Sustained Outrage

The Utica Shale: Big deal or big hype?

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drill
Earlier this summer, Gazette-Mail business writer Andrew Brown produced a detailed look at how West Virginia’s oil and gas industry uses partition lawsuits to assemble the mineral rights it wants to pursue natural gas drilling in the Marcellus Shale region. Now, Andrew has spent some time examining the recent hype over the Utica Shale and provides us with this guest blog post:

Based on reports, one can be forgiven for believing that West Virginia is about to witness an immediate surge in gas exploration in the state’s northern counties. Over the past month, coverage of the gas industry has been fueled by a new study by West Virginia University that suggests the state may be sitting above another one of the world’s largest gas reserves – the Utica shale, a formation located several thousand feet below the now well-known Marcellus.

When the study was unveiled in Canonsburg, Pa., on July 14, numerous stories were written that played up the Utica’s potential and the possibility of the formation overtaking the Marcellus as the primary target of gas companies.

The State Journal wrote:

While the Marcellus Shale basin has been getting most of the credit for West Virginia’s recent natural gas boom, a recent West Virginia University study suggests the Utica play could soon fall under the spotlight.

Data from the Utica Shale Play Book Study, a two-year geological study conducted by the Appalachian Oil and Natural Gas Research Consortium, suggests the Utica Shale play is much larger than original estimates, and its size and potential recoverable resources are comparable to the Marcellus play, the largest shale oil and gas play in the U.S. and the second largest in the world.

The Exponent Telegram quoted Doug Patchen, the director of the Appalachian Oil and Natural Gas Research Consortium, the WVU group that led the study:

 “It certainly has that potential. Right now, we’re estimating it has an equal potential, at least, to the Marcellus. It’s just a matter of time,” Patchen said.

With all of this hype over the formation, it should come as no surprise that gas companies – some of which helped to fund the study — took the opportunity to emphasize their plans to drill their first Utica wells in West Virginia. On July 31, the EQT officials emphasized the results of a Utica test well in Pennsylvania and reiterated their interest in drilling another well in Wetzel County later this year. As the State Journal reported:

EQT Corp.’s test well in the Utica Shale in western Pennsylvania has produced more dry natural gas than expected, so now the question is whether the Utica test well it plans to drill in Wetzel County soon will deliver the same results.

And less than two days after the study was released, Antero Resources jumped on the opportunity to announce its first exploratory well in Tyler County. The Exponent Telegram predictably linked the company’s announcement to the WVU study:

News of Antero’s first Utica well in the Mountain State comes as new research suggests the gas play contains far greater reserve than originally thought. On Tuesday, researchers released the results of a West Virginia University-led study that concluded the Utica holds 782 trillion cubic feet of technically recoverable natural gas and another 1,960 million barrels of oil.

Continue reading…

Part 2: How many jobs would a cracker create?

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Gov. Earl Ray Tomblin

The potential construction of a natural gas “cracker” plant was understandably a big topic of discussion yesterday at Gov. Earl Ray Tomblin’s Energy Summit here in Charleston. Unfortunately, though, state officials continue to misstate the findings of an industry jobs study in their rhetoric about what a big deal such a plant would be for West Virginia’s economy.

In opening the conference, Commerce Secretary Keith Burdette, for example, cited the American Chemistry Council study and said it found such a facility would create “12,000 direct and downstream jobs.”

Then, during a very brief luncheon speech, Gov. Tomblin cited the same study and said it showed a cracker plant here would create 12,000 jobs in the “chemical and polymer industries.”

We’ve discussed this study before on this blog (see here), and tried to explain what it does and doesn’t say. You can read the study documents for yourself here, here and here. But this is the bottom line, quoting from my previous post on this:

Table 1 outlines the estimated ongoing (permanent) jobs that might be created if a company invests $3.2 billion in a major cracker facility here: About 12,300 total jobs. That figure includes 2,500 direct jobs, 6,300 indirect jobs and 3,500 induced jobs. As Kevin Swift, the council’s chief economist, just explained to me, that total number of jobs — the 12,000 figure the governor cited in his speech on statewide television and radio, before a joint session of the Legislature — includes all manner of jobs. It is not only direct manufacturing jobs, but positions with suppliers and support industries — everything from a waitress at a new cafe across the road from the plant to a doctor who starts a practice to serve residents in a growing community.

But they’re not all manufacturing jobs, and the ACC study doesn’t provide more detail that would give a clearer picture of how many jobs in various sectors with various levels of pay and benefits might be includes. You can get perhaps a bit more information by looking at the average wages for each category — $112,000 annually for direct jobs and $34,000 for indirect. But that’s a basic average, and may not tell the whole story.

It’s true that Gov. Tomblin said later in his talk that the cracker would provide:

.. Billions of dollars of economic impact that will affect every aspect of our economy, from locally owned grocery stores to plastics manufacturers.

But his speech still confuses the general public into thinking that  a West Virginia cracker plant would create 12,000 jobs in manufacturing or in the chemical industry, because he overstates what this study found. There’s no question such a project would have a huge economic impact — so why do state leaders insist on exaggerating things?

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As the Marcellus drilling boom continues, the media reports of almost unlimited jobs and economic impact grow and grow (see here, here, here and here) — with few questions ever asked about where the estimates of the industry’s benefits come from.

Things get especially out of hand when West Virginia political leaders turn to their efforts to tout the potential benefits of getting a “cracker” plant to locate in the state. We’ve tried before to bring some sense to that discussion, and we’ve pointed out that state officials never really finished a legislatively mandated report that was supposed to examine whether the jobs that the Marcellus boom is creating were actually going to West Virginians.

Now comes an important post from PolitiFact Ohio that addresses similar issues in a neighboring state.  The post examines claims by the Ohio Oil and Gas Association that the industry has created 40,000 new jobs in that state:

No source for the jobs figure was given with the ad, which we accessed on April 10, so we called the Oil and Gas Association and asked how it was supported.

They referred us to “America’s New Energy Future,” a report by the global market information and research company IHS, Inc.

Given wide coverage when it was released in December 2012, the report was commissioned by the U.S. Chamber of Commerce’s Energy Institute, the American Petroleum Institute, the American Chemistry Council, America’s Natural Gas Alliance and the Natural Gas Supply Association.

The report includes state-by-state breakdowns on how many jobs have been created and are projected to 2035 due to shale exploration. It refers to horizontal drilling and hydraulic fracturing as unconventional drilling.

Now, keep in mind that this industry-funded study is the same one that many media reports in West Virginia (see here, for example) have cited, and check out what PolitiFact had to say:

The figure of “nearly 40,000” is an accurate reference to the IHS report. And the ad’s reference to jobs “in all walks of life” does indicate that the jobs net is being cast over a wide area not solely restricted to drilling.

But the reality and relevance of the number in the context of the ad is undermined considerably by the fact that it is not the result of surveying but of modeling; that fewer than half of its nearly 40,000 jobs are directly or indirectly related to drilling, and that the single largest element — almost 30 percent of the jobs total — consists of unidentified “induced” jobs.

We think the ad’s reference to the creation of new jobs would reasonably be taken as referring to permanent or continuing jobs, not temporary employment.

Further, the touting of jobs “right here in Ohio” that are “restoring Ohio’s heritage” is not supported by the substantial percentage of jobs going to out-of-state workers, even if that percentage is diminishing.

Finally, the IHS report says its figure of 38,830 jobs refers to total jobs supported by drilling during 2012, not to new jobs created in the year, as the ad claims.

And the words matter. The IHS report itself makes clear that there is a difference between jobs that are “created” by the industry — which, in a generous reckoning, would encompass direct and indirect jobs — and jobs that are “supported,” which would be all of the 21,020 induced jobs.

That’s an important distinction that the ad ignores, and it accounts for more than half the jobs that the ad claims.

So the association has misrepresented its own industry’s study with compounded exaggerations.

The Truth-O-Meter says Pants on Fire!

McClendon gives up Chesapeake board chair

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Here’s the announcement today from Chesapeake Energy:

Chesapeake Energy Corporation today announced that its Board of Directors has renegotiated the terms of the company’s Founder Well Participation Program (FWPP) with Chairman and Chief Executive Officer Aubrey K. McClendon to provide for the early termination of the FWPP on June 30, 2014, 18 months before the end of its current term on December 31, 2015. Mr. McClendon will receive no compensation of any kind in connection with the early termination of the FWPP.

The FWPP, which was approved by shareholders for a 10-year term in 2005, in conjunction with Mr. McClendon’s employment agreement with the company, provides Mr. McClendon a contractual right to participate and invest as a working interest owner (with up to a 2.5% working interest) in new wells drilled on the company’s leasehold. Mr. McClendon has agreed to forego such contractual right 18 months early without compensation.

The Board of Directors will name an independent, Non-Executive Chairman in the near future. The Board’s Nominating and Corporate Governance Committee is considering potential candidates with no previous substantive relationship with Chesapeake and will be soliciting input from major shareholders. Upon the appointment of a Non-Executive Chairman, Mr. McClendon will relinquish the position of Chairman and continue as Chief Executive Officer. Mr. McClendon has indicated his support of the Board’s decision to name a Non-Executive Chairman and waived any rights he might have under his employment agreement as a result of no longer serving as Chairman. As previously announced, the Board is reviewing the financing arrangements between Mr. McClendon (and the entities through which he participates in the FWPP) and any third party that has had or may have a relationship with the company in any capacity.

The announcement follows the recent stories about McClendon’s business dealings.

Shedding light on Stamping Plant tax deal

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The South Charleston Stamping Plant will be home to Gestamp, an $11 billion international automotive stamping company. Gazette photo by Chip Ellis

The big news in the Kanawha Valley this week has been the announcement of plans to reopen the Charleston Stamping Plant, creating perhaps as many as 700 jobs working for the company Gestamp at the facility in South Charleston. Media coverage made brief mention of a tax break plan passed by South Charleston to try to land the project:

The city council approved an ordinance last week that will cap the business and occupation tax at $365,000 a year for companies that meet certain criteria of employment numbers and revenue.

And now, the good folks at the West Virginia Center on Budget and Policy have tried to put a number on how much this tax break is going to cost.  They explain:

As for the tax incentive, it involves a credit against the local B&O tax, which the plant must meet certain sales and employment requirements to receive. The credit is for 50% or 25% of the B&O tax liability, depending on the number of years of operation. The amount of the tax that can be owed is also capped, at $365,000 per year for the life of the credit.

The credit would go into effect in the facility’s fifth year of production, if it has sales of $100 million and meets the employment requirements. It is impossible to know what the sales will be four years or 12 years down the road, so we are assuming that they are the minimum requirements set forth in the tax credit.

In short:

Over the time frame, the credit would reduce the amount of B&O taxes owed from $14.6 million to $10.4 million, a savings of $4.2 million

But, they explain:

The cap on the tax is actually more valuable than the credit over the life of the credit … with the cap in place, the facility would only owe $5.1 million, an additional savings of $5.3 million. This is because, beginning in year 9, the amount of tax owed is greater than the $360,000 cap. So while the credit falls from 50% to 25%, the size of the tax break actually increases, due to the cap.

The Center concluded:

To be clear,  this analysis is not suggesting that this isn’t a “good deal” for the state. We think it is great that there is a possibility of creating new good paying jobs. Like we’ve said a million times, we are all for a strong economy and for government to play a smart role in economic development.  Our only aim with this post is to shed some light on what the fiscal impact might be on the deal.  Since these job subsides are taxpayer funded, the public has a right to know the costs and benefits. While history shows that deals like these often go sour,  we hope it not only works out but that it revitalizes auto parts manufacturing in the region.

 

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Yesterday morning, I happened to put in a call to my old buddy, Tomblin administration Commerce Secretary Keith Burdette, to ask him a couple of questions about the Marcellus Shale drilling boom — things that were kind of far out in the weeds related to the various proposals out there for a natural gas “cracker” plant that some folks believe is the region’s biggest economic development project in a generation.

By the time Secretary Burdette called me back, rumors were starting to swell that an announcement was coming very soon about one of those proposals, the multi-billion-dollar project from Shell Chemical.  When I asked him about it, Burdette confirmed that state officials had been told an announcement was coming. Shell told the governor what they had decided, he said, but any information on that would have to wait until Shell went public first.

But from the tone of Secretary Burdette’s comments, it was pretty clear how things had played out:

Under any circumstances, it’s going to be a good thing, Some of us are going to be applauding, and some of us are not.  I know there’s an awful lot of pride in trying to be the one who gets the deal, but it really does have a huge regional impact.

The official announcement from Shell came shortly before 1 p.m. From there, the race was on among the West Virginia press corps to figure out how the Shell facility — so much sought after by Gov. Earl Ray Tomblin and state business boosters — ended up going instead to Beaver County, Pa.

In a quick blog post yesterday,  I tried to provide some context about how tax breaks and other incentives rarely seem to have much to do with these decisions, and how improving our state’s educational system and infrastructure might help more in bringing new jobs and a higher quality of life to residents.  The good folks at the West Virginia Center for Budget and Policy soon posted their own take, explaining that if taxes alone were the issue, Shell would have been better off going to Ohio.

It appears that my friend Larry Messina at The Associated Press got the big scoop, with his reporting of this part of the story:

West Virginia lost the battle to attract Shell’s multibillion-dollar chemical plant because of the costs of relocating a casino that occupies the company’s in-state choice for a site, sources told The Associated Press.

Shell announced plans Thursday to build the so-called “cracker” plant in Monaca, Pa., about 12 miles from the West Virginia border. Two individuals with direct knowledge of the negotiations with Shell, but who were unauthorized to speak publicly about them, said the company’s preferred West Virginia location encroached on Mountaineer Casino, Racetrack and Resort.

Other theories came rushing out. The State Journal let gas industry lobbyist Corky DeMarco suggest that labor unions were to blame, for having the gall to criticize another industry project that’s not hiring local union construction workers. Shell didn’t mention this, and ACT Foundation director Steve White made a strong argument that DeMarco is simply wrong. Republicans activists like former Don Blankenship operative Greg Thomas were falling all over themselves to paint this as Gov. Tomblin’s fault, saying it shows the need for the state to “lower taxes on new investment, controlling cost of government, comprehensive legal reform and implement reasonable regulations” along with “ethics and election reform to show potential investors WV isn’t run by corrupt career politicians.” Over at West Virginia MetroNews, Hoppy Kercheval is so rabid to get a Republican governor that he’s pushing candidate Bill Maloney’s argument along these lines, despite admitting in today’s commentary that Maloney and his campaign are probably wrong about it.

But the truth is: We’ll never really know what happened.

That’s because 99 little words in the West Virginia Code give our state’s economic development agents an exemption from the state public records law and, in the process, a free ride from any real public accountability. That’s right. Check out W.Va. Code 5B-2-1, the second paragraph:

Any documentary material, data or other writing made or received by the West Virginia development office or other public body, whose primary responsibility is economic development, for the purpose of furnishing assistance to a new or existing business shall be exempt from the provisions of article one, chapter twenty-nine-b of this code: Provided, That any agreement entered into or signed by the development office or public body which obligates public funds shall be subject to inspection and copying pursuant to the provisions of said article as of the date the agreement is entered into, signed or otherwise made public.

Where did this nifty little piece of state law come from? Well, it was rushed into the code at the behest of state business leaders and the Underwood administration back in 1997, after The Charleston Gazette won a state Supreme Court ruling that forced the West Virginia Development Office to release records about its efforts to lure a $1 billion pulp and paper mill to Apple Grove in Mason County. Back in the day, I wrote a couple of hundred stories about this project, which was highly controversial because of its potential to pollute the Ohio River with dioxin, strip West Virginia hills bare of timber, and bring in non-union, out-of-state workers for its construction.

Development Office officials under Gov. Gaston Caperton had given us some records about their efforts, detailing some requests for large, tax-free state loans, highway improvements, and other incentives that Parsons and Whittemore wanted for the project. But they had withheld hundreds of pages of records, claiming a broad ability to withhold from release any correspondence between state officials and outside parties like the pulp mill developers. The Gazette thought the people had a right to know what sorts of deals were being offered on their behalf, so the newspaper went to court.

In a unanimous opinion issued in mid-December 1996, the state Supreme Court ruled that we were right. The Development Office had to give us many more records, and some of the revelations were fascinating (subscription required):

— State agents met privately with Mason County schools officials to arrange the closing of a local elementary school that was inconveniently located near the proposed mill site.

— Public employees at the Development Office encouraged state environmental officials and legislators to weaken pollution limits to make the mill’s operation easier and less expensive (but also more polluting).

— One state official — longtime state development agent Rolland Phillips — even castigated Gov. Caperton for not taking a strong enough public stance in favor of the mill.

— Phillips also ghost-wrote letters for the company, and then wrote the state’s official replies.

— Other documents showed that the project was eligible for as much as $750 million in Super Tax Credits, far more than the $150 million that Development Officials suggested.

Continue reading…

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Republican gubernatorial candidate Bill Maloney is certainly getting a lot of attention for his remarks about the tax credit legislation Gov. Earl Ray Tomblin eased through the legislature this session in the hopes that it would help lure a natural gas “cracker” plant to West Virginia. Speaking with my buddy Hoppy Kercheval on the MetroNews show Talkline, Maloney said:

If we’d fix our courts and our tort reform issues we’d stand a lot better chance of getting a cracker than we would be in passing this huge bill that we just pull down our pants to get a cracker, when everybody should be getting the same tax breaks.

But perhaps the real story about this sort of thing was further into today’s Daily Mail, where business editor George Hohmann revealed the findings of a new report by Gov. Tomblin’s own Tax Department about these sorts of tax breaks and other incentives, concluding among other things:

The credit programs may help some individual business taxpayers, but the overall impact of the credit programs on economic growth is arguable.

Remember that when the cracker tax break passed, Gov. Tomblin said:

To spur economic development, attracting an ethane steam cracker has been my number one goal and I am so pleased, with this vote, the legislature has sent a clear signal that they are joining me in this effort. This tax relief bill, I believe, showcases our State’s commitment to being a great business partner today and long into the future.

Greg LeRoy and his group Good Jobs First have written extensively about the ineffectiveness of tax incentives as an economic development tool, and the great investigative reporters Barlett and Steele have also exposed these sorts of programs.

Of course, the lack of any proof that such tax breaks work overall didn’t stop West Virginia lawmakers from falling all over themselves to approve the governor’s cracker bill — and to do so without even having any clear analysis of what the potential costs of the legislation might be. It took the good folks over at the West Virginia Center for Budget and Policy to inform us that the price could easily be $300 million.

Not for nothing, but the most recent reports (see here, here and here) indicate it might be a while before Shell actually moves forward with the cracker plant West Virginia political leaders are spending so much energy trying to lure to our state …

DOE slashes estimate of Marcellus Shale reserve

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In this July 27, 2011 file photo, Range Resources site manager Don Robinson stands near the well head by the drill that goes into the shale at a well site for natural gas in Washington, Pa.  (AP Photo/Keith Srakocic, File)

Significant news out this morning from the U.S. Department of Energy’s Energy Information Administration:

… The estimated unproved technically recoverable resource (TRR) of shale gas for the United States is 482 trillion cubic feet, substantially below the estimate of 827 trillion cubic feet in AEO2011. The decline largely reflects a decrease in the estimate for the Marcellus shale, from 410 trillion cubic feet to 141 trillion cubic feet.

Now, this comes after last summer’s fairly confusing release of a new U.S. Geological Survey analysis of the Marcellus Shale reserve, and in the wake of other reports that have warned the Marcellus is not nearly as huge as some hopeful reports from the media, industry and political leaders have said.

In today’s early release of a summary of its 2012 Energy Outlook, the EIA explained its new figures this way:

Both EIA and USGS have recently made significant revisions to their TRR estimates for the Marcellus shale. Drilling in the Marcellus accelerated rapidly in 2010 and 2011, so that there is far more information available today than a year ago. Indeed, the daily rate of Marcellus production doubled during 2011 alone. Using data though 2010, USGS updated its TRR estimate for the Marcellus to 84 trillion cubic feet, with a 90-percent confidence range from 43 to 144 trillion cubic feet—a substantial increase over the previous USGS estimate of 2 trillion cubic feet dating from 2002. For AEO2012, EIA uses more recent drilling and production data available through 2011 and excludes production experience from the pre-shale era (before 2008). EIA’s TRR estimate for the entire Northeast also includes TRR of 16 trillion cubic feet for the Utica shale, which underlies the Marcellus and is still relatively little explored.

Interestingly at about the same time the EIA was briefing the media on its new report, Chesapeake Energy announced this news, what it called an update on additional steps it is taking to continue creating shareholder value in response to the lowest natural gas prices in the past 10 years:

Chesapeake plans to further reduce its operated dry gas drilling activity by 50% to approximately 24 rigs by the 2012 second quarter from 47 dry gas rigs currently in use and by 67% from an average of approximately 75 dry gas rigs used during 2011 … Specifically, during the 2012 second quarter, Chesapeake plans to have reduced its drilling activity in both the Haynesville and Barnett shales to six operated rigs each and to 12 operated rigs in the dry gas area of the Marcellus Shale in northeastern Pennsylvania.

And even in the so-called “wet gas” areas of the Marcellus like West Virginia (those areas where the natural gas reserves also contain significant amounts of potentially profitable other materials like ethane, butane, propane, and pentane), Chesapeake said:

Chesapeake plans to further reduce its undeveloped leasehold expenditures, the majority of which have been focused on liquids-rich plays during the past three years. The company is now targeting to invest approximately $1.4 billion in undeveloped leasehold expenditures in 2012 (net of joint venture partner reimbursements), of which approximately 90% will target liquids-rich plays and 100% will be in plays where the company is already active. This compares to undeveloped leasehold expenditures, net of joint venture partner reimbursements, of approximately $3.4 billion and $5.8 billion in 2011 and 2010, respectively.

Chesapeake CEO Aubrey McClendon said:

We have committed to cut our dry gas drilling to bare minimum levels that are likely to be maintained until expected drilling economics on dry gas plays return to levels competitive with expected returns in Chesapeake’s lineup of liquids-rich plays, which we believe is the best in the industry. As in previous natural gas pricing downturns, Chesapeake is promptly responding to rapidly changing market conditions, and we hope today’s announcement helps disprove the view held by some industry observers that producers fail to act rationally in times of unusually low natural gas prices.


How many jobs would a ‘cracker’ plant create?

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Gov. Earl Ray Tomblin waves to the crowd Wednesday, Jan. 11, 2012 prior to delivering his state of the state address at the Capitol in Charleston, W.Va. (AP Photo/Jeff Gentner)

Gov. Earl Ray Tomblin focused attention during last night’s State of the State address on his administration’s efforts to land a “cracker” plant that would create spin-off jobs based on the boom in natural gas drilling in the Marcellus Shale fields across West Virginia. The governor promised:

I will do everything in my power to make sure that West Virginia is positioned to take full advantage of this opportunity. I will not limit our efforts to just one project or even two. We will compete for every project — every dollar of investment and every new job that relies on the natural resources with which we have been so blessed.

Among other things, Gov. Tomblin said he plans to introduce legislation “to further refine our incentives in a fashion I believe will strengthen our competitiveness,” a proposal that the West Virginia Center for Budget and Policy have already explained is based on pretty questionable math.

But the governor also made this statement in his speech:

The American Chemistry Council estimates that we could create an additional 12,000 manufacturing jobs in West Virginia with the construction of an ethane cracker.

Now, when you think of manufacturing jobs, you think of pretty darned good jobs, right? Overall, the manufacturing sector in West Virginia pays about a third more in weekly wages than the private sector as a whole.

But Gov. Tomblin got this one wrong … Take a look at this two-page summary put together to describe the calculations the American Chemistry Council did of the economic impact of locating a cracker plant in West Virginia (for that matter, take a look at this fancier one-pager put together by the council’s communications department).

Table 1 outlines the estimated ongoing (permanent) jobs that might be created if a company invests $3.2 billion in a major cracker facility here: About 12,300 total jobs. That figure includes 2,500 direct jobs, 6,300 indirect jobs and 3,500 induced jobs. As Kevin Swift, the council’s chief economist, just explained to me, that total number of jobs — the 12,000 figure the governor cited in his speech on statewide television and radio, before a joint session of the Legislature — includes all manner of jobs. It is not only direct manufacturing jobs, but positions with suppliers and support industries — everything from a waitress at a new cafe across the road from the plant to a doctor who starts a practice to serve residents in a growing community.

But they’re not all manufacturing jobs, and the ACC study doesn’t provide more detail that would give a clearer picture of how many jobs in various sectors with various levels of pay and benefits might be includes. You can get perhaps a bit more information by looking at the average wages for each category — $112,000 annually for direct jobs and $34,000 for indirect. But that’s a basic average, and may not tell the whole story.

For those who want to understand the methodology of the industry study, you might check out this more detailed analysis that looks more broadly at impacts from expansions of the chemical industry associated with the natural gas boom and any accompanying cracker plants. It’s also worth remembering that these industry-produced studies are not necessarily the most helpful source for these sorts of projections, as we’ve reported before here.

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Yesterday, Chesapeake Energy officials were tweeting away in an effort to downplay the potential impacts of their company’s decision to sign a long-term contract to transport 75,000 barrels of ethane per day from the Appalachian shale region to the Texas Gulf Coast:

“We believe 75,000 barrels a day is a fraction of the ethane that will be produced. The news is ABUNDANCE.”

“If we can get a price locally, we will sell locally. The pipeline agreement is not a sales agreement.”

Chesapeake’s Scott Rotruck had already told the Gazette’s Eric Eyre that this pipeline agreement would not be the end of West Virginia’s efforts to lure a “cracker” plant to our state. As Eric reported on Sunday:

Rotruck said the pipeline project actually could help West Virginia’s chances of recruiting a cracker plant to the state. Ethane supplies “should remain significant” in the region, he said.

Sites under consideration for the cracker plant include Bayer-owned properties in New Martinsville and Institute.

“This announcement should not preclude our state’s ability to attract an ethane cracking facility,” said Rotruck, Chesapeake’s vice president of corporate development. “It will help ensure robust Marcellus development, which must be demonstrated in order to build a cracker.

“Proper ethane management will be a multi-tiered solution, with possibilities for storage, pipeline and cracking facilities.”

But the West Virginia AFL-CIO is apparently not convinced. Here’s the press release they sent out yesterday evening:

John Dillinger, the famous bank robber of the 1930’s when asked why he robbed banks replied, that’s where the money is! Today if West Virginia working families, (who struggle each day due to the scarcity of good jobs), were to ask Chesapeake Energy CEO, Aubrey McClendon why he is robbing West Virginia we suspect he would answer; because that’s where the money is!

After reviewing a document from the American Chemistry Council we believe Chesapeake Energy’s decision to export up to 125,000 barrels of ethane per day, (from our valuable Marcellus shale natural resource), by pipeline to the gulf coast will potentially destroy any hope of as many as 12,000 West Virginia jobs and result in the loss of $800 billion in wages and tax revenue.

Is this justice for West Virginia working families or is it another example of an out of state corporation robbing us?

(The labor organization apparently got their numbers confused … Chesapeake’s deal involves up to 75,000 barrels per day, while 125,000 barrels per day is the entire capacity of the Enterprise Products Partners pipeline).

There’s some interesting discussion of the whole pipeline issue over at the Marcellus Drilling News site and the Energy Inc. blog from the Pittsburgh Business Times.