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2017-09-15 / News

West Virginia prepares for manufacturing jobs spurred by shale gas

Regional Business Analyst

McPhail McPhail On August 3, President Trump, who won big in West Virginia — 67.9 percent of the vote vs. Hillary Clinton’s 26.2 percent — held a campaign-style rally at the 9,000-person Big Sandy Superstore Arena in Huntington, West Virginia.

“As you have seen, I have kept my promise as President,” he told attendees.

“We are putting our coal miners back to work. We have ended the war on beautiful, clean coal. We have stopped the EPA intrusion. American coal exports are already up.”

Coal imports have increased due to a recovering global economy, which began before Trump’s presidency. Coal prices rebounded by 100 percent last year. The handful of new mines in Alabama, Pennsylvania, West Virginia and Wyoming that have opened or are scheduled to open have been in the permitting process for years. These new mines will produce metallurgical coal for steelmaking. The latest, Acosta Deep Mine, which started the permitting process in 2010, opened in June near Somerset, Pennsylvania. The mine will produce 375,000 tons per year of metallurgical coal and create about 80 underground mining jobs that pay an average of $80,000 to $100,000 annually.

The market for the thermal coal used in power generation — the biggest use for coal in the U.S. — has been steadily declining. Low-priced natural gas from the abundant shale gas plays in the Appalachian Basin and other shale gas regions in the country have caused power plant owners/developers to switch from coal to natural gas. Since 2010, natural gas for power generation has increased by nearly 33 percent to 9.7 Tcf (trillion cubic feet) per year.

Last year, for the first time, natural gas-fired power generation exceeded coal generation in the U.S. on an annual basis, according to the U.S. Energy Information Administration. Natural gas produced 31.5 percent of the country’s electricity and coal 30.2 percent, and it will likely become the predominant source of electricity by 2020.

In addition, robotic automation — self-driving trucks, automated loaders and automated drilling and tunnel-boring systems — has significantly contributed to the declining employment in the coal mining industry, according to a study by the Brookings Institution. By 2015, coal mining had lost 59 percent of its workforce, compared to 1980.

As the product of three generations of coal miners (immigrants from Scotland), Rebbeca McPhail, president of the West Virginia Manufacturers Association in Charleston, WV, has seen the decline of coal mining and the rise of the natural gas industry in her state.

“The issue we have in West Virginia is more a cultural one,” said McPhail.

“People have established deep roots in the southern West Virginia coal fields, and the idea of leaving those areas to go to other parts of the state isn’t a particularly desirable one.

“That said, given the right roads and infrastructure development — a big issue on the table in West Virginia — we can establish an environment primed for shale-related downstream manufacturing growth in the southern regions of the state.”

West Virginia manufacturers employ 6.44 percent of the workforce and produce 9.88 percent of the total output in the state. Total output from manufacturing was $7.45 billion in 2014. There were 48,500 manufacturing employees in West Virginia in 2015, with an average annual salary of $65,653.

“Today, low-cost natural gas is enhancing U.S. and West Virginia’s manufacturing competitiveness in several important ways,” said McPhail.

“The most immediate beneficiaries are energy-intensive industries, such as producers of chemicals, aluminum, steel, glass, cement and polymers, which enjoy a cost advantage of up to 50 percent over their counterparts in Europe and Asia.

“Much of those cost savings are passed to downstream manufacturers that use those petrochemicals to make everything from plastics to synthetic fabrics — and eventually to U.S. consumers who buy those products.”

McPhail points to U.S. Methanol’s Liberty One Methanol plant in Institute, West Virginia as an example of a company that relocated in West Virginia to access cheap, natural gas. U.S. Methanol is disassembling a methanol plant in Brazil and will reconstruct it in the Dow Chemical facility in Institute. The plant is expected to create about 350 temporary construction jobs and 50 permanent jobs at the plant.

“There are also discussions on the table centered on co-generation and manufacturers that could produce their own energy through the availability of supply and sell excess power into the grid,” said McPhail.

“In addition, current pipeline projects, particularly those in the state’s eastern panhandle, should open new possibilities for existing and future industries to access a competitively — priced energy source.”

The Mountain Valley Pipeline, a 303- mile interstate pipeline that will run from northwestern West Virginia to southern Virginia, is scheduled to go online in October 2018. The Atlantic Coast Pipeline, a 600-mile interstate pipeline that will serve multiple public utilities in Virginia and North Carolina, will go online in late 2019.

“One of the unfulfilled promises of trade agreements is the idea that manufacturing might move to lower cost countries, but that those other countries would raise environmental and worker standards on parity with the U.S, and that simply hasn’t happened,” said McPhail.

“Further, our ability to compete goes far beyond wages into the regulatory environment, healthcare costs and tax structure.

“The difference I see in what our companies value about the American worker is the value of their skill and training.

“It is important for the U.S. and West Virginia to keep an eye on developing the quality workforce needed to meet current and future demand.”

What effort has West Virginia made to retrain coal miners and train younger people entering the job market for the anticipated growth of manufacturing due to shale gas and the development of ethane cracker plants, which will provide feedstock for manufacturing plastics and other industrial products?

“West Virginia as a State is making considerable progress in the development of our community and technical education system,” said McPhail.

“Our regional community and technical colleges are extremely responsive to industry needs.

“Further, West Virginia is starting even earlier with a program called ‘simulated workplace’ in high school career and technical education centers.

“Automation, while replacing some jobs, will create others.” .

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