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Report, Gov. Tout Marcellus Shale as Economic Driver

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The shale energy industry is projected to support over 220,000 direct and indirect Pennsylvania jobs by 2020, according to a new study from the US Chamber’s Energy Institute.  The industry is also on pace to generate $2.3-billion dollars a year in state & local taxes by that same time. 

“There are so many possibilities here as we develop this resource responsibly, and move forward with it, that I think it holds great promise for Pennsylvania” says PA Chamber of Business and Industry President & CEO Gene Barr.  He says continued progress will help put a stop to imported oil. 

Responding to a listener question on the “Ask the Governor” program, this month, Governor Tom Corbett reaffirmed his opposition to a severance tax.  He pointed not only to the corporate tax revenue already being generated, but to the $200-million dollars collected in the first year of impact fees. 

The governor is eager to see the natural gas industry reach its full potential in the Keystone State, saying his focus is on increasing demand through the conversion of vehicle fleets and buildings to natural gas power.  “We can’t look at this industry as what’s there today, it’s what’s going to be there 10, 20, 30 years from now, and it’s going to continue to grow,” says Corbett. 

He says there are indications the Marcellus Shale play is bigger than first thought.  While the low cost of natural gas tamped down the number of new wells being drilled in 2012, production is surging in the Marcellus Shale.

Negotiators Agree to Budget Framework, Tax Credit

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Governor Tom Corbett has repeatedly said that June 30th means something to him.  With Wednesday night’s announcement that he and top Republican lawmakers have agreed to a $27.656-billion dollar budget framework, it appears that Pennsylvania is on pace to meet a second consecutive budget deadline.

Neither Corbett nor the legislative leaders were willing to discuss the details, as rank-and-file lawmakers are still being briefed on the specifics and a few details are still being finalized.  However, $27.656-billion is the same spend number the state Senate used when it passed a budget bill in May.

One of the Senate’s top priorities at the time was the restoration of proposed 20% cuts to the State System of Higher Education and proposed 30% cuts to the three big state-related universities (Penn State, Pitt and Temple).  The planned restorations came with a promise from those universities to keep next year’s tuition increases below the Consumer Price Index.  Whether these restorations made it into the final deal has yet to be confirmed.

We do know that 40.3% of the budget is comprised of education spending and 38.9% is spent on social services.  So, any movement in the spending plan – either up or down – will likely come from those two categories.

In addition to the budget framework, negotiators have confirmed agreement on an ethane tax credit that’s designed to lure a massive new petrochemical plant to western Pennsylvania.  “We are investing I believe… in a new industrial revolution in Pennsylvania,” Governor Corbett said earlier on Wednesday.  “We are investing in the opportunity for thousands of Pennsylvanians to have a good job.”

The American Chemistry Council estimates 10,000 construction jobs, 400 direct plant jobs in 17,000 spinoff jobs in chemical and manufacturing industries if the proposed Shell Oil petrochemical plant comes to fruition in Pennsylvania.

While Corbett was joined at the capitol by a large & diverse group of tax credit supporters, critics are wary of giving taxpayer money away to big industry.  One of those critics is state Rep. Jesse White (D-Washington).  He’s already proposed an alternative that would fund the incentives through a surcharge on Pennsylvania’s natural gas wells.  “We should not be socializing costs while privatizing profits,” White said in a statement this week.

Scranton, City of Scranton

Cities, Chambers Join Forces to Address Financial Woes

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A new group is calling on state lawmakers to provide mandate relief for Pennsylvania’s cities and towns.  It’s called the Coalition for Sustainable Communities, and it’s comprised of a variety of business and municipal groups from across the state. 

Chambers of commerce and local government groups had been working independently to strengthen Pennsylvania’s communities, but Greater Reading Chamber of Commerce President Ellen Horan says they realized they had some common goals.  “The areas where we saw our agendas conform were in seeking relief from state mandates on local governments, specifically on the areas of binding arbitration and pension.” 

Pennsylvania League of Cities & Municipalities Executive Director Jack Garner believes the new partnership speaks volumes to the General Assembly and public.  “Over 2,500 municipalities are continuing to function in an outdated, inflexible and uncompetitive set of local laws, which haven’t been changed since – in some cases – 1930,” Garner explains. 

The group’s third priority is reforming Pennsylvania’s Act 47 program for distressed cities, an issue that’s already been the subject of great debate under the capitol dome.

Garner hopes to see three or four bills materialize from the coalition’s efforts.  Horan tells us vibrant communities are key to Pennsylvanians’ quality of life.  “It directly has an impact on businesses ability to attract and retain talent,” she says.

Fighter Jet Program has Economic Impact in PA

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Lockheed Martin has begun limited production of the F-35 Lighting II, a fifth generation fighter jet.  Three versions are being produced to meet the specific needs of the US Air Force, Marines and Navy.  The average age of America’s fighter jets is 22-years, according to Lockheed Martin’s Daniel Conroy, a retired Air Force Colonel.  “I flew the generation of fighters that this is replacing; it gives me a little bit of motivation to see the new aircraft get out there.”

The F-35 costs $65-million dollars to build and has more than 1,000 suppliers in 47-states.  Pennsylvania is home to 47-different suppliers, which officials say are already responsible for $65-million in economic impact and 1,000 jobs.  “Those numbers will only increase as the program ramps up,” Conroy says. 

Jim Cawley, F-35

Lt. Gov. Jim Cawley concentrates on "flying" the F-35 demonstrator.

Lockheed Martin’s F-35 simulator was stationed in the state capitol this week, where Lt. Governor Jim Cawley took it for spin.  “My hats off to those who fly the real ones, because everything they do in there has consequence,” Cawley said, as marveled at the sensitivity of the equipment. 

This reporter experienced the sensitive equipment first hand, being the first “pilot” of the day to run the simulator off the runway. 

State Rep. Frank Farry (D-Bucks) has introduced a resolution that would urge Congress to fully fund the F-35 program.  It notes that the F-35 is the most advanced fighter aircraft ever built.  HR 510 was unanimously voted out of the Veterans Affairs and Emergency Preparedness Committee.  It now awaits a full House vote.

Locally Owned Small Business May Pack a Bigger Economic Punch

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Dr. Stephan Goetz

Small, locally owned businesses and start-up companies tend to provide higher, long term economic growth according to Dr. Stephan Goetz,professor of agricultural and regional economics at Penn State University and director of the Northeast Regional Center for Rural Development.  Dr. Goetz and graduate student David Fleming were investigating whether firm ownership and size mattered in terms of economic growth.

Dr. Goetz says the research suggests that the smaller firms and locally owned firms give the biggest bang for the buck in terms of economic growth.

 Dr. Goetz says they suspect there are more opportunities for creative innovation and new process and product development in the smaller companies.  He says over time, you have more of an entrepreneurial hotbed if you have multiple smaller firms that are trying to innovate, than if you have the bigger firms.

Dr. Geotz adds that smaller, local firms would be more likely to use local logistic providers, wholesalers and advertising outlets to meet their supply chain and business needs. He says firms based out-of-state would be providing those services out of centrally located facilities, or outsourcing them overseas.

The study also finds that as a company grows, the economic benefit appears to diminish. Medium and large-sized locally owned businesses were not associated with faster economic growth in later years.

Dr. Goetz says a better strategy to promote economic growth may be encouraging local businesses and creating an environment that attracts local entrepreneurs.

Industry-Backed Study Details Benefits of Marcellus Shale Boom

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Pennsylvania is now a net exporter of natural gas, and has the potential to account for 17.5-billion cubic feet of natural gas, per day.  President of the Marcellus Shale Coalition, Kathryn Klaber, says that would be one-quarter of the nation’s natural gas production.  The new study, The Pennsylvania Marcellus Natural Gas Industry: Status, Economic Impact, and Future Potential, was conducted by Penn State researchers, and commissioned by the Marcellus Shale Coalition.    

Kathryn Klaber says PA’s shale industry has blown its projections out of the water.  “At the beginning of 2010, it was projected that Pennsylvania would be producing a billion cubic feet equivalent  per day by the end of 2010, and we saw that it was double that.”   

The study also projects that Marcellus Shale development could support 156,000 PA jobs this year, and more than 256,000 PA jobs by 2020.  “Every dollar that’s invested in building one of these wells involves more people to do that work, to run the equipment, and to do everything throughout the supply chain,” Klaber said. 

But, the Pennsylvania Budget and Policy Center contends those jobs numbers are overstated.  “Overall, we welcome the gas industry’s contribution to Pennsylvania’s economy, but with this study, the industry continues to overstate the economic benefits and underestimate the costs of increased drilling in the Marcellus Shale,” PBPC director Sharon Ward said in a statement. 

The study is being released less than a week after the governor’s Marcellus Shale Advisory Commission voted for a series of 96-recommendations, including a local impact fee.  “The industry and the Marcellus Shale Coalition has been very clear of its support of an impact fee that’s competitive, that’s styled to address the unmet needs of local governments,” Klaber said in an interview with Radio PA.

Which One of These Cities is Not Like the Others?

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HUD Secretary Shaun Donovan

HUD Secretary Shaun Donovan

Cleveland, Detroit, New Orleans… and Chester, PA are among the six cities taking part in a new pilot initiative from the Obama Administration called Strong Cities, Strong Communities.  The population in Cleveland, OH is about 430,000.  Detroit’s population is around 900,000.  Chester, on the other hand, has about 37,000 residents.  “Chester, specifically, we wanted to make sure that there was a smaller place engaged… and we thought Chester was a very good example of that,” says Housing and Urban Development (HUD) Secretary Shaun Donovan. 

In a conference call with reporters, Donovan said all of the cities involved in the pilot share similar long-term economic challenges, including population loss and deteriorating infrastructure.  Each city also has its own economic development plan in place. 

Strong Cities, Strong Communities is designed to cut through the federal red tape and get cities working cooperatively with the federal government.  Federal agencies will be providing technical assistance on the ground, and developing relationships with the regions’ leaders.  Officials say they will leverage existing federal dollars. 

The other two cities in the pilot include Fresno, CA and Memphis, TN, which have populations in the 480,000 and 675,000 ranges respectively.  In addition, communities across the country will be eligible to compete for federal grants that would provide economic planning assistance.

(That’s Detroit’s skyline pictured above)