Employers utilize employee handbooks to establish policies and convey expectations to employees. But do they actually matter from a legal perspective? As a matter of fact, yes. Here are just three examples of such situations. Unemployment Compensation Pennsylvania’s unemployment compensation system generally provides benefits to
For more than 20 years, Pennsylvania Business Central has been recognizing 100 people from the previous year who have impacted the 22-county readership area. The people who make up our list are the ones who make up the best sampling of experience, expertise and entrepreneurial
Baby boomer retirements and a desire to broaden territory and expertise are driving accounting firm mergers In the past two years, mergers and acquisitions have been the chief trends in the nation’s accounting industry. According to the 2012 PCPS Succession Survey, nearly half of all
When Chase Commercial Banking Economist Jim Glassman compiled research for his 2015 Pennsylvania Economic Outlook report, he found that some cities in the commonwealth had recovered more quickly and robustly while others had not. Cities lagging behind the state and national economies include Philadelphia, Johnstown,
Six years ago, “Black Monday” entered history books when stock markets around the world crashed. Since that time and at the end of the Great Recession, the U.S. economy has added 8.3 million jobs, and the unemployment rate has fallen from 10 to 5.7 percent.
Employers utilize employee handbooks to establish policies and convey expectations to employees. But do they actually matter from a legal perspective? As a matter of fact, yes. Here are just three examples of such situations.
Pennsylvania’s unemployment compensation system generally provides benefits to employees who involuntarily lose their jobs. However, there is an important exception to the general rule: employees who lose their jobs due to “willful misconduct” are ineligible for benefits.
Some misconduct is so blatantly against the employer’s interests that no formal policy or handbook is necessary. For example, an employee who punches his manager in the face can hardly say, “But there’s nothing about that in the handbook!” and collect unemployment compensation. Sometimes, an employer’s handbook will make or break the case though.
In one real-life case, an employee took a part from a computer that his employer had thrown in a trash truck. Does taking trash constitute willful misconduct? In this case, yes. The employer had a policy prohibiting unauthorized removal of scrap or refuse, so the employee was denied benefits. Compare that to the case of a hospital worker who was fired for taking cafeteria coupons for free drinks that were intended for patients. The Pennsylvania appellate court specifically noted that, unlike the case with the trash truck, the hospital had “no specific policy prohibiting the use by employees of the coupons provided to patients.”[ii] The Court awarded her unemployment compensation benefits. If the employer had included a policy in its employee handbook, it probably would have won.
Sexual Harassment – Hostile Work Environment
Sexual harassment claims provide another example of handbooks making a difference. Hostile work environment claims based on a supervisor’s sexual harassment can lead to big judgments against employers. However, employers are not always liable for such harassment in the workplace. The Supreme Court has recognized an affirmative defense to such claims. If we want to get technical, it’s called the Faragher-Ellerth defense.
The Faragher-Ellerth defense applies in cases where a supervisor sexually harasses a subordinate, but without any tangible adverse employment action such as firing or demotion. To avoid liability, the employer must first establish that it “exercised reasonable care to prevent and correct promptly any sexually harassing behavior.”[iii] Do you want to guess how employers can establish such reasonable care? That’s right, an employee handbook with a clear anti-harassment policy and multiple reporting avenues should do the trick. Then, the employer can avoid liability by establishing that the “employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise.”
A few paragraphs in an employee handbook can open up this affirmative defense to employers and are certainly worth the effort. From a practical perspective – aside from the legal implications – a policy can also help employers deter and address harassment in the workplace before it even turns into a lawsuit.
Family and Medical Leave Act (FMLA)
The FMLA provides our third example. The FMLA contains a number of written notice requirements, including a requirement that employers provide general notice to employees of their FMLA rights in a handbook or other written policy. In addition to basic compliance, the content of the written policy can actually limit the amount of leave an employee may take.
For example, an employee with a serious health condition may take up to 12 total weeks of FMLA leave in a “year.” Imagine an employee who used FMLA leave for the final 12 weeks of 2014. Can he take another 12 weeks at the start of 2015? After all, it is a new “year” right?
It actually depends on the employer’s policy. An employer may opt for defining a “year” as a calendar year. But, alternatively, the employer may utilize a “rolling” year. Under this calculation method the employer looks backward for 12 months to see how much FMLA leave the employee has taken. In our example, the employee who requested an additional 12 weeks on January 1, 2015 would not be eligible to take any additional leave (because he already used his full 12 weeks within the previous 12 months).
The employer must provide notice of its calculation method up front though – in an employee handbook would be a good place. Without notice of the employer’s policy, the employee can choose the option that is best for him. In our example, the employee would select the calendar year method, resulting in an extra 12 weeks of leave.
A good employee handbook can save employers from a lot of headaches. Sometimes, the handbook can actually make or break cases in court. Unemployment compensation, sexual harassment and FMLA leave are just three such examples. Employers should make sure their handbooks are drafted to reach their full liability-saving potential.
Philip K. Miles III is an attorney in McQuaide Blasko’s Labor and Employment, and Civil Litigation practice groups. He also publishes the employment law blog, Lawffice Space (www.lawfficespace.com), and teaches undergraduate employment law at The Pennsylvania State University.
For more than 20 years, Pennsylvania Business Central has been recognizing 100 people from the previous year who have impacted the 22-county readership area. The people who make up our list are the ones who make up the best sampling of experience, expertise and entrepreneurial spirit in the diverse region.
In comprising this year’s list, the editorial team collected more than 140 nominations throughout a month’s worth of submissions.
These worthy nominees set themselves apart throughout the year with their corporate leadership, community involvement and contributions to the business sector.
“Once again, we are proud to present our annual Top 100 People list,” said Publisher David Wells. “The number of nominations that were received from all over the state of Pennsylvania and beyond were outstanding.
“Certainly, the numbers represent the best of the best and have proven themselves to be an asset not only for their company or organization, but also to the communities they serve,” Wells added.
Narrowing the total number of nominees down to 100 proved to be a difficult task and fiercely competitive. Many have had a significant impact in the business community whether it is from job creation, building expansion, improvements, fiscal growth, community involvement and more.
Some names are familiar who have been on prior lists. Others are sole proprietors, small business owners or key players in smaller operations.
The final list chosen by an editorial committee that appears in today’s edition represents large corporations, small businesses and non-profit organizations.
Last year, we asked all finalists to submit a “fun little-known fact” about themselves along with their biography, and as a result of the positive feedback from our readers, we asked this year’s group for the same information and have published it in the upper right-hand corner of each biography.
We hope you enjoy reading about some of the best of the best our region has to offer the business community. The profiles featured in this year’s Top 100 are an impressive lot of intelligent and community-minded people.
Now that this latest edition of Top 100 People is finalized, Pennsylvania Business Central is moving on to finalizing the list of Top 100 Organizations, which will be published on Feb. 27.
2014 Top 100 People:
Scott A. Becker
Joseph Bower Jr.
G. Henry Cook
Vincent J. Delie, Jr.
Michael Fiorentino Jr.
Edward J. Flynn
Thomas P. Foley
Davie Jane Gilmour
Kay Ann Hamilton
Steven P. Johnson
J. Martin Kooman
Calvin S. McCutcheon
Timothy C. Nagle
Michael N. O’Keefe
William C. Polacek
Fred Raco Jr.
John “Jack” Schultz
Glenn D. Steele, Jr.
Fr. Malachi Van Tassell
John L. Vidmar
Richard E. Wible
Richard Witt Jr.
Stephen A. Wolfe
Baby boomer retirements and a desire to broaden territory and expertise are driving accounting firm mergers
In the past two years, mergers and acquisitions have been the chief trends in the nation’s accounting industry. According to the 2012 PCPS Succession Survey, nearly half of all accounting firms were already in merger talks or expected to be within two years.
The survey also showed that nearly 80 percent of the CPA firm owners participating in the poll expected succession to become a major issue in the next 10 years. Fewer than half of multiple partner firms had a written and signed succession plan. That number dropped lower for smaller firms: 33 percent for firms with eight to 15 professionals; 25 percent for firms with three to seven professionals; and 14 percent for firms with one or two professionals.
Last year, the largest accounting firm merger in Pennsylvania was Philadelphia’s Parente Beard LLC and Chicago’s Baker Tilly Virchow Krause, LLP in September 2014. Headquartered in Chicago, Baker Tilly is an independent member of Baker Tilly International, a worldwide network of independent accounting and business advisory firms in 137 countries, with 27,000 professionals. The combined worldwide revenue of independent member firms is $3.4 billion.
Pittsburgh’s Corbis Walker and West Virginia-based Arnett Foster Toothman signed a merger agreement in October.
While those two mergers were driven by a desire to grow in expertise and geographic territory, most other accounting firm mergers in the state and across the country were due to baby boomer retirements. The large number of accounting firms dealing with partner retirements and a lack of succession plans has created a need to find ways to continue the practice and fund partner retirements. Many accounting firms are looking to mergers as an exit strategy.
B2B CFO, an accounting consulting firm in Huntingdon and operating in 46 states, serves as an outsourced chief financial officer for small to mid-sized businesses. The company also provides exit strategy planning for its clients. B2B CFO’s founder, Jerry Mills, wrote “The Exit Strategy Handbook,” which addresses what he calls the “Baby Boomer Tsunami.”
“There are a large number of baby boomers that own or control privately owned companies, be they accounting firms or other businesses, and in the next five to 10 years, there’s going to be a glut of those businesses coming on to the market as the owners retire,” said Steven Koval, CPA, partner at B2B CFO.
“These privately-held businesses want to maximize the wealth that they built up, and the way for them to do that is by coming up with some type of exit strategy, whether they sell the company to their employees or a third party.
B2B CFO cleans up the company’s back office and gets the books ready for the due diligence process that a typical buyer will come in and look at.
“Providing CFOs is our bread and butter, but succession planning and developing exit strategies for small business owners has become a big part of our practice, and thanks to all the baby boomers retiring, we’re seeing a lot of growth in that area,” said Koval.
Carbis Walker in Pennsylvania and Arnett Foster Toothman in West Virginia and Ohio came together to form Arnett Carbis Toothman on Jan. 1.
“I met with the managing partner at Arnett Foster and Toothman a while back, and we talked about how we knew each other’s companies so well since we’ve worked together for over 20 years through an alliance we belong to, and our two firms were structured similarly, so we began to think about how we might benefit from pooling our talent,” said James Hunt, formerly managing partner at Carbis Walker, who now chairs the merged firm’s executive committee.
“Merging gave us an opportunity to pick up additional expertise on each side, for example, Arnett Foster Toothman had worked for banks whereas Carbis Walker hadn’t.
“The merger also gave both companies an opportunity to expand geographically, so we are now stronger together than we were alone.”
Arnett Carbis Toothman has three Pennsylvania offices — Pittsburgh, New Castle and Meadville — five offices in West Virginia — Charleston, Bridgeport, Buckhannon, Morgantown and Lewisburg—and an office in Columbus, Ohio.
When Chase Commercial Banking Economist Jim Glassman compiled research for his 2015 Pennsylvania Economic Outlook report, he found that some cities in the commonwealth had recovered more quickly and robustly while others had not.
Cities lagging behind the state and national economies include Philadelphia, Johnstown, Erie and Scranton. Cities that are thriving include Allentown, Lebanon, Pittsburgh, State College, Williamsport and York.
“State College is a nicknamed ‘Happy Valley’ and it lives up to its name as a bright spot in Pennsylvania’s economy,” said Glassman.
“Employment in State College is 16 percent above where it was in 2001 and also above where it was during the recession of 1990-91 — and there aren’t many communities in Pennsylvania or even in the nation that can make those claims.”
Pennsylvania Business Central spoke with Vern Squier, president and CEO of the Chamber of Business and Industry of Centre County about State College’s robust economy.
PBC: Why has State College fared so well throughout the Great Recession?
Squier: There are multitude of factors, but the chief one is the presence of Penn State University, which is not only a stabilizing force for the local economy, but it also helps it grow.
Applied research and the development of new technology on campus stimulates the creation of wealth in State College and surrounding townships through the intellectual property output by the university. This drives economic development through the spin-off companies coming of the incubator and through contractors that help augment the research.
Let’s say a big pharmaceutical company or biotech company wants research done at the university. That helps fuel jobs both at the university and outside the university to support that research.
The same applies to government-sponsored research, those outside dollars help fuel both job retention and job creation. For example, the Applied Research Lab at Penn State is a U.S. Navy University Affiliated Research Center as designated by DoD and maintains a long term relationship with the university.
Further, the intellectual property that’s garnered from research and related educational curriculum stimulates the creativity of students, staff and faculty, and certain individuals chose to stay here and start businesses in the State College area. So it’s a regeneration cycle that has helped the local economy to keep growing.
PBC: In 2003, State College had the lowest unemployment in the state at 3.4%. It hit a high of 6.4% in 2010, and is currently holding at 5.3%. Will State College get back to 3.4%, or stay about 5.3%, which is a bit lower than where the federal government expects the nation to remain, because some jobs that went offshore aren’t coming back and the economy is expected to expand at a slower rate due to many baby boomers retiring?
Squier: We’re not caught up in the offshoring and reshoring cycle like some communities, and our labor force is relatively young, so we expect employment to remain stable. The largest segment of Centre County’s population is in the 20-29 age group, which comprises nearly 28 percent of the county’s population.
Our unemployment numbers can’t be as statically measured as some communities, because we have more transiency, with people moving in for education, and job cycles moving out, others moving in to replace them, so we’re not like most communities with more fixed populations.
PBC: Outside of the university and its spin-offs, which private business sectors are the fastest growing in State College?
Squier: Professional services is one. Attorneys, accountants, and engineers are professionals that companies hire to do everything from design to build and to structure the deal.
Transportation has also been a big part of our economy. Glenn O. Hawbaker, a road contractor, employs close to 1,400 people now. With Act 89 road work and the private-public partnership bridge projects starting in earnest this year, I expect Hawbaker to be stronger than ever.
I think 2015 bodes well for State College and the Centre Region, and with the shale gas development in the northern part of the county, I think we have a lot to look forward to this year.
Six years ago, “Black Monday” entered history books when stock markets around the world crashed.
Since that time and at the end of the Great Recession, the U.S. economy has added 8.3 million jobs, and the unemployment rate has fallen from 10 to 5.7 percent.
That number isn’t as low as the pre-recession rate of 4.6 percent in 2007, but it is lower than the double digit unemployment figures in Western Europe. Since the federal government includes part-time workers in its employment figures, and excludes workers who have given up looking for full-time work, economists warn that full-time unemployment in the U.S. is probably higher than stated.
Over the past 58 straight months, the U.S. has added 11.2 million private sector jobs. The U.S. economy has been growing at a pace of 3 to 5 percent, the fastest pace in 11 years, making it one of the fastest growing economies in the world — a boost for corporate earnings and stock prices.
Business activity has experienced widespread improvement. Industrial production has increased in 51 of the past 65 months to hit a record high, and durable goods orders have increased every year in 51 of the last 59 months. The Small Business Optimism Index soared to an eight-year high after rallying for the 11th time in the past 14 months.
Inflation in the U.S. remains low. The relative strength of the U.S. recovery has created a strong dollar in international trade.
In Pennsylvania, the Shale gas boom helped ease the blow of the recession by creating jobs and preventing housing prices from falling in most areas. In 2010, the average Pennsylvania home was worth 10 percent more than the national average, although home prices have since come in line with national averages.
However, the Shale industry alone could not keep the entire state economy afloat. By December 2013, Pennsylvania had fallen to 48t out of 50 states in job creation.
Jim Glassman, head economist at Chase Commercial Banking, forecasts that Pennsylvania’s economy will follow national trends and experience strong growth in 2015. Glassman is a long-standing participant in the widely-followed Federal Reserve Bank of Philadelphia Survey of Professional Forecasters and the National Association of Business Economists’ panel of macro-economic forecasters.
“The fundamentals show a strong foundation for growth that will begin accelerating this year,” said Glassman. “In my 2015 Pennsylvania Economic Outlook report, I have a graph that compares employment trends for the U.S., Pennsylvania, Pittsburgh and Philadelphia, and while Pittsburgh, the state and nation are trending at similar levels, Philly is lagging way behind.
“Take Philly out of the picture, and the job growth ranking for the state significantly improves.”
Pittsburgh has been doing particularly well in part due to Shale gas development.
“Every time I’m in Pittsburgh, I’m impressed with how a creaky old steel town could re-energize itself by replacing a dominant industry with a broad-based economy that runs the gamut from shale gas to biotech, from healthcare to a world-class university system,” said Glassman. “It’s certainly not the place that I knew when I was a kid.”
According to Glassman, Pennsylvania’s businesses have recovered or replaced 75 percent of the jobs lost in the recent recession. The state’s recovery has slightly lagged behind the national recovery pace so far, but Glassman thinks that could change this year.
In 2015, the state’s real estate and construction sectors are expected to finally join the nationwide housing revival. Health and human services industries have a larger footprint in the state, compared with the national economy. Bankruptcy filings are back down to normal levels. Gas drilling activity slowed down but now appears to be stabilizing.
While Pittsburgh and Canonsburg have become the regional headquarters of many shale gas companies and support businesses, drilling was banned from the southeastern part of the state near Philadelphia.
The state legislature placed a moratorium on gas drilling until 2018 in the South Newark Basin, which lies underneath the southeastern part of the state. The United States Geological Survey estimates that shale in the South Newark Basin contains 876 billion cubic feet of gas.
Would gas drilling in this basin have helped Philadelphia recover faster?
“It probably would have been a big help,” said Glassman. “I sometimes refer to Pennsylvania as two states – the dynamic and revitalized western Pennsylvania and the older and sluggish eastern part of the state.”
Sharon Ward, the director of the Pennsylvania Budget and Policy Center in Harrisburg, agrees with much of Glassman’s forecast, but attributes the overall sluggish job growth in the state — Philadelphia in particular — with public policies.
“Most of the big drags on Pennsylvania’s economy had to do with the policy decisions that were made in Harrisburg, such as the significant retrenchment of educators,” said Ward. “We lost 27,000 educators, 5,000 of which were from the Philadelphia area, and due to federal sequestration cuts, there were also reductions in Title 1 funding. And since Philadelphia has a very large school district, that also contributed to the loss of additional education staff.
“I think these education cuts by the state and federal government at least partly explains why Philadelphia has continued to do worse than the rest of the state in terms of job growth.”
Manufacturing in the state has also lagged behind the nation. Employment by manufacturers declined over the past year, according to the 2015 Pennsylvania Manufacturers Register. Pennsylvania lost 6,330 manufacturing jobs, or about 1 percent from July 2013 to July 2014, compared to the 1.4 percent national average gain reported by the Labor Department during the same period.
“The manufacturing sector is finally showing some signs of recovery, but this comes after a decline,” said Ward.
When manufacturers in the state start hiring, and if energy-intensive manufacturers that left the U.S. decide to reshore to Pa. be close to cheaper natural gas, they might have a hard finding a skilled labor force to operate and maintain the machines in their semi-automated factories.
“A lot of our manufacturing clients complain they have good-paying positions open, but they aren’t able to fill them because today’s manufacturing requires more sophisticated technical skills, and there are not enough workers in Pennsylvania who have those skills, and those few who do have been drawn to other states such as North Dakota and Texas where there’s a lot of growth in building infrastructure and shale development,” said Glassman.
“The lack of a skilled workforce for the manufacturing sector is a major stumbling block that both the federal and state government need to address if we’re ever going to see the much talked about manufacturing renaissance in this country,” said Ward.
“Without that workforce, it won’t be only Philadelphia lagging behind, but the entire state lagging behind China and emerging industrial nations.”
The features and benefits of the world’s top natural gas-producing region are not going to end anytime soon.
In 2010, natural gas production in the Marcellus shale region was at a low 2 Bcf/d. Predictions for the end of 2014 expected production to surpass 16 Bcf/d.
This is just some of the data pointing toward one fact: there is no shortage of natural resources or drilling activity.
But a lack of infrastructure is preventing the glut of gas from reaching key areas. And this continues to suppress natural gas prices.
The 2015 Marcellus-Utica Midstream Conference (MUM) scheduled later this month in Pittsburgh is designed to answer many top midstream questions:
Which projects will move forward? How can companies capitalize on the need for midstream investment in the Northeast?
With more than 1,800 attendees and over 200 exhibitors and sponsors, including media sponsor Marcellus Business Central, the Marcellus-Utica Midstream conference and exhibition is the region’s premier midstream event.
Each year key decision makers and stakeholders from the financial community, producers, pipeline operators, contractors and service providers gather to review metrics and options at the Marcellus-Utica Midstream event.
Dubbed “the best in the East,” the Marcellus and Utica shale formations are the undisputed drivers of the U.S. shale gas revolution. Now the largest natural gas-producing region in the world, both formations account for almost 40 percent of total U.S. natural gas production.
More than 20 executive-level speakers are scheduled, and almost 10 hours of exclusive networking opportunities are available.
“Top operators joining our speaker roster have been a huge attraction,” said Stephanie Palmer, spokeswoman for Houston-based Hart Energy. “This year’s conference is themed, “Extending the Reach: Meeting Global Demand.
“Annually, this news and networking event attracts 1,800 attendees and 200 exhibitors,” Palmer added.
Barry Davis, CEO of EnLink Midstream Partners LP, is the opening keynote speaker focusing on Appalachia’s Continuing Grown. EdLink Midsteam has an expanding presence in the Utica and Marcellus plays through its Ohio River Valley operations. Davis will provide insights on what he sees ahead for the region.
John Kneiss, Director of Governmental Affairs at Stratas Advisors will provide a Regulatory & Policy Update. With the congressional elections just completed and a presidential election next year, the industry’s regulatory environment is in flux. Learn how the midstream sector will likely be affected.
Karen Kabin, Vice President of Business Development at Kinder Morgan Energy Partners, L.P., will review the market for the region’s growing gas and gas liquids production—and Kinder Morgan’s own organic growth plans to connect producer and consumer.
Also speaking is Richard Hoffman, Executive Director of INGAA Foundation. He will deliver the Keynote Address: Meeting The Pipeline Challenge, discussing how the industry faces major challenges as it repurposes existing systems and adds new capacity, thanks to the growing unconventional plays.
The MUM Conference and Exhibition will be held Jan. 27-29 at the David L. Lawrence Convention Center. Attendees can register for the conference online: www.marcellusmidstream.com
Last January, when temperatures in New York City plummeted into the single digits, natural gas delivered to the city from the Gulf Coast spiked to a record $123 per thousand cubic feet (Mcf) on the spot market. Not far away, in Pennsylvania’s Marcellus shale play, the price was 30 times cheaper at $4 per Mcf.
The price difference wasn’t due to a lack of supply, but a lack of adequate interstate pipelines, a problem that will be remedied by 10 new “greenfield” interstate pipelines, which are expected to begin transporting Marcellus and Utica gas to major markets in the Northeast between 2016 and 2018.
Williams, an Oklahoma-based midstream company, is sole sponsor of three of the new pipelines – Atlantic Sunrise (PA), Diamond East (PA, NJ), the Western Marcellus Pipeline Project (OH, WV) – and a co-sponsor of the Constitution Pipeline (PA, NY). Williams is best known for owning and operating the largest volume pipeline system in the nation — the 10,200-mile Transco Pipeline, which moves natural gas from the Gulf of Mexico to the East Coast.
The new midstream projects are designed to bring reliability and price stability to growing markets in the Northeast, Mid-Atlantic, and Eastern seaboard, especially during peak-demand periods in the winter.
“The shale-gas revolution has generated huge infrastructure demands,” said Tom Droege, a spokesman at Williams.
“We’re responding with a multi-billion pipeline expansion program that will add three billion cubic feet of natural gas gathering to the Northeast by 2017.”
One of Williams’ major projects, the 124-mile Constitution Pipeline, received FERC (Federal Energy Regulatory Commission) approval about a month ago on Dec. 2. Assuming timely receipt of all remaining regulatory approvals, the Constitution Pipeline would begin construction as soon as the first quarter of 2015 in order to help meet the growing demand for natural gas in New York and New England by the winter of 2015 or 2016.
“When the Transco pipeline was built, it was designed to move gas from south to north, from the Gulf of Mexico to the East Coast, but since the 1980s, natural gas production in the Gulf of Mexico has been declining,” said Droege.
“Today, we’ve reached a tipping point where more natural gas enters our pipeline system in Pennsylvania than the Gulf.”
Marcellus gas wells produce between 13 and 14 Bcf/d (billion cubic feet per day), accounting for about 20 percent of U.S. supply – up from just 2 percent only a few years ago. By 2020, that number is expected to climb to 64 percent.
“Because natural gas is clean and affordable, we’re seeing increased demand from both local gas distribution companies and power-generators,” said Droege.
“Our plan is to connect the best supplies with the highest-value markets by providing large-scale natural gas and natural gas liquids infrastructure.”
To carry out that plan, Williams has developed partnerships with other midstream companies, like Chevron and Shell.
The Laurel Mountain Midstream joint venture in southwestern Pennsylvania includes nearly 1,400 miles of pipeline, with average throughput of 200 MMcf/d (million cubic feet). Williams Partners operates the joint venture and owns 51 percent of it. Chevron, the other partner, owns 49 percent.
In April 2013, Williams and Shell formed Three Rivers Midstream Joint Venture to develop infrastructure for 248,000 acres of rich-gas land in northwest Pennsylvania and northeast Ohio.
Three Rivers plans to construct a large-scale 200 MMcf/d (million cubic feet per day) cryogenic gas processing complex, which would be expandable as business grows. The initial plant is expected to be in service by second quarter 2015.
In October 2014, Williams Partners L.P. and Access Midstream Partners, L.P. entered into a merger agreement, with Williams retaining controlling interests in the two master limited partnerships.
The addition of Access Midstream more than doubles the volume of natural gas Williams gathers each day to 11 billion cubic feet and makes Williams a natural gas powerhouse with positions in most key North American production basins.
Last year, Williams brought additional fractional and processing facilities online at its Ohio Valley Midstream business in northern West Virginia, southwestern Pennsylvania and eastern Ohio. The Moundsville, Ohio fractionator plant receives raw natural gas liquids (NGLs) from the company’s Fort Beeler and Oak Grove, WV processing plants. The fractionator separates the NGLs into purity products – butane, pentane and propane – so they can be stored, transported and sold separately.
“Williams’ presence in the Northeast has grown dramatically in the past five years,” said Droege.
“We started out in the Marcellus and Utica shale plays with fewer than 200 employees – today we have almost 1,100 people in Pennsylvania, West Virginia, New York and Ohio working to develop the Marcellus and Utica shale plays.”
Dramatic growth in U.S. oil and gas production creates shockwaves around the world
They say you can’t have too much of a good thing — but that adage doesn’t apply to energy markets.
Demand for oil and natural gas is expected to rise indefinitely in the future, but currently supplies are outpacing demand due to slow economic growth in Europe and Central Asia and abundant energy supplies in the U.S.
On Dec. 16, the price of Brent Crude Oil — a trading classification of sweet light crude oil that serves as a major benchmark price for purchases of oil worldwide — dropped to a five-year low of $60 per barrel. In the U.S., the price for West Texas Intermediate fell to $55.73 per barrel, far less than the $106 per barrel price in late June — a 47 percent price decline in less than six months.
Record oil production in the nation, made possible through the efficient hydrofracturing of oil-rich shale, has produced a worldwide glut that has been driving down oil prices since last summer. In response, oil & gas companies have announced cutbacks to their drilling and development budgets for 2015, with some drillers pulling rigs from the oil-rich Eagle Ford and Bakken shale plays.
In December, drilling rigs targeting oil dropped by 10 to a six-month low of 1,536, according Baker Hughes Inc. (BHI), the Houston-based field services company. Up to 800 additional rigs now drilling for oil could potentially be idled if oil prices remain low, which would slow the boom in domestic production and cause U.S. gasoline and diesel prices to rise.
In March 2012 when oil prices hit a record $140 per barrel, the industry moved rigs from gas plays to oilfields; however, the migration of rigs back to shale gas is less likely since the price of natural gas liquids, which had been the thrust of the Marcellus and Utica shale gas plays last year, generally follows oil.
With oil prices down more than 40 percent since last summer, some companies, including ConocoPhillips, have cut their drilling and development budgets by about 20 percent. Chevron Corp and Exxon Mobil Corp are expected to follow suit. Oil & gas service companies such as Halliburton and Hercules Offshore have begun laying off employees.
Pennsylvania’s most prolific shale driller, Range Resources, announced an 18 percent cutback in its spending budget for 2015, though the company still plans on investing nearly $1 billion in Marcellus wells and increasing gas production by at least 20 percent.
Unlike Europe and Asian markets, the price of methane (“dry gas”) is decoupled from oil in the U.S., so natural gas can remain competitively priced.
“Where the drop in oil prices is likely to have the greatest impact on natural gas demand is in transportation since over 90 percent of the oil consumed in the U.S. is used for transportation,” said Jim Ladlee, associate director, Penn State Marcellus Center for Outreach & Research (MCOR).
Owners of some of the largest truck fleets in the nation including United Parcel Service, Lowe’s and Procter & Gamble are shifting their fleets to natural gas. P&G currently has seven percent of its trucks running on natural gas and plans to convert 20 percent of its fleet within two years.
“Natural gas fleet conversions still have appeal because in the long run natural gas is cheaper and gas prices are more stable than oil. However, when you add in the cost of conversion, it’s more challenging now that gasoline and diesel prices are so low,” said Ladlee.
For example, the cost of an liquefied natural gas (LNG) tractor trailer is $50,000 more than a diesel-powered rig.
“The world energy markets are currently experiencing a period of adjustment due to the dramatic increase in North American oil production,” said Ladlee.
“The U.S. alone has produced 3 million more barrels of oil per day during the past five years, with 2.3 million barrels a day coming from the Eagle Ford and the Bakken shale plays.
“When the Eagle Ford started in 2008, it only produced 50 barrels a day, but now it’s up to 1.4 million barrels a day, so there’s been a sharp increase in domestic oil production, and Canada, our biggest energy partner outside of Saudi Arabia, is also producing more oil.”
The increase in domestic oil and gas production has implications for both national security and diplomatic relations. The U.S. stopped buying oil from some foreign countries.
“Even Saudi Arabia, which generally likes us because we’re their biggest customer, has been impacted now that we’re gaining more energy independence, and it’s starting to come out of their market share so they’re seeking a new trading partner in China, and so are the oil producing countries in North Africa,” said Ladlee.
Saudi Arabia’s oil production costs are about $30-$50 per barrel, but no one knows for certain because Saudi Aramco is state-owned. Saudi Arabia has continued to produce oil at pre-glut rates, which has added to the downward spiral in world oil prices and has allowed Saudi oil to remain competitive against U.S. oil.
It would be “difficult, if not impossible” for Saudi Arabia or OPEC to give up market share by curbing production, said Ali Al-Naimi, Saudi Arabia’s oil minister in the Saudi press.
By comparison, the breakeven point for Bakken shale oil is $64.74 a barrel, and $84.45 a barrel for the Barnett Shale-Southern Liquids Rich oil, according to Credit Suisse.
“If the Saudis can produce oil at a cheaper cost than we can, then countries are going to buy from them, but we could still be competitive with LNG exports,” said Ladlee.
“We are marching toward energy security — a term I prefer to energy independence — because Canada and Mexico are our energy trading partners, and since Canada buys natural gas from us, it doesn’t make sense to cut them off.
“While energy abundance is a good thing for the U.S., it’s creating shockwaves in global energy markets and foreign energy producing countries, which will need to make a major adjustment to cope with the new reality of the U.S. as the world’s largest energy producer,” Ladlee said.
MONACA, PA – Seven years ago, a visitor to the Beaver County region near the Horsehead Corp. zinc smelter site here would have had a difficult time finding a hotel room to spend the night.
That is no longer the case.
Six new hotels have been constructed in the past three years, with more to be built on commercial property that is becoming more and more of a commodity.
One could say that the proposed Shell cracker plant is the proverbial golden goose laying a large basket of golden eggs in Monaca and surrounding Beaver County.
It would be the first cracker plant built in the Northeast. A “cracker” converts ethane, a by-product of natural gas, to ethylene, which is used to make plastics, plastic bags, antifreeze and detergents.
After three lease renewals, Shell exercised its option to buy the property on Nov. 7, 2014. The company said the purchase will help advance the permitting process. Shell has applied for an air-quality permit and has contracted with Consol Energy Inc. to ship ethane to the proposed plant. Consol is drilling 45 wet gas wells on 9,000 acres at the Pittsburgh International Airport.
Shell also recently held a meeting with engineers last month at the state Department of Transportation building to talk about the next phase of the Route 18 realignment.
In additional recent developments, Shell just purchased
According to Beaver County Commissioner Joe Spanik, Route 18 currently runs past the plant itself. Shell is planning to move the highway about 1,000 feet into the hillside, and create a six-lane highway for a certain portion of it.
Spanik said that, even though the plant is still “proposed” and not a sure thing as of yet – the “golden opportunity” awaiting the area is evidenced by the commercial development upswing as of late.
“Even though Shell is still calling it a proposed cracker plant, I can tell you that here in Beaver County, hotels, housing, retail office space are getting a lot of developers coming in and purchasing property in anticipation of the growth of the area due to the cracker plant,” Spanik said in a telephone interview from the commissioners’ office. “Even though it’s not a 100 percent sure thing, developers don’t want to miss out on a golden opportunity by coming in after Shell finalizes its plans and property values have already gone up.”
Plants like this do tend to bring regional impacts. They can draw manufacturers that work with the chemicals to make plastic products, cleaners, paints and even fabric. State Department of Labor & Industry research has estimated every one permanent worker at this kind of plant would lead to 15 more permanent jobs at other companies, including drillers that would hire more to produce more ethane for the plant.
Spanik said Shell just recently purchased property outside of the plant, including MidWay Bar & Restaurant and a number of residential homes.
“They are moving forward in security the property outside the plant,” Spanik said. He added that Shell is currently waiting on approval of a required air quality permit – which Spanik anticipates will be finalized very soon.
He said the thousands of jobs that will be created by the plant, both directly and indirectly, will be a boon for Beaver County and the surrounding area.
“Construction-wise, it will create anywhere from 8,000 to 10,000 jobs. There will be 400 to 500 permanent plant jobs once the construction is finished.
“Ancillary jobs, or what we call the ‘downstream customer base,’ could create another 15,000 to 20,000 jobs,” Spanik said.
And while commercial property is being snatched up at a record rate, Spanik said there is no reason to panic.
“There is still industrial property available,” Spanik said. “Hopewell is looking at putting in two hotels in their community. And the Beaver Mall is looking to expand.”
He said the mall property owners were originally seriously considering selling the property.
“Now, they’re looking at renovating and expanding it,” Spanik said. “Next to the mall, Columbia Gas is supposed to be moving one of its regional headquarters there. And housing developments are expanding.”
As a result, Spanik expects a boost in population, which currently stands at just above 170,000 persons – about 20,000 more than Centre County.
“It will take three to five years of development before people will be moving in, depending on the nature of their business drawing them here,” Spanik said. “But we are certain that population will grow in certain areas, like Center Township.”
R. Brock Pronko contributed to this story.
A few years ago, an elderly gentleman stormed into Michael Dinich’s retirement planning office in Sayre, frantically looking for help after losing a substantial portion of his life savings in a high risk portfolio at his local bank.
The 80-year-old pastor had invested only in CDs and other safe forms of money his whole life. With the market in the midst of a downturn and the Federal Reserve lowering interest rates to near zero to help stabilize the financial markets, he wanted a higher return on his money so the teller sent him to the bank’s investment department.
After hearing his story, Dinich decided to approach the bank and try to restore the man’s retirement funds.
“The bank determined what they had done was so completely wrong, they refunded his money,” said Dinich.
And like the pastor, many “baby boomers” who are now retiring without pensions find themselves wondering if they will outlive their nest eggs, and some are seeking alternative ways finance their retirement.
“Retirees are looking for guaranteed income, but the truth they have never been told is that you can’t have a guaranteed income from a non-guaranteed product such as a mutual fund or a stock,” said Dinich. He added that many retirees are following information – some of which is not realiable — found in publications like Money and AARP’s The Magazine.
The biggest concerns of retirees is that they are living longer than any other generation, said Dinich, and they are retiring in low interest rate environment and a very risky environment as reflected by the ups and downs of the stock market.
Happy 40th Anniversary IRA
According to the Government Accountability Office, 43 million taxpayers have an IRA with a total reported value of more than $5 trillion. The maximum contribution amount for 2015 is $5,500 and $6,500 for account holders age 50 or over.
“In the 1970s, big corporations decided they no longer wanted the burden of providing pensions and small businesses couldn’t afford them, so the corporations and the financial institutions lobbied Congress, and in 1974 legislators came up with the IRA, and in 1978, the 401k, which shifted the responsibility of a successful retirement to the individual,” said Dinich. “The problem with that is, if you look at most 401k accounts and their available options, there are no safe guaranteed money programs there either.
Dan Nestlerode, co-owner and portfolio manager at Nestlerode & Loy financial planning firm in State College, has also seen an IRA gone wrong.
“We were contacted by a woman who had an ING annuity in her $80,000 IRA, but she was having a hard time getting her money out of her account,” said Nestlerode.
“As an insurance product, annuities fall in between the cracks so they don’t get regulated as a security, and what happened is this poor old lady turned 70 and a half and at that age the government requires that she has to start taking money out of her IRA, but because she had an annuity in her IRA, she was penalized $8,000 by ING for taking money out, which was now taxable income so she had to pay tax on top of the penalty, plus she paid ING a 10 percent commission for the annuity.
“It was an awful situation, and we wrote a letter to ING complaining about it, but they just ignored us.
“ING changed its name to Voya, but it still offers these annuity IRAs and at least one investment department at a bank in the Centre Region uses Voya in its customers’ investment portfolios.”
With 10,000 baby boomers retiring each day, some of Nestlerode’s clients are starting to take money out of their investment accounts to live on.
“We have a few people who take out too much money, that is, what they’re taking out is not sustainable, not if they live long, and they say that when they finally get to that point where they can start seeing the bottom, they will have more financial discipline or tighten their belt and live off social security.
“Nobody planned ahead for zero interest rates, not one person, not one financial planner back in the 1990s told their clients that if they had a million or two million in their nest egg they couldn’t earn 5 percent off it and live off their interest for the rest of their lives.
“Now if you have $2 million in the bank, you’re getting $5,000 a year in interest, which is not enough to live on even meagerly.
“So retirees had to go into the investment market and buy preferred stocks and junk bonds, real estate investment trusts, and limited partnerships and finally become real investors.”
Changing of the Guard
“It’s more difficult today for young people to save than it was their parents because real wages have not kept pace with inflation, and we’ve seen a stagnation or even decline in wages over the past 10 years, which is not favorable for savings and investment,” said Dinich.
“Even if younger families manage to save five percent of their income in an IRA or a 401k while 40 to 50 percent of their income is going to pay off debt on their credit cards, mortgages, and autos, they are still in a no-win situation.
“One of the things we do with younger people is teach them how to become their own bank, how to become their own credit card company, so they can stop that transfer of wealth to financial institutions.
“In time, if they can recapture 30 or 40 percent of that lost debt income and retain it for their own family, they will be a lot more successful in retirement than just saving 5 percent per year.”
Attracting Gen X and Y clients will be vital to financial advisers and planners as boomers retire, but these tech savvy generations grew up on the Internet and some would rather make their own investments online and avoid the service fees.
“Young people are having a big impact on the investment industry, and the old notion of full service brokerages has gone away,” said Nestlerode.
“Almost all of the investment industry is shifting toward portfolio management as a better way to serve younger clients.
“The young, tech-savvy investors who manage their own portfolios through e-trade, Charles Schwab, Scottrade or other investment companies, do something that the older generation doesn’t do, and that is, pay attention to their investments.
“They’re online looking at their investments every day, making decisions and not letting opportunities get away from them.
“People who are older and not as tech savvy pay people like me to do that for them, and that’s really our market niche, those clients who are too busy with family and careers to manage their own portfolios, and fortunately, even in the generations coming up, there will always be plenty who will still depend on us.”