The Link: Natural Gas and Manufacturing Jobs

By July 22, 2010Economy, Energy

President Obama visited Youngstown, Ohio, in mid-May to promote the Administration’s economic policies, pointing to the stimulus bill’s success in encouraging investment and job creation. To illustrate his argument, he appeared at V&M Star, a manufacturing of steel tubular goods, embarking on a $650 million expansion.

In the President’s remarks, he hailed the new railroad spur that encouraged the company’s expansion.

So as a result of this investment, V&M Star’s parent company decided to invest $650 million of its own money — its own money — (applause) — to build a new one-million-square-foot mill right here in Youngstown, the largest industrial plant built in the valley since GM built its plant over in Lordstown in the 1960s.  Think about that — biggest investment since the 1960s — 50 years.  (Applause.)  So right here, in the heart of the old steel corridor, where some never thought we’d see an investment like this again, they’re placing a bet on American manufacturing and on this community.

And that bet is going to pay off for 400 construction jobs once they break ground this summer; 350 new manufacturing jobs once the mill comes online, which doubles the current workforce.

Infrastructure investment is critical to the manufacturing sector, of course. It was one of the key elements of a Milken Institute study, “Jobs for America: Investments and Policies for Economic Growth and Competitiveness,” sponsored by the National Association of Manufacturers.

But there better be an economic reason to justify the infrastructure, some underlying demand that inspires the investment. Unfortunately, President Obama made only one passing reference to the basic reason for V&M Star’s expansion — natural gas, that is, shale gas, that is, the Marcellus Shale, made accessible by hydrofracturing technology.

Groundbreaking ceremonies were held at V&M Star the end of June, and the local newspaper, The Vindicator, reported on the event. From “V&M Star’s $650m expansion gets rolling“:

Philippe Crouzet, chairman of the Vallourec Management Board, praised the private- and public-sector cooperation that made V&M’s expansion possible. [Vallourec is the French parent company.]

“Every aspect of our endeavor is coming together remarkably well,” Crouzet said. “There was an unprecedented collaboration between elected leaders, government professionals and the business community.”

The expansion will allow V&M Star to respond to the growing demands of its natural-gas customers in the Marcellus Shale, Crouzet said. The shale, a natural-gas formation the size of Greece located under Pennsylvania, New York, West Virginia and Ohio, could contain as much as 489 trillion cubic feet of recoverable gas.

“We are building the future in a market that has great opportunities,” Crouzet said. “V&M is well-positioned to serve as a bridge between this demand and supply.”

In case there was any doubt about the connection between economic activity, jobs and the Marcellus Shale, the American Petroleum Institute has released a new study that documents the value of natural gas. From the news release, “New Study Finds Natural Gas in Marcellus Shale Region Worth 280,000 Jobs, $6 Billion in Government Revenue“:

WASHINGTON, July 21, 2010—Natural gas production in the Marcellus Shale region—if developed—could create 280,000 new American jobs and add $6 billion in new tax revenues to local, state and federal governments over the next decade, a new study released today finds.

“One of the biggest opportunities to create jobs and increase America’s energy security lies within the Marcellus Shale region,” said Jack Gerard, president and CEO of the American Petroleum Institute. “Pennsylvania, New York and West Virginia have enough natural gas to create hundreds of thousands of well-paying jobs and provide Americans with a stable, domestic energy source for generations to come.”

The study is “The Economic Impacts of the Marcellus Shale: Implications for New York, Pennsylvania, and West Virginia,” by Timothy J. Considine, Ph.D. of Natural Resource Economics.

The study is well-timed. For the usual reasons, some groups have decided (erroneously) that the hydrofracturing technology — injection of fluids under high pressure to fracture the gas-bearing shale — is too risky, despite it having been used safely for decades. Members of Congress have sponsored bills to slow or effectively block development of the Marcellus Shale, and House Energy and Commerce Chairman Waxman has started the anti-industry drumbeat. The EPA is working on a study, and a few local politicians and activists are raising a fuss. (New York State is especially afflicted, probably because Upstate New York really doesn’t need the jobs.) There’s even one of the rote, anti-energy “documentaries” that have become so popular in recent years.

All the stimulus projects, infrastructure investments, and congressional speeches about manufacturing jobs will go for naught if policymakers reject natural gas and the Marcellus Shale. You can look at V&M Star and read through the API study. Natural gas equals jobs. Stopping development of the Marcellus Shale’s natural gas resources is a rejection of jobs. It’s that simple.

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