Pennsylvania Today: Opportunities For Growth In The Keystone State

Wednesday, June 13, 2012 - 12:09

 

The Editor interviews Gene Barr, President and CEO, Pennsylvania Chamber of Business and Industry.

Editor: Please describe the Pennsylvania Chamber of Business and Industry (PCBI). What is PCBI’s mission, and what are its core activities?

Barr: We are the largest broad-based business advocacy group in Pennsylvania. Our mission is to advance those policies that make our commonwealth more competitive with other states and nations.

Editor: Please talk about PCBI’s membership and where large corporations fit in. Tell us about PCBI’s “Investor” member program and its benefits.

Barr: Chamber membership varies greatly: members range from the largest corporations in the nation to some of the smallest companies across almost every industry sector and from all corners of Pennsylvania. As major employers in the state, large corporations are obviously key to what we do, and they tend to seek a higher level of involvement than other members and are more willing to invest in the Investor-level program, which has a specific minimum dues commitment. For that, Investors receive a number of benefits, among them targeted communications and invitations to meet with the governor and cabinet officials, network with other Investor companies, as well as attend our regularly held Government Affairs Roundtables, where attendees participate in detailed discussions about public policy issues with the PA Chamber’s Government Affairs staff and key lawmakers and state officials.

Editor: What are the major areas in which PCBI focuses its advocacy efforts?

Barr: We work on many issues, but the most obvious include healthcare, as we begin to address what exchanges we will have in the state, and energy and environmental regulations because of what’s happening in the Marcellus Shale. We’re also concerned with state tax policy, legal reform, employment, workers’ comp, transportation, international trade, and education and labor, especially workforce issues.

Editor: What are the critical regulatory issues that PCBI is currently addressing?

Barr: Over the last year, Pennsylvania fortunately became one of a handful of states to reform joint and several liability – in which a party who may be liable for, say, five percent of the damage in a lawsuit winds up paying 100 percent. Joint and several liability was a significant disincentive to business from our perspective.  It took three tries to actually pass the legislation: the first time it was tossed out by the courts on procedural grounds; the second time it was vetoed by then Governor Ed Rendell. Fortunately the third time seems to be the charm.

In addition, over the years Pennsylvania has developed a reputation for having a more challenging environment from a permitting regulatory perspective in the areas of transportation, environment and energy. We often hear from companies actively working the Marcellus area that Pennsylvania is a lot tougher to deal with than Texas or Oklahoma, where the permitting process is much simpler and straightforward. I believe the current administration, in particular the secretary of the Department of Community Economic Development, is trying to find ways to break down those roadblocks that impede development. There’s a delicate balance between easing the permitting process and appropriate protection of human health and environment, which, of course, we want to preserve.

Editor: What are the key factors affecting Pennsylvania’s jobs environment, and what legislative action is being considered to encourage job growth?

Barr: Historically, Pennsylvania has been very strong in pharmaceuticals, biotech and science, especially in the southeast, thanks in large part to the state’s many fine educational institutions. Well-known colleges and universities throughout the state attract excellent minds for research and development. The state also boasts many world-class healthcare institutions. Meanwhile, because of its coal, Pennsylvania has for years been an energy exporter.

But what has been most exciting in recent years is the development of the Marcellus Shale, the second largest natural gas field in the world.  We’ve seen significant employment development in the Marcellus, not just in terms of direct jobs but also indirect jobs in several different industries. That has been a huge success for Pennsylvania. Some of the northern counties where the Marcellus is being actively drilled are experiencing near-full employment.

Editor: We understand you served on Governor Corbett’s Marcellus Shale Advisory Commission. Please talk more about the findings, especially those regarding the Marcellus’s impact on businesses and communities.

Barr: The governor put together the commission about a year ago. We met at an accelerated pace for a few months to ask ourselves the following: How do we encourage growth in the state through the Marcellus? And, what should we avoid doing? As for the first question, generally, it’s by developing the site in an expeditious manner while making sure that we adequately protect human health and the environment.

We had many discussions about how we might encourage more utilization of natural gas from the Marcellus Shale, such as using gas to power delivery trucks and municipal buses.

As for the second question, we talked about what we should be wary of. We are experiencing a phenomenon that is something like the Gold Rush days in the West. We’ve got a huge influx of people and a large amount of money coming in, and with that there are some social issues that the impact fee is designed to address. Furthermore, in areas that have historically had subsidized federal housing, the rents are being driven up by new wealthier arrivals, leading to housing shortages in many of the smaller towns.

In response, we’ve spoken with representatives in the building industry about acquiring more housing. Should we bring in modular housing? How can we create places for families while looking after people who may not have the economic wherewithal to stay in their hometowns? There are always positive and negative social effects that result from major economic change, and we tend not to think about the latter until they occur.

Editor: You mentioned indirect job creation as a result of the Marcellus. Please tell us more.

Barr: Here’s an interesting example. As part of our work for the commission, we visited a company that had been making parts for the amusement industry, but in response to the Marcellus, the company ingeniously found a way of translating a plastic cushion for a particular park ride into an impermeable lining for trenches at drilling sites.

The Marcellus has also spurred an increase in energy and environmental firms far afield – for instance, one Lancaster firm’s business grew such that last year it needed to buy 75 pickup trucks – and it did so from a Lancaster County dealer a couple hundred miles away from the nearest drilling. And, of course, there are the concomitant restaurants, hotels and entertainments that spring up wherever new jobs and growing populations can be found.

Editor: What are the benefits of establishing corporate locations in Pennsylvania?

Barr: Clearly, we’ve got a good transportation system, with good connections in our large cities, Philadelphia and Pittsburgh, although we at the chamber would like to see improvement there. We’re also close to significant segments of the U.S. population, and Philadelphia and Pittsburgh are certainly less costly options than New York or Washington, DC.

We’ve had to work through our corporate net income tax issues, and we’re trying to drive those down to make our tax structure more attractive.

I view what we did on legal reform as an economic development incentive, and our work developing the natural gas fields in the Marcellus Shale has significantly reduced the cost of energy for both residents and industries. For instance, because it has natural gas on its site, the Procter & Gamble facility in Mehoopany, PA went from being one of the highest-cost sites in their system to one of, if not the, lowest-cost sites in their system because they were able to drive down their energy costs so much.

Editor: Do you see any challenges ahead for natural gas?

Barr: It’s a real conundrum: the availability of this gas has driven the price down, and as a result development has slowed to a certain degree. In most cases it costs more to get it out of the ground than you can sell it for, so while I hate to say this, we probably need to see prices rise a bit before development ramps up again.

As I mentioned earlier, we aim to encourage the development of alternate uses for gas in addition to electricity generation and home heating, especially in transportation. This would increase demand and shore up prices. The ideal candidate for this use would be a company like UPS or FedEx that has a refueling facility that drivers can use when they come to work in the morning, then come back and refuel later. For the rest of us, it’s a chicken-or-egg scenario: nobody wants to put these facilities in until they know people will drive gas-powered vehicles, and people won’t develop the vehicles until they know the facilities are there.

That said, some transit authorities are using gas-powered vehicles – among them, the Centre County Transportation Authority in State College, with its entire fleet powered by natural gas – so we’re hoping to encourage others because the price disparity between natural gas and gasoline now is so great.

Editor: Have you seen a large population influx?

Barr: We’ve begun seeing growth in certain counties, but because much of the influx occurred after the 2010 census, I don’t know that we’ve measured it officially. I would anticipate that by 2020, assuming this industry continues to grow, we’ll see historically very rural counties make significant population gains. Many small towns that were almost dead are now coming back. The most obvious case is that of the city of Williamsport, kind of an old-fashioned town that had been very well-to-do in the 19th century, with beautiful homes owned by coal and timber industrialists, which had fallen on hard times. Today, because some of the companies working on the Marcellus are establishing their regional headquarters there, department stores are being built downtown, and hotels and restaurants and so forth are going up. You would have had to see Williamsport four or five years ago to appreciate the stark contrast.

Editor: Has this improved the tax base?

Barr: It has absolutely. The state has seen an increase in corporate contributions in addition to money coming into the state directly because it owns some of the land on which drilling is happening. We’re seeing more personal income tax out of those areas because of the huge sums of money people are receiving for leases and royalties as production ramps up.

Meanwhile, the industry has agreed to pay local impact fees to offset some of the social costs as well as more direct costs for roads and bridges that might be deteriorating at a quicker rate. Even better, according to local officials I’ve spoken with, many of the companies have themselves offered to rebuild whole sections of road to support their heavy machinery and extra traffic.

Editor: Do you have any final thoughts for our readers?

Barr: I think we have even better days ahead. With our historic strengths in nuclear, coal, solar and wind, the development of natural gas in the region will greatly enhance an already broad array of energy options for the consumer.

We’re making some real strides in legal reform. And like any other northern state, we do have some labor issues, and we understand we’ve got to do a better job. We’d like to see the young adults we’re educating in Pennsylvania stay here to share their skills and knowledge. Working with the legislature and this administration, we’re optimistic about making Pennsylvania a more attractive place to be.

Please email the interviewee at gbarr@pachamber.org with questions about this interview.