If Energy = Jobs, Where Are They?
Matthew is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I had the opportunity to sit in on a small business round table with Robert DeSousa who is the state director for U.S. Senator Pat Toomey of Pennsylvania. He was there to get a feel for what small businesses are struggling with and how Washington can help, or at least stop hurting. There was a very lively discussion on taxes, regulations and unemployment.
Of everything that was discussed, the topic of energy was the one that really caught my attention. He had a lot to say on the subject and was especially critical of the EPA saying that they are stalling the job creation process as they are completely out of control. He gave an example that we now ship coal to China to burn in plants using 1890’s technology while we are forced to close plants here in the US because they are using 1990’s technology. As southwestern PA is a big producer of coal this is important for the region. It is also important to have a steady supply of inexpensive electricity here in the US to power our economy and create jobs.
One example that he pointed out was one from earlier this year when FirstEnergy (NYSE: FE) announced they were closing six coal-fired power plants because of new environmental regulations. These closings in Ohio, Pennsylvania and Maryland would affect more than 500 employees. Many in the region are hoping that natural gas can pick up the slack, however, as gas prices remain depressed and the drill rig count comes down many are wondering what the future holds. The debate between the economy and the environment will not go away and it goes without saying that we cannot sacrifice our environment for economic gain.
Still, the biggest hope in job creation is in our emerging domestic energy industry. According to some industry statistics, in 2010, the development of shale gas supported 600,000 jobs and that figure is expected to surpass 870,000 in 2015. Further, oil and natural gas development created nearly one out of every 10 new jobs in the US. However, with unemployment remaining above 8% many are asking the big question:
So if energy does equal jobs, where are they?
A lot of the future jobs are still in the pipeline, quite literally. TransCanada’s (NYSE: TRP) Keystone XL pipeline gets most of the press these days for reasons other than job creation. However, the company says the $7 billion dollar project will create 20,000 jobs, it is but one of many projects in the pipeline. With over $8 billion of projects being developed over the next three years, Enterprise Products Partners (NYSE: EPD) is creating jobs. One of their projects, to build the world’s largest propane dehydrogenation unit, will create about 2,000 temporary and permanent jobs. The list goes on and should continue to grow.
In the Marcellus Shale region alone, which Sen. Toomey represents, it is estimated that they’ll need $20 billion dollars of midstream investment to meet the production growth between now and 2020. This is because companies like Range Resources (NYSE: RRC) are still spending money to drill, especially in the liquids rich areas. For 2012, Range was planning to spend $1.6 billion to support their drilling program with a lot of it going to the Marcellus. In a press release announcing their 2012 plan they pointed out another project by Enterprise, the ATEX pipeline that has enabled them to make significant progress in marketing their ethane production. I’ve written about this currently stranded commodity before, but as projects ramp up it will create jobs.
The biggest single job creator for the state is coming by way of the proposed Shell (NYSE: RDS-A) cracker plant (which uses ethane as a feedstock). The $3.2 billion dollar project is projected to create between 10,000 and 20,000 new permanent jobs. Most of these jobs will be what are called induced jobs, which are jobs that support those who work either directly or indirectly for the plant. According to the secretary of labor the state believes that 15 new permanent jobs will be created for every permanent job at the plant.
The problem and one of the biggest criticisms of both the politicians and the industry is that many feel these job creation numbers are being inflated. For instance, at the Shell cracker plant, only 400 permanent direct jobs will be created which bring the total job creation numbers to be closer to 6,000 to 8,000 jobs if you use the fifteen to one ratio, much less than the state is touting. Those same criticisms are being leveled against the Keystone XL pipeline. We’ll probably never know exactly how many indirect and induced jobs will be created if these projects do ever come on line, but we do know that energy projects do create jobs.
If you look at what the Bakken has done to the unemployment rate for North Dakota and it should give you hope. Currently that state has an unemployment rate of less than 3% while the national average is 8.2%. With all the projects that are in the works to use our energy resources, it means that jobs will be created. As much as we want to see people go back to work today, it is at least a comfort to know that they are in the pipeline. With over $8 billion of exciting projects, Enterprise is going to create a lot of jobs over the next couple of years, making them the one energy infrastructure company I'm buying today.
latimerburned owns shares of Enterprise Products Partners L.P. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Enterprise Products Partners L.P., Range Resources, and TransCanada. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.