Energy Jobs

           Along with the ad of the leggy woman purring “Do you own an oil well?” the energy folks rolled out an ad featuring a little blue locomotive (that can) rolling onto the tracks of a steel yard in the dawn’s early light accompanied by perky background music and “Steel, once a symbol of America’s might, now a symbol of our will. Thanks to the energy industry places like Lorain Ohio are booming again” (Energy from Shale- The Oil And Natural Gas Institute). Energy In Depth: The Ohio Project highlighted this ad in an article entitled Energy From Shale Highlights Carrollton, Return Of Ohio Steel on April 13, 2012. The EID website’s “about” page shows a bucolic rural landscape much like Rod Portman’s (with a red barn even!), and states that the EID was launched by the Independent Petroleum Association of America (snail mail contact is Granville P O). Now that we’ve had a year of being lubricated in anticipation of jobs and prosperity for all, the grease is beginning to congeal and the friction of reality has set in. Physicists all remind us that friction is a constant. A recent conversation with Cheryl Johncox, executive director of the Buckeye Forest Council, reveals that the wells being fracked are turning up more gas than oil. Gas is currently cheap. The little blue train that could ad may just as well have been run by the “clean coal” folks in that the background transmission station, along with all the steel making processes are powered by electric. Except NOT because electric generators are eyeing the cheaper, and more regulatory abiding natural gas for future  electric generation. A whole other story, I digress. There is no infrastructure for the gas transmission (to ship it overseas in order to drive the price up), so the wells are being capped. The folks virulently opposed to fracking have turned their sites unto the injection wells for waste disposal, plentiful in Ohio. The ingredients of the mounting waste is, well (without a right to look), mostly undisclosed. The wells themselves are for the most part unregulated and unmonitored. The state receives a pittance for out of state waste trucked in, but townships and counties where these wells are located receive nada and have even less say in what goes on there. Cheryl’s information is corroborated in a recent article (6-14-13) by James B. Kelleher in Reuters entitled U.S. Shale Is A Boon To Manufacturers But Not Their Workers. Almost exactly a year after the little blue engine that could got us thinking “Yes we can!” the paint is starting to fade and chip. Kelleher reports that

But state employment data, academic research and a week-long tour of half a dozen factories in Ohio suggests the shale gas revolution has been a disappointment when it comes to job creation. “The industries benefiting are more capital intensive than labor intensive,” said Tom Waltermire, the chief executive of Team NEO, the economic development agency for northeast Ohio.”

The EID article from 4-13-12 touted the coming of Vallourec, V&M Star to the Mahoning Valley and the $185 million investment by U.S. Steel and Republic Steel in Lorain. Reuters’ empirical follow up a year later (6-14-13) shows reality a bit different from visionary promise:

“The Vallourec Star plant, for example, will employ just 350 workers. Those jobs won’t begin to make up for ones lost just a year ago, when RG Steel closed its plant here and laid off more than 1,000 workers – let alone the tens of thousands of jobs Youngstown has lost since the late 1970s, when the steel mills that drove the local economy closed.

And some recent investments, like the $100 million Timken put into a new intermediate finishing line at its Faircrest Steel Plant in Canton, are resulting in fewer, not more, jobs. Timken’s old intermediate finishing line employed more than 200 workers and processed pipe and other products in 10 days, according to plant manager Larry Pollock. The new facility, built to meet surging demand from the energy industry, employs fewer than 30 and can process the same material in as little as two hours, plant manager Larry Pollock said. In the brightly lit and relatively quiet plant, no human hand touches the pipes as they speed down the line. Workers monitor the process at half a dozen computerized control consoles. “A lot of the old assets were standalone work centers, independently loaded and unloaded, very labor intensive,” Pollock said.

Data from the state’s Bureau of Labor Market Information tells the story. After bottoming out in 2010, Ohio’s manufacturing sector has added nearly 42,000 jobs in recent years. But the state still has nearly 110,000 fewer manufacturing jobs today than it did in 2007, when the last recession began. Meanwhile pay across the sector is going down, not up, according to the U.S. Bureau of Labor Statistics Quarterly Census of Employment and Wages. Manufacturing workers in Ohio, for instance, have seen their wages fall 1.3 percent in the last year alone. In a sign of how the labor supply is far exceeding demand, Vallourec Star got more than 20,000 applications when it solicited applications for its 350 openings online. “You can see how hungry people are,” says Joel Mastervich, the company’s president and COO.”

Kelleher goes on to corroborate Johncox:

“A report in mid-May from Ohio’s Department of Natural Resources (DNR) suggests Ballas [Nick Ballas, president of American Road Machinery in Minerva Ohio] has reason to be cautious. The report concluded that the state’s shale deposit was heavy on lower-priced gas and light on more profitable oil. Since the oil and other liquid petrochemicals believed to be trapped here were the big draw for many drillers, not the gas itself, the report raised questions about just how much demand the industrial companies will actually enjoy as a result of the Ohio shale play – and whether some may have gotten ahead of themselves as they invested to meet expected demand.”

The Bottom Line (and it seems to be a race to the bottom!)

Given the current zeal to outdo America’s global competitors in state public/private partnership, Ohio’s recent legislation enactments to keep these entanglements secret and undisclosed (until a decision has been made, of course), and the actuality that “The industries benefiting are more capital intensive than labor intensive,” it would be prudent to bear in mind that tax breaks, incentives, TIFFs, etc. made on the ostensible promise to create “jobs” instead produce enormous capital investments while laying the burden of infrastructure maintenance, schools, and security on the area’s residents. The actual folks with jobs featured in the little blue engine that can ad number about five. The steel pipe production shown is primarily through highly automated machinery, that, like the blue locomotive itself, are powered primarily by energy — something the energy industry is promising to provide in abundance. One interpretation of the promo ad shows all that energy consumption benefiting 5 laborers while generating a huge capital return. When “jobs” are promised, it should be asked whether these are for robots or humans.

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