How's the economy? Looking up
By Chris Buckley
Published: Tuesday, May 7, 2013, 3:18 p.m.
Earlier this year, the Washington County Commissioners were joined by more than 200 Washington County business leaders at Southpointe Golf Club for an economic development press conference held to demonstrate the state of the county's economy.
The event highlighted 73 economic development projects, accounting for more than $346 million in capital investment in Washington County during the past year. These projects spurred more than $7.7 million in additional investments the county is making this year through the Washington County Local Share Account, which is funded by gaming revenues, the commissioners noted. These investments are being boosted by an additional $25.8 million in public and private resources.
“Once again, Washington County continues to lead the greater Pittsburgh region in terms of economic development projects, energy production and job creation,” said commission board Chairman Larry Maggi.
“In 2012, our business community announced $346,365,000 in new business investment, which will account for an additional 2,530 jobs in Washington County,” he said.
Maggi said at the event that this growth in business investment and job creation was driven by numerous sectors of the local economy – energy, technology, commercial/industrial development, hospitality and manufacturing.
Dun & Bradstreet reported there are 280 companies in Washington County involved in manufacturing alone.
The economic development event served as a state of the economy update for Washington County, but it pointed to the trends that are guiding the Valley's economy midway into the second decade of the 21st century.
Washington County is ranked first in the Greater Pittsburgh Region in both natural gas wells drilled and drilling permits issued 2012.
“With 753 unconventional wells drilled from 2005 to 2012, Washington County's leadership position in our region and state truly earns us the designation as Energy Capital of the East,” Maggi relayed.
The county is ranked fourth in Pennsylvania for natural gas wells drilled and second in the state for number of drilling permits issued in 2012.
The growth of the energy sector throughout the region is tied directly to Marcellus Shale drilling.
While drilling is not new to the region, the discovery of horizontal and slick water fracking helped it take off, noted David Schlosser, senior vice president, engineering and strategic planning for EQT production. This type of fracturing is new to the Appalachian region, which includes the Valley.
Specifically it took off in the past five to six years. It includes a stretch that spans from central West Virginia to upstate New York, a region of more than 40 million acres. Geographically, the Valley is just a little south of center of that region. It is the second largest gas field in the world.
“We'll be drilling here for decades,” Schlosser said. “It's not a flash in the pan. It will produce enough energy to meet the nation's energy needs for the next 100 to 200 years.”
Schlosser said southwestern Pennsylvania has some of the best Marcellus shale areas in the country.
EQT was formed 1888 as the Philadelphia Gas Company, then changed to Equitable Gas company. It was formed by George Westinghouse.
Equitable is the distribution arm of EQT.
Marcellus shale can be drilled back as much as 2 miles from an entry pad.
The American Chemistry Council report on what natural gas means to their industry found that the relatively low price of natural gas gives U.S. manufacturers an advantage over competitors in other parts of the world that rely on a more expensive oil-based feed-stock.
Growth in domestic natural gas production reduces prices and creates a more stable supply. It is estimated that U.S. shale deposits contain 100 years of natural gas supply. This shale gas is a “game changer” that could rejuvenate America's chemistry industry, strengthen U.S. manufacturing, boost exports, create jobs — and significantly improve America's energy security, the American Chemistry Council report stated.
It is estimated that a modest increase in natural gas supply from shale deposits would generate more than 400,000 new jobs in the United States, more than $132 billion in U.S. economic output and $4.4 billion in new annual tax revenues. The findings come in a new ACC report, “Shale Gas and New Petrochemicals Investment: Benefits for the Economy, Jobs and U.S. Manufacturing.”
Schlosser said having a source of cheap gas will draw industry here.
“That will be the second wave you'll see,” Schlosser said. “The first wave is drilling. There is an abundant, reliable source of natural gas. Marcellus shale is now the largest source of shale gas.”
EQT is now liquidifying natural gas and shipping it to Europe. Fueling cars with natural gas will be a possibility. Many electric producers are changing from coal to natural gas.
“We know we have to be a partner with coal in this reason, but natural gas much cleaner,” Schlosser said.
Schlosser is modest in discussing Marcellus shale as the panacea for the region's economy.
“It feels like it's setting up that way,” Schlosser said. “We at EQT wouldn't say that, but others in the industry are saying this. A lot of people are saying this is the answer to the end of the recession.
“It's definitely revitalizing a lot of places that were really down. The typical Marcellus shale well will continue producing gas for 50 years. They have long lives.
And they will continue to create jobs.”
Schlosser said natural gas provides a greener alternative because it creates less emissions.
Drilling wells usually work on diesel. But many are converting their rigs and hydraulic fracking trucks to natural gas.
“The natural gas we're drilling is powering the vehicles and machinery were using on these sites,” Schlosser said.
Jeff M. Kotula, president of the Washington County Chamber of Commerce, recognized the role Marcellus shale is playing in the local economy's growth.
“There is no question that the Marcellus shale plan has been a tremendous opportunity for Washington County,” Kotula said.
“Not only have we seen the attraction of companies involved in the energy industry, but we have also seem an increase in local business development. That is what I personally value. To see longtime Valley companies such as Lee Supply and Conspec benefit from natural gas is a true positive for our county and something we need to continue by supporting the energy industry.”
Dr. Paul Hettler, professor of economics at California University of Pennsylvania, said Marcellus shale is important to the region's changing economy and is making a difference.
“But overall, it's not a dramatic shift,” Hettler said. “Still, the focus is on health care and services-oriented industries. Expect that to continue in the next decade.”
Hettler said the state Bureau of Statistics indicates while there is a dramatic increase in extraction industries, they make up roughly five percent of the workforce. In contrast, the construction industry and health care account for as much as 20 percent of the workforce each.
Hettler predicted that figure won't change considerably in the next decade.
The advantage of the extraction industry is that it's a “basic industry,” Hettler said.
Basic industries don't depend on other industries to exist. Basic industries are vital to a region's economic growth because they export nearly all that they produce. The money to sustain such industries come from outside firms and is spent locally, everything from sub-contractors to the consumer items purchased by the workers employed in that industry.
“If we doubled the size of the restaurant industry, it would have much less impact than extraction,” Hettler said. “Steel was a basic industry. Who bought steel? My next-door neighbor didn't buy steel. The auto industry bought steel.
“We've always had things we export outside the region. Even a lot of our service industries are not all for local consumption. In health care, a lot of focus is on research.”
Hettler said Marcellus shale has grown faster in a short period time than many basic industries.
For example, in Fayette County in less than a decade, employment in the extraction has more than doubled. Allgeheny County grew from $40 million to $230 million total wages in the extraction of oil and gas industry.
Hettler said Marcelus shale “is not and will never be as big as coal was 150 years ago or that steel was 50 years ago.”
“There's a strong lesson to be learned,” Hettler said. “Coal is not big now not because we did not mine and use a lot of coal but the coal that was cheap to mine is gone.”
The future of Marcellus shale will depend not only on availability but price on the market.
“If prices are really low, it might not be worth developing some of it,” Hettler said. “It will never be all gone, but it will get to point where it will cost too much to get and won't be worth getting.”
Hettler said the excitement over Marcellus shale is tied to its potential.
Overall, Hettler said southwestern Pennsylvania is doing better than the rest of the country because it has a more diverse economy than ever had in its history.
“The diversified economy here is the reason we were not hit as hard by the recession,” Hettler said.
But the region's population is the biggest negative for local economy – using a lot of resources and producing less.
“The biggest negative is we don't have people moving here,” Hettler said. “Marcellus shale should have some impact on people moving here. The problem I've seen so far it is a lot of transient movement.”
Commenting on the current status of Valley's economy, Hettler said it has evolved since the death of the steel industry.
“It hasn't necessarily evolved into a booming economy, but has evolved into an economy that can support the local population through diversification, including the service industry and health care. We have a lot of services and industry that support the local population.”
Hettler predicted the economy will grow faster that it has in the past 20 years.
It is a view shared by Kotula.
“It is important to remember that the successes we are experiencing in Washington County are not accidental,” Kotula said. “They are the result of years of strategic planning undertaken by the Washington County Commissioners, business community and our economic development organizations to anticipate future growth and be proactive in developing site-ready business parks.
“While we of course did not foresee the tremendous positive economic impacts of the energy industry 15 years ago, the decisions made then to develop ready-to-go sites made our county uniquely positioned to take advantage of these economic opportunities.”
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