Construction boosted by gas-drilling boom
CHARLESTON, W.Va. -- In recent months, the Marcellus Shale boom has saved the region's construction industry, a Charleston construction company owner said last week.
"Thank God for that," said John Strickland, president of Maynard C. Smith Construction, referring to the natural gas reserves in the Marcellus Shale formation that extends throughout most of West Virginia in addition to Pennsylvania, Ohio, New York and other eastern states. "It has put our pipeline contractors to work, our road building contractors to work. That huge private sector has saved our cookies."
Nationwide, the number of construction jobs has dropped in nearly half of the 337 metropolitan areas from June 2011 to June 2012 included in a report released last week by the Associated General Contractors of America.
But construction employment increased in 127 of those metro areas -- including West Virginia overall and the Charleston metro area.
West Virginia's construction employment increased from 34,100 in June 2011 to 36,700 jobs in June 2012. Until this year's boost in construction jobs in the state, West Virginia's construction employment had dropped 19 percent during the three years prior.
Mike Clowser, executive director of the Contractors Association of West Virginia, said quite a few of the new construction jobs are in the Marcellus Shale industry, especially in the Mountain State.
"A lot of our members are working in the Marcellus Shale industry. Water and sewer contractors are putting in lines, highway contractors are putting in roads, aggregate suppliers are supplying stone to these projects," Clowser said. "We are seeing a pretty good market for our membership that are now working in the oil and gas industry that were not involved in this process five years ago. As such, our members have been able to stay pretty busy."
Shale gas production supported more than 600,000 jobs in 2010, according to "The Economic and Employment Contributions of Shale Gas in the United States," a report by IHS Global Insight. People employed in the shale gas industry will increase by 1 million by 2035, according to the report.
Mark Grigsby, president of Pray Construction, said the Marcellus boom has sent West Virginia workers from his Scott Depot company to complete construction projects in Ohio and Pennsylvania. As a secondary supplier to the natural gas industry, Pray Construction employees are building support structures, he said.
"At least 30 percent of our work volume is tied to the natural gas industry," Grigsby said. "That industry has continued to develop the last several years and we have followed them in the marketplace."
Construction spending rose to a two-and-a-half year high in June 2012, according to new federal data released last week by the AGCA.
Five of the 11 private nonresidential categories in the Census Bureau's monthly construction spending report saw double-digit percentage gains in spending from June 2011 to June 2012, said Ken Simonson, Associated General Contractors of America's chief economist.
Power and energy construction (including oil and gas-related projects) had the largest percentage gain in construction spending from June 2011 to June 2012 with a 26.5 percent increase, according to the AGCA spending report. Lodging had the next biggest percentage gain at 26.3 percent followed by manufacturing at 19 percent; educational at 18.8 percent; and transportation at 17.1 percent.
West Virginia may have the highest hope in private nonresidential construction since spending is up 14 percent, construction economist Simonson said.
"With the fracking in West Virginia and neighboring part of Ohio and Pennsylvania and interest in the chemical companies to put in ethane crackers ... nonresidential could benefit," Simonson said. "I think that's going to provide multiple benefits to construction and other industries in West Virginia."
Drilling wells is considered a mining job, Simonson said, but construction workers are leveling roads and building storage structures, which is adding new jobs in the industry.
Pray Construction has hired new staff in the last year, Grigsby said. Administrative support staff, a project manager, and construction workers have been hired to join the nearly 60 seasonal employees at Pray Construction, he said.
"Our work has not fallen off. We have experienced nothing but increased volume for the past several years," Grigsby said.
The statewide increase in construction jobs is "very positive news that has been well received," in the industry, Grigsby said.
However, Strickland said although he has hired new construction workers at his Charleston business in the past year, the volume of projects is decreasing.
The Charleston metro area saw only a 2 percent increase in construction employment during the past year. While the area -- which includes Kanawha, Putnam, Boone, Clay and Lincoln counties -- did see job growth, the increase is much smaller than last year's 15 percent increase in construction employment, the fifth-highest jump in the nation in 2011.
Industry leaders said last year the 2,300 jobs created in 2011 -- compared to just 300 in the Charleston metro area one year later -- was fueled mostly by publicly funded projects, such as schools, bridge repairs and replacements, water and sewer lines and Yeager Airport renovations.
Many of those projects have since wrapped up, Strickland said.
"In 2011, there was so much demand and so much work and we participated in that. Now that demand has been somewhat faded and we need to move on," Strickland said. "Last year it just seemed like there was a lot of work to bid...the double edge sword was the work dried up."
Strickland said federal funding -- such as the American Recovery and Reinvestment Act of 2009 -- "was a great idea to kill two birds with one stone" but that money is now gone and so are most of the jobs that it created.
Cutbacks in spending on the public and private levels have resulted in reduced construction projects, Clowser said.
AGCA officials said the nearly 50 percent decline in construction jobs nationwide is a result of the public sector continuing to cut back on investments and slow economic growth.
Clowser said there is a direct correlation between the continuing decline in construction jobs and the economy.
"That is a direct result of the economy and if we do not have new investments in construction projects, obviously we are not going to use many construction workers for the work," Clowser said. "We've seen other industries have a recession but the construction industry nationwide has been in a depression. When you invest in infrastructure, not only are you improving the quality of life for all West Virginians, you're creating hundreds of high paying construction jobs."
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