By Jennifer Jett
They say a picture is worth a thousand words, but in terms of our “Industry Snapshots,” a picture is worth thousands of jobs and millions of dollars in revenue.
As we come upon a new year, West Virginia Executive wants to greet 2012 with a look at our state’s top industries. With the help of the West Virginia Department of Commerce, we directed our focus to the industries of aerospace, bioscience, coal, construction, fulfillment and distribution centers, health care, high technology, manufacturing and natural gas. In these snapshots, our goal is to provide somewhat of a comparison across these industries in terms of the role each plays in West Virginia’s economy, the challenges they are facing and possible solutions to those problems, the strengths they possess as West Virginia businesses and the opportunities for growth they expect as we move into 2012.
Some common themes have arisen during the process of putting these pieces together. We see time and again the importance of a skilled work force and repopulating that work force as a large amount of current employees begin to plan for retirement. West Virginia’s geographic location is a prime selling point when it comes to recruiting new businesses, and this is particularly true with the fulfillment and distribution center industry. We also see that West Virginia holds great potential for research and development and is playing a key role in meeting the state and federal needs in technology and bioscience.
High Technology
North Central West Virginia continues to see the evolution of economic sectors that provide diversity to the classic industries of the state. As these industries mature, they stand alongside manufacturing, coal mining and natural gas extraction and help carry the economic load.
Employment in the I-79 Technology Corridor is approaching 19,000, and the employment rate continues to outpace national averages. The income rate in this sector has grown faster than any other in the state. As cited by the Anderson Economic Group in 2006 in a report entitled “North Central West Virginia’s Technology Industry: A Pathway Through the 21st Century,” normal operating expenditures by the technology industry have a $5.2 billion economic impact on the state on an annual basis.
While progress is being made, challenges remain. West Virginia’s technology sector is closely tied to the federal facilities located in North Central West Virginia. These federal operations have served as anchors by not only hiring people, but by issuing millions of dollars through subcontracts every year. These contracting opportunities attract a diversity of technology companies to West Virginia. We have seen a steady expansion of the critical mass of companies in the area over the last two decades. However, West Virginia has seen an increasing effort in Washington, D.C. over the last several months to downsize these federal operations. This is especially true at the National Energy Technology Lab in Morgantown. If these anchors are diminished, then the growth of the technology sector will, at best, stagnate. Our federal delegation represents our frontline defense, but state government needs to embrace the federal operations for the economic drivers they represent.
A second challenge facing West Virginia’s technology sector is finding a qualified work force within the state, thus requiring out-of-state recruiting efforts. Unfair, negative state stereotypes make recruiting difficult, but it can be mitigated by targeting those who grew up here and moved away.
The biggest opportunity for growth in the technology corridor is the National Oceanic and Atmospheric Administration’s (NOAA) Environmental Security Computing Center (NESCC) and its Geostationary Operational Environmental Satellite (GOES) programs recently established in Fairmont. NOAA is investing more than $50 million in the construction of these operations at the I-79 Technology Park. The first contract issued for the configuration of the new supercomputer was $300 million awarded to Computer Sciences Corporation. The GOES mission control center in Fairmont will collect massive amounts of data from newly launched climate satellites. This data will be processed in part by the NESCC supercomputer. If estimates are correct, there could be billions in contracting opportunities over the next several years just in the modeling and management of this data.
Of all the opportunities and challenges, there is one area that needs the most attention. West Virginia is really missing out on the commercialization sector. Even with the sluggish economy, there are still billions being spent nationally on start-up technology companies. Unfortunately, West Virginia does not have a commercialization support infrastructure in place to make itself more attractive to both companies and investors. This is not something the private sector can put into place. Instead, the private sector will go to where infrastructure exists, and this infrastructure is provided at the state level. For example, the State of Pennsylvania spends tens of millions of dollars every year on just the basic support services. Innovation Works is a commercialization support organization that serves the Pittsburgh area. It has supported companies over the years that have returned billions to the Pittsburgh economy. We will never see real growth if this important area is not addressed effectively.
Provided by Jim Estep, West Virginia High Technology Consortium Foundation
Energy – Coal
Perhaps no state has a stronger relationship with a single industry than West Virginia and coal. Not only are we the second leading coal producing state, but through our universities we are at the forefront of technology development related to mining. Our mining companies and service providers have pioneered many advances in technology to improve efficiencies in mining; in safety technologies to make mining safer and in communications so we can better communicate with our miners. We have also pioneered coal gasification and liquefaction technologies, as well as new and exciting possibilities in carbon foams and nanotechnology. In addition, we have been at the forefront of developing processes such as carbon capture and storage and coal bed methane production, as well as other research projects that have and will continue to benefit our state, our nation and our world.
West Virginia’s coal is clean, high-quality bituminous coal with a high BTU rating, and our metallurgical coal is among the most sought after in the international marketplace. Our location, which is close to ports, transportation routes, major North American population centers and many of the major electrical generation areas of the country, helps us compete in the domestic and world markets.
Ending the federal Environmental Protection Agency’s (EPA) continuing war on coal is perhaps our greatest challenge. West Virginia has the coal America needs to fuel the rebuilding of our economy and to free us from dependence on foreign sources of oil. If we can end the EPA’s attack on our nation’s most dependable source of fuel, we can and will lead this nation out of its economic downturn and make West Virginia the economic powerhouse of the next 50 years.
Provided by Bill Raney, West Virginia Coal Association
Energy – Natural Gas
At the heart of the oil and natural gas industry is what is known as the independent producer. Beyond that, there is a multitude of supporting businesses that make the industry work. If the producer’s drilling is successful, not only have jobs been provided for a varied host of individuals and businesses, but the owner of the mineral rights also benefits from royalty payments. Additionally, our state benefits through severance taxes paid based on the revenues of the production, as well as property, sales, fuel and use and income taxes.
We are in a great position to use this industry to economically benefit West Virginia. Geologists have noted that our state lies in the heart of the Appalachian Basin. This basin is comprised of a number of productive formations that include the Marcellus, Utica and Lower Huron shales. The recent discovery of an economical way to extract gas from these shales puts West Virginia and surrounding states at the forefront of North America’s energy business.
The challenges this industry faces are not that different from other U.S. energy industries. Each industry faces regulatory challenges from the federal, state and local levels. To counter these challenges, the industry works diligently to implement the best available technology and management practices in order to satisfy all of the regulatory requirements. Unfortunately, over-regulation at any of these levels has the ability to stunt its growth. A recent economic study done by West Virginia University tells us that at least an additional 7,000 jobs will be created over the next few years by developing the Marcellus Shale in West Virginia. No other industry stands on the horizon of the future job growth and economic development potential that shale development brings to West Virginia.
Provided by Dave Drennon, Independent Oil and Gas Association of West Virginia
Manufacturing
More now than in any other time in our state’s history, manufacturers are charting a new course to ensure future economic stability for West Virginia workers and their families. Opportunities for new growth continue to emerge and the direction we take during the next decade will be critical to sustaining our manufacturing base.
We are fortunate in West Virginia as our manufacturing base encompasses all areas of the state and many sectors of manufacturing, including chemical, polymer, wood, metal and automotive. Not only do we manufacture products, but over the years research and development conducted here has resulted in new products such as the discovery of nylon and Teflon. Our products have become a part of our everyday lives and are shipped throughout the world, enriching the lives of millions of people. In 2010, manufacturers in West Virginia exported product worth approximately $3.15 billion. We have a history rich in manufacturing and research and development, and the future looks bright for us.
Over the past few years changes such as the privatization of workers’ compensation and tax reforms that have been put in place have positioned the state to attract new investment, but we still have some challenges to overcome. West Virginia should consider changing its tax structure, as it currently taxes capital investment while other states, for the most part, do not. Another issue that has confronted the manufacturing industry is the lack of skills and education to fill many of the jobs that we now have. Over the next few years, there will be thousands of retirements, and those jobs will need to be filled. To address this problem, the West Virginia Manufacturers Association has worked with the West Virginia Department of Education to create a curriculum geared toward a manufacturing career path that can be adopted by county school systems. Further, we have worked with several of the community and technical colleges to develop courses that meet the needs of industry in their area. This educational effort is key to future growth in manufacturing not only here but throughout the country.
West Virginia is on the precipice of revitalization of its manufacturing industry. Not in our lifetime will we see another opportunity such as the one that has been presented to us with the development of technology to allow for horizontal drilling of the Marcellus Shale. Once again our natural resources will provide us the ability to supply the world with energy and feedstock for manufacturing products. Opportunities will abound with the location of an ethane cracker—or crackers—for the state. Not only will the location of a cracker demand construction jobs but there will be several hundred jobs created in order to operate the facility. Most important to manufacturing, the ethylene, the primary product of the cracking process, is key to virtually every consumer-product manufactured today. We will have the ability to attract new investment to our existing facilities and attract new companies that will manufacture everything from carpet to cosmetics.
Provided by Karen Price, West Virginia Manufacturers Association
Construction
Not only is the ongoing construction downturn devastating to people working directly in construction, but it is serving as a drag on U.S. economic growth. Construction spending nationwide accounts for more than 8 percent of U.S. gross domestic product and is responsible for one out of every 10 U.S. manufacturing shipments and one out of every 12 machinery shipments.
In West Virginia, construction employment in July 2011 was 32,500, down 19 percent from its peak in August 2006 at 40,300. Most economic forecasters predict slow and sub-par growth in the broader economy through the rest of the year and into 2012. While much of the same is expected for the construction industry, there is a growing consensus that reviving demand for construction is essential to sustaining broader economic growth.
Given the challenging economic times, contractors are reviewing their business models and reconsidering their company’s organization and focus. The reduction in the market will drive companies to innovate and create new business opportunities. There will be more mergers and acquisitions, as well as the creation of joint ventures to perform projects that probably would not have occurred had the market remained stable.
Congress, as well as West Virginia lawmakers, will realize that it will cost more to repair the nation’s and the state’s infrastructure than to maintain it. This will lead to future funding of infrastructure projects, which will boost the economy and improve employment levels. It will lead to an increase in domestic demand for manufactured goods, shipping services and supplies and materials, and it will bring new vitality to many of our hardest hit communities.
Provided by Mike Clowser, Contractors Association of West Virginia
Aerospace
The aerospace industry is a great asset to West Virginia. At the Mid-Atlantic Aerospace Complex, North Central West Virginia Airport, the industry encompasses commercial and passenger air service, composites manufacturing, military training and maintenance repair operations. Our companies provide parts and services for engineering, research and development and the production of unmanned systems, nano-enhanced titanium and organic metal matrix composites. They also provide full-service repair on aircraft, production of assemblies and sub-assemblies for aircraft component parts and full-service engine overhaul and manpower for this industry.
Air travel will continue to be an essential part of our national transportation system. We are fortunate that internationally renowned aerospace companies that located here in the 1960s have chosen to stay here. West Virginia has always been a part of America’s national defense, and with the commitment of our aerospace companies, we are able to continue in our role within America’s defense industry.
Aerospace is a unique sector that requires a specific set of skills and, in many cases, FAA-certified instruction. West Virginia is poised to support the continued growth of our aerospace industry with the training, certifications and degrees offered at the Robert C. Byrd National Aerospace Training Center and the Robert C. Bird Institute. The Mid-Atlantic Aerospace Complex helps ensure consistent enrollments and a skilled labor pool to draw from and works diligently to inform future generations that they do not have to leave the state to work in this industry. ν
The information presented in this snapshot encompasses companies located in North Central West Virginia and their economic impact on the state.
Provided by Tracy Miller, Mid-Atlantic Aerospace Complex, and Rick Rock, North Central West Virginia Airport
Fulfillment and Distribution Centers
From just about anywhere, you can buy just about anything: the hottest fashion accessories, latest computer hardware or newest automotive component. With a click of a mouse or touch of a pad, the product is on its way.
Fulfillment and distribution centers are the keys to providing products to consumers all over the world. Fulfillment centers are part of a larger industry category known as non-store retailers. Similar job skills can be found in the wholesale trade and warehousing and storage industries, and oftentimes a single company may be involved in more than one sector. Distribution centers, on the other hand, deliver stock to retailers while fulfillment centers deliver to consumers. The increase in the need of fulfillment and distribution centers is based on the growing trends of products being ordered by phone or other multi-channel electronic transactions.
West Virginia presents several advantages with strong appeal to the fulfillment/distribution industry, specifically in terms of location, work force and community support. The Mountain State is strategically located within overnight delivery of half of the U.S. population and one-third of the Canadian population, bringing fulfillment/distribution centers closer to their East Coast customers and suppliers. Our work force has earned a reputation for its work ethic, productivity and loyalty. According to one fulfillment center executive, the national fulfillment/distribution industry turnover rate is typically 25 percent. The rate at his West Virginia distribution center is less than 5 percent. Since fulfillment/distribution centers are often judged based on their speed, productivity and accuracy, retaining a skilled work force is essential for these centers to be competitive and timely.
West Virginia works to recruit new businesses and assist the expansion of existing businesses through a variety of tools. For example, WorkForce West Virginia works with employers to identify qualified applicants; educational institutions have partnered with companies to develop needed instructional courses and the West Virginia Legislature has provided pro-growth measures such as the sales tax exemption for certain warehouse and distribution centers, which exempts the purchase of construction materials and material handling equipment in qualified warehouse and distribution centers.
The fulfillment and distribution industry is a result of the widespread availability of the Internet and the new convenience of shopping anywhere in the world from the comfort of your home. This industry has found a dependable partner in West Virginia, and we foresee only continued growth and expansions for this sector in the Mountain State.
Provided by Catherine Zacchi, West Virginia Department of Commerce
Bioscience
The bioscience industry is an exciting new industry taking shape in West Virginia and it is beginning to spark technological breakthroughs that have the potential to create thousands of jobs.
The industry’s members are involved in the research and development of innovative health care and agricultural, industrial and environmental products. Bioscience products combat debilitating and rare diseases, reduce our environmental footprint, feed the hungry, use less and cleaner energy and utilize safer, more efficient industrial manufacturing processes.
The bioscience and life science fields are just now emerging in West Virginia, but they are already making a significant impact. Capital investment is a challenge for bioscience companies, and startups are facing the difficulty of finding incubator space, an important aspect for companies that need to focus their investment capital on development and growth.
In West Virginia, bioscience companies are helping researchers identify proteins and produce large amounts of short DNA sequences for use in DNA vaccines, gene therapy, diagnostics and bio-agriculture. In order to continue this success, the industry is going to need to work more closely with the state’s universities where basic research is taking place. This collaboration will help identify technologies that can develop into new products, potentially creating new businesses. West Virginia also has unique opportunities to expand into green technology and biotechnology as it pertains to forestry, mining and the environment, which would have a profound impact on business development, job growth and quality of life.
To say that the bioscience industry is an exciting field is truly an understatement when you consider the companies, discoveries and jobs it will create for the state.
Provided by Derek Gregg, Biosciences Association of West Virginia
Health Care
Health care is one of the most important industries of this country’s economy, creating 205,100 new jobs this year alone. Within this health care hub, hospitals are the single major segment. As one of West Virginia’s largest employers, hospitals employ more than 39,000 people statewide.
Economics notwithstanding, our hospitals have always faced challenges. Now, with the 2010 Patient Protection and Affordable Care Act (ACA), they must remain topnotch health care providers while meeting new financial, operational, political and regulatory pressures.
Coping with payment shortfalls by government health care providers is continually challenging. Hospitals in 2009 experienced $324 million in unpaid costs, and growth in the uninsured population is problematic. Theoretically, the ACA should reduce the numbers of uninsured with its complete implementation in 2014.
The ACA also greatly increases the demand for caregivers, making recruitment and retention of qualified health care professionals imperative. Because our state is largely rural, accessible health care on all levels is a necessity, and that requires further expanding broadband networks. The West Virginia Health Information Network is a particularly valuable resource in this area.
There is no one solution to the myriad of challenges hospitals face, but putting patients first as health care reform unfolds is a step that all of our hospitals are taking together. Change brings challenges, but it also creates growth. We stand on the cusp of an exciting era in health care, with accelerations in technology, education, clinical research and patient safety. Our hospitals will meet these challenges head on as they advance new health-based initiatives forward for the future generation of health care in West Virginia.
By Tony Gregory, West Virginia Hospital Association
