It’s the eternal question for West Virginia — how can a state that produces so much in natural resources be so poor? And, given the decisions we have to make, it’s a question we can’t afford to get wrong.
Sen. Joe Manchin, D-W.Va., has surely thought about it. Judging from two letters he’s written to the Biden administration — one supporting the Keystone XL pipeline and another on the importance natural gas — he seems to feel we should take the same path we always have.
We can’t be sure why Manchin is pitching Keystone XL. (XL stands for “export limited.”) It’s a pipeline that never crosses east of the Mississippi, and would take Canadian oil to Texas to be shipped overseas. It looks to offer zero benefit for West Virginians — unless someone leaves the state to work on it, or has stock in a company connected to it.
There is another troubled pipeline he probably has his eye on — the Mountain Valley Pipeline — which is three years behind schedule and over budget by 50%. Industry observers now question if it will ever be finished, and some investors are backing away.
Critics say it’s just too difficult to build a huge pipeline across the Appalachians. Regulators recently cited the MVP for construction problems — its third big batch of clean water violations. Federal regulators are slowing the project, out of concern for construction issues.
They’re not just talking about dirty streams — a lot of troubled energy ventures look for government relief when they can’t produce the prosperity they promise.
According to the economic figures crunched by the Ohio River Valley Institute, the Marcellus boom is, once again, leaving West Virginia behind. The institute found that — in spite of creating huge wealth for some between 2008 and 2019 — only one of the seven West Virginia Marcellus counties had job and personal income growth faster than the national average. And the seven counties actually lost population, even faster than West Virginia as a whole.
Twenty-two Marcellus counties across three states averaged job growth below 2%, and Wall Street has long cast a skeptical eye these unconventional oil and gas enterprises.
One finance professor pointed to a painful reassessment at ExxonMobil and other huge players in a recent article in the Charleston Gazette-Mail. In the context of the Marcellus play, she said, “They’re producing gas, but they haven’t figured out a way to make this into a profitable business. They’ve been cash-flow negative year in and year out.”
Barclays recently downgraded Equitrans Midstream (the company building the MVP), citing “renewed regulatory headwinds. ... We have become less certain that the project will cross the finish line, and until the project is completed or outcome assured, we expect shares of ETRN to underperform.”
Similarly, the Fitch Rating service has said it’s skeptical of several big pipeline projects, including MVP and Keystone XL.
Companies that promise to bring wealth by mining or drilling often fall victim to a curse we know far too well — the boom and bust cycle. When a new technology or find opens up a prospect, companies pour in. They invest heavily, making production explode. That makes the price of the commodity crash, leaving many of those companies stuck. And if the local community does not have a well-diversified economy, it also suffers.
It’s worth pointing out this market turbulence is typically unrelated to environmental rules. In 2016, West Virginia miners were promised they would be put back to work. But, in spite of that, central Appalachian coal jobs and production fell over the past four years. The problems of Marcellus gas are different, but the results are similar — it’s just hard to make a profit and maintain employment when gas is at $3 per MMBtu (British thermal unit).
Compare this to solar and wind jobs. Renewable employment growth has been some of the fastest in the country, in some years growing as much as 17 times faster than the general economy.
In spite of slowing some in 2018 to 2019, solar jobs are growing again in neighboring states. Of the quarter-million solar jobs in the United States in 2019, Ohio had 7,282, Virginia had 4,489, and North Carolina had 6,617.
West Virginia? 340.
The comparative stability of wind and solar employment might be because these resemble industrial products, and their costs and prices are much less volatile than fossil fuels. But whether that’s true, Manchin would do better for the state he loves by helping it chart a new direction.