. They said patients haven’t beenhurt, but the prospect of opting for backup drugs so regularly is aconcern. ■

RUGGERO FATICA PHOTOS

LEFT: Sudhir Shah (left) a Cleveland Clinic pharmacist, and Jay Patel, a pharmacy technician, work in the hospital’s clean lab. RIGHT: Pharmacy technician MichaelMelville compounds sterile products.

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SUBJECT: REQUEST FOR PROPOSAL (RFP) re: Cell Tower Revenue:The City of Seven Hills, Ohio invites Proposals from Qualified personsor entities for the selection of a:

Broker for the Buyout/Enhancement of Revenue Streams of Up to ThreeCity Cell Tower leases

Parties interested in obtaining a complete copy of this RFP may do so byaccessing the City of Seven Hills Web Page at www.sevenhillsohio.org.City Information > Forms > Cell Towers beginning August 27, 2012, orby faxing their request to (216) 525-6276, attention Stewart Lovece PE,PS, CBO, Director of Public Service and Properties. Please include thefollowing information in your request: name and address of firm; name,telephone and facsimile number of contact person; specify RFP CellTower Leases.

Copies of the RFP may also be obtained by calling 216-525-6224 Trish,or in person at City Hall, 7325 Summitview Drive Seven Hills, Ohio44131 at the Building Dept.


NCAA decides to hold its festivities elsewhere■ The Greater Cleveland Sports Commis-sion has lost out on the 2013 Division II WinterNational Championships Festival, whichwas scheduled for Spire Institute in Genevanext March.

Jeff Orloff, Spire’s chief oper-ating officer, said last week thatthe NCAA opted to move theevent — which features champi-onships in men’s and women’sswimming, men’s and women’sindoor track, and wrestling — toBirmingham, Ala., because ofchallenges with the hotel block.

Division II is the only NCAAgroup that holds more than oneevent at the same site at the sametime; the goal of the festivals isto house all athletes in one area,preferably a city center, to cre-ate a unique atmosphere. Whenchallenges arose in downtown Cleveland,where the NCAA wanted all athletes to stay,the governing body opted to change thevenue, Mr. Orloff said.

The NCAA, which originally awarded the2013 winter event to Cleveland in April, hasheld its two previous festivals — last fall andthis past spring — in Louisville, Ky. Mr.Orloff said Spire and the sports commissioncontinue to discuss bringing future eventsto the sprawling athletic facility, though herefused to discuss those possible events because deals are not finalized. — JoelHammond

Free art, but with a few strings attached■ Local nonprofits looking to spruce up theiroffice space could land a piece of modernart at no charge from the collection of thelate Nancy and Frank Porter, the longtime

proprietors of Central Cadillacin downtown Cleveland.

The Cleveland Foundationobtained the Porters’ large modern art collection as part ofa bequest of their estate in 2003that totaled between $60 millionand $70 million, according toKathy Hallissey, the foundation’sdirector of community-respon-sive grantmaking.

The foundation until Sept. 28is fielding applications fromnonprofits interested in obtaininga piece of art for display in theiroffices or for educational use. Tobe eligible, the nonprofits must

support residents of Cuyahoga, Lake orGeauga counties.

Some of the art available includes piecesby Leon Polk, Evelyn Svec Ward, WilliamPettet and Enrique Gran.

Qualifying nonprofits must acknowledgethey’ll be able to pay for transportation,storage and insurance for the pieces of artthey’re awarded. In addition, applicants areasked to describe how they’d use each pieceof art and whether they had any sort of rela-tionship with the Porter family.

For a list of the available pieces and infor-mation about applying, visit http://cleveland

foundation.org/Grantmaking/PorterArtGallery.html. — Timothy Magaw

Marketing a newmarketing group■ Even though industrial marketing doesn’thave a television show such as “Mad Men”to glamorize it, Craig Coffey thinks creatinga Northeast Ohio chapter of the BusinessMarketing Association will help make busi-ness-to-business marketing more attractiveto young people either in or consideringmarketing careers.

“I want (the BMA chapter) to be like thecool guy or the cool chick that everyonewants to know,” said Mr. Coffey, marketingcommunications coordinator for ParkerHannifin Corp. and part of the local BMAsteering committee. “I want it to be cuttingedge. I want it to be reflective of the peoplewe want to attract.”

While the region has other marketing associations, Mr. Coffey said, it lacks an association for those dealing primarily withthe B-to-B market rather than the more vis-ible consumer products market,.

“Companies can use the BMA to help uptheir game in B2B marketing,” said EduardoConrado, chief marketing officer at MotorolaSolutions and national chairman of BMA,who promotes its “tribal learning” approach.

The local BMA chapter will hold quarterlymeetings, which will serve as fundraisersand new member attraction events, as well asperiodic committee meetings, Mr. Coffey said.

Its first event will feature business authorPaul Gillin on Sept. 13. — Ginger Christ

WHAT’S NEW

THE COMPANY: Buyers Products,ClevelandTHE PRODUCT: SnowDogg municipalplows with a trip edge

You might not be ready to think aboutsnow, but Buyers Products is — and so, ithopes, are the company’s customers.

Buyers Products, which makes productsfor the mobile equipment market, has intro-duced SnowDogg municipal plows with a tripedge to keep snow in front of the plow.

The trip edge plow “is a new addition tothe existing line of full-trip reversible plows,available in standard rolled carbon steel oroptional stainless moldboard for easier snowremoval as well as extended plow life,” thecompany says. Continuous welds “providefor a stronger plow while laser-cut componentsprovide a smooth finish and precise fit,” according to Buyers Products.

Trip-edge plows are available in three standard sizes: 42 inches by 10, 11 and 12feet. All SnowDogg municipal plows are avail-able with a variety of hitch configurations anda choice of 3- or 4-inch cylinder.

For information, visit www.BuyersProducts.com.

Send information about new products to managing editor Scott Suttell at [email protected].

REPORTERS’ NOTEBOOKBEHIND THE NEWS WITH CRAIN’S WRITERS

THEINSIDER

THEWEEK AUGUST 27 - SEPTEMBER 2

The big story: TMW Systems Inc., a Beach-wood-based provider of software for managingtransportation fleets, agreed to be acquired by aCalifornia company in a $335 million transac-tion. Trimble Navigation Ltd. of Sunnyvale,Calif., which itself is a producer of wireless tech-nology to manage field and mobile workersmore efficiently, entered into a definitive agree-ment to buy privately held TMW. Trimble saidthe all-cash purchase will be financed throughits existing credit facility. The transaction is expected to close in the fourth quarter. (See related story, Page One.)

Their chip has come in: Shearer’s Foods,the big snack food manufacturer based in

Brewster in Stark County,agreed to be acquired by a private equity firm inChicago. Wind PointPartners did not say what

it will pay for Shearer’s,which claims to be the largest producer of private-label salty snacks in North America andthe largest producer of kettle-cooked potatochips in the world. The transaction is expectedto close in October. Shearer’s makes both brandedand private-label snacks. It started with four employees in 1974; it has 1,850 now.

Grab some Z’s: Shiloh Industries Inc. of Valley City, a maker of steel blanks, complexstampings and modular assemblies for the auto-motive and heavy truck markets, named as itsCEO an executive from Federal-Mogul Corp. Itsboard of directors appointed Ramzi Y. Hermizas president and CEO, effective Sept. 4. Mr. Hermizwill succeed Theodore K. Zampetis, who previ-ously announced his plan to retire on Dec. 31.Mr. Hermiz has served since 2009 as senior vicepresident of vehicle safety and protection atSouthfield, Mich.-based Federal-Mogul.

PVF gets a lift: PVF Capital Corp., the parentof Park View Federal Savings Bank, said a regu-latory order issued against the bank in October2009 was lifted. PVF met the targets establishedby the order of its regulator. Those targets involvetier one capital, risk-based capital and classifiedand criticized asset ratios, as well as achievingprofitability, PVF said. The regulatory order wasissued Oct. 19, 2009, and required the bank toraise its core capital level and its total risk-basedcapital level. PVF exceeded the required capitallevels by raising $30 million in March 2010.

That’s how they Rolec: Diversified manu-facturer Eaton Corp. agreed to buy Rolec Comercial e Industrial S.A. of Santiago, Chile.Eaton did not say what it will pay for Rolec, amaker of integrated power assemblies and low-voltage and medium-voltage switchgear, and aprovider of engineering services, particularly tothe mining market in Chile and Peru.

Dam right: Advanced Hydro Solutions LLC ofBeachwood sold its six-megawatt MahoningCreek hydroelectric project in western Pennsyl-vania to Enduring Hydro LLC of Chevy Chase,Md., which plans to add a $16 million hydroelec-tric generation system to the existing dam. Ad-vanced Hydro said Mahoning Creek received itsFederal Energy Regulatory Commission licensein March 2011 and is completing final permittingbefore construction.

See you next year: The Ohio OptometricAssociation’s annual EastWest Eye Conferencewill move to the under-construction ClevelandConvention Center in 2013, 2014 and 2015. Theoptometrists’ meeting will attract 1,500 atten-dees and 100 exhibitors, who are expected tobook 1,125 room nights in downtown hotels, according to MMPI Inc., the developer and man-ager of the new trade show complex.


BEST OF THE BLOGSExcerpts from recent blog entries onCrainsCleveland.com.

Private equity firmspick up the buying pace■ Private equity buyouts are back, The WallStreet Journal reported, but they’re “smallerand less flashy” than in past booms.

“Emboldened by a flurry of activity, private-equity executives say the buyoutmarket is crawling back from the doldrumsof the financial crisis, when the debt that fueled such deals disappeared and potentialsellers were put off by low valuations,” TheJournal said.

The paper said private equity firms “havesnapped up $64.7 billion worth of U.S. com-panies since January, the highest amountyear-to-date since 2007,” according to dataprovider Dealogic.

Among the executives quoted in thepiece is Stewart Kohl, co-chief executive ofCleveland- and New York-based RiversideCo. He told The Journal that he has foundlenders eager to invest in his firm’s 18 buy-outs this year, all of which targeted companieswith annual sales between $10 million and$250 million.

“Some of the investment bankers thatRiverside works with have been so busy thissummer that one institution asked Mr. Kohlto delay the sale of one of its companies because its staff was overloaded,” thenewspaper reported.

Kids won’t leave?You’re not alone■ Parents of a certain age shouldrelate to a recent story fromHousingWire, which is based onresearch from the Federal ReserveBank of Cleveland.

“The rate at which Americans formedhouseholds fell sharply during the Great

Recession, with the greatest shortfall amongyoung adults squeezed financially by theweak economy,” HousingWire reported, citingthe work of Tim Dunne at the Cleveland Fed.

Tighter lending standards “are furthercomplicating the housing sector’s ability torecover by reducing access to mortgagecredit,” according to Mr. Dunne’s research.“This may have increased the incentive ofindividuals to delay household formation inorder to save for a down payment, buildcredit histories, or repair tarnished creditscores,” Mr. Dunne wrote.

The analysis shows the biggest dropoff in household formation occurred amongadults aged 18 to 34.

“An additional 2 million younger adultsnow live in a household headed by their parents than did before the recession,”HousingWire reported. “Although theseyounger adults make up a relatively smallportion of household heads, they accountfor almost three-quarters of the overallshortfall in household formation.”

By one measure, smallfirms are doing better■ Small business bankruptcies continuedtheir decline in the second quarter of 2012,shrinking by nearly 17% from the previousquarter, according to the new Small Busi-ness Bankruptcy Report from Equifax.

It’s the fourth straight quarterly declinein the number of total U.S. small businessbankruptcies and the lowest for the sec-

ond quarter since 2007. The number ofbusiness bankruptcies peaked in thesecond quarter of 2009, Equifax reports.

“Small business owners are stillsteadfastly deleveraging, bringingtheir debts, assets and cash flows

into better alignment; couple thatwith promising signals in small business

lending, and business owners are better positioned to stay afloat,” Equifax said.

FILE PHOTO/MARC GOLUB

The indoor track facilityat Spire Institute



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