Carl Marrara’s testimony to the Philadelphia LNG Export Task Force
Read the full study HERE!
Good morning esteemed members of the Philadelphia LNG Export Task force. I am Carl A. Marrara, Executive Director of the Pennsylvania Manufacturers’ Association – the statewide, nonprofit trade organization representing the people who make things here in the commonwealth – everything from Chinook helicopters just minutes from where we are sitting, to iconic Zippo lighters in the northern-most portion of our commonwealth – to steel, glass, plastics, food, candy, and more. Manufacturing in Pennsylvania employs more than a half million jobs on our plant floors, adds more than 101 billion dollars in annual gross state product, and sustains millions of additional jobs in supply chains, distribution networks, and vendors of industrial services.
I am honored to join you today to talk about the potential for an LNG export facility in the Philadelphia-area and what it would mean to the economy of the region and the commonwealth as a whole.
Before we dive into the details of this specific case study, it’s important to note that Pennsylvania has missed out on economy-changing projects, in this very area, in the past. In 2018, Braskem, a Brazilian-based leader in the plastics supply chain, with American headquarters just a few miles away in Philadelphia, was sighting a new plant in the Americas. Marcus Hook was a finalist, but ultimately this project was awarded to La Porte, Texas because of known delays in necessary infrastructure the plant would need to function. Pennsylvania lost out on 1,300 construction jobs and nearly 100 full time manufacturing jobs, with other manufacturers that would have surely located near the feedstock they would have produced.
It was the loss of that project that led to our investment at the Pennsylvania Manufacturers’ Association to purchase IMPLAN economic modeling software. Typically, this program is used by economic development corporations or grant writing organizations to show return on investment for tax programs. We use IMPLAN to see what projects would mean for the economies to urge policymakers to work with our many vital industries to ensure our manufacturers locate, hire, and expand here in our commonwealth versus a competitor state.
And competitor states are no longer just the states that touch our borders. Business capital and talent is more mobile than it’s ever been. And that’s why we are excited to present you with the document that’s before you today, including an economic impact study of what an LNG export facility located in Delaware County, PA would mean for the county, the five-county region, and Pennsylvania as a whole.
Others have shared the importance of LNG in the global marketplace with you in previous hearings, but it begs repeating. LNG is a fuel source that the world is craving, and which has drastically lowered worldwide emissions in the past two decades as more and more power facilities and manufacturing plants are transitioning from coal and oil to a cleaner and more efficient natural gas. Every indicator shows global LNG demand rising, and with the large quantities of natural gas in Pennsylvania, we can help supply the world, especially as our overseas allies seek to disentangle themselves from foreign adversaries such as Russia and Saudi Arabia.
For the purposes of the IMPLAN study, we took the closest LNG export facility which is Cove Point in Lusby, Maryland, and modeled the construction and full-time operations of that facility as though it existed in Delaware County, Pennsylvania. A previous economic impact study published by Sage Public Policy Group in Baltimore provided the inputs for what the actual construction and full-time operations employment numbers were. We also acquired an estimate of the total amount of natural gas that facility uses as feedstock per year. This was added to the model, as well.
IMPLAN is a regional economic analysis software application that is designed to estimate the impact or ripple effect (specifically backward linkages) of a given economic activity within a specific geographic area through the implementation of its Input-Output model. By using the spending patterns each unique industry deploys, it can predict the indirect and induced jobs in a study area. Indirect jobs and economic effects stem from business-to-business purchases in the supply chain. Induced jobs and economic Effects stemming from household spending of labor income, savings, and commuter income.
For this model, the construction phase would be estimated as taking four years. It’s important to note, this is just the construction of the facility – this does not include any needed pipeline or other infrastructure that would be needed for a facility like this to be feasible, so construction totals are likely underrepresented.
In the study completed by Sage Policy Group, it was found that during the four years of the construction project to build the Cove Point LNG Terminal, there was an average of 4,323 construction jobs supported, per year. These construction jobs consist of the following categories:
- 1,017 Environmental and Technical Services
- 3,213 Construction of Manufacturing Facility
- 93 Industrial Equipment Servicing and Repair
In one year, these 4,323 direct jobs would support an addition 1,062 indirect jobs and 1,677 induced jobs in the study area. The full analysis is in your packet, including the top ten industries by growth percentage, the top seven indirect and induced jobs, how many of these indirect and induced jobs would be in the 5-county area verses the remaining 62 counties in Pennsylvania, and the totals over the four years of the project.
Over the four years, the construction of the facility would support a total of 28,249 direct, indirect, and induced jobs. This totals more than 2.3 billion dollars in labor income, 2.8 billion dollars in gross state product or value added, and 4.8 billion dollars in total output. Over the four years of construction, the tax obligation would be $527 million dollars in total, with 80 million to the state, 390 million to federal, and the remaining to local governments.
The full-time, ongoing operations at the facility consist of 204 “Industrial Gases Manufacturing” jobs. Because this category does not assume LNG production, a commodity event was added to the model to show potential natural gas intake. Based on industry knowledge of the Cove Point LNG terminal, this facility utilizes a conservative average of 1 billion cubic feet of natural gas feedstock per day. Based on current pricing, this value of natural gas was added to the model as a commodity event.
With the 204 industrial gases manufacturing jobs and the commodity event, the ongoing operations of the plant would directly support the employment of 514 positions. The additional 310 jobs are mainly in the area of natural gas production. These 514 jobs would support 1,280 indirect jobs, and 1,205 induced jobs. Each year, the labor income from these combined 2,999 jobs would total 432.5 million dollars and add 1.5 billion dollars to gross state product with an altogether output of 2.5 billion dollars, each year the plant is operational. These monetary totals would likely increase year-over-year due to inflation.
Manufacturing jobs have the greatest multiplier effect of any other industry due to the feedstock required to make the finished good and the distribution of that good to market. This model shows this through the large number of indirect and induced jobs created. These are high-value jobs in the areas of custom computer programming design, management of companies, truck transportation, and in the medical and educational fields.
The yearly tax impact from the ongoing operations would amount to 184 million dollars per year with 52 million to the state, 85 million to the federal government, and the remaining to county and local.
In a five year-snapshot, assuming four years of construction and one year of operations, the combined totals show that this project would support a total of 31,248 jobs, 2.7 billion dollars in labor income earned, 4.3 billion in gross state product, 7.1 billion dollars in total output, and 714 million in tax revenue.
In addition to the study, we have outlined five policy initiatives to best attract and retain an investment of this type.
First, permitting reform for pipelines and other critical infrastructure. PA lost significant business investment in the past due to the slow and cumbersome process to connect major end users of natural gas to feedstock via pipelines. Policymakers should prioritize streamlining the permitting process and supporting infrastructure connections to industrial end users. This will attract new investment, lower business operations costs, and lower emissions as industries continue to transition from coal and crude oil to natural gas and alternative energy.
Second, permitting reform for the construction of new manufacturing or commercial facilities. Similar to pipeline/ infrastructure challenges, manufacturers face backlogs on new construction and expansion permits. PA’s land use requirements are far more strict than federal standards and this should be amended for uniformity and simplicity. Additionally, a comprehensive review of all existing regulations should be completed to remove duplicative and/or contradicting regulations.
Third, a focus on workforce and training programs. According to IMPLAN, 30% of the jobs for this model require a certificate, some college, or an associate’s (or equivalent). In Delaware County, 24% currently possess these needed levels of certification. The public sector needs to assist in identifying areas of need and expand local best practices to best meet the needs of the workforce to maximize the number of Pennsylvanians who can work and benefit from these projects.
Fourth, a federal issue but warrants mentioning – amending or providing temporary relief from the Jones Act. Currently, the Jones Act requires goods shipped between U.S. ports to be transported on ships that are built, owned, and operated by United States citizens or permanent residents. Therefore, American LNG cannot be sent between US ports unless it is on a US-built and flagged carrier. At present, there are no U.S.-flagged LNG carriers and thus no American LNG can be transported from port to port. Relief from the Jones Act is needed to curb foreign LNG imports from being distributed through US ports for domestic use.
And last and most comprehensively, we must enhance Pennsylvania’s business competitiveness. The goal of Pennsylvania policymakers should be to make it the smart business decision for employers to locate, expand, and hire here in this commonwealth rather than in one of our competitor states. This means we must restrain state spending, enact pro-growth business tax relief, provide limits on lawsuit abuse, improve the regulatory climate, and ensure we have a trained workforce.
Even though their American headquarters are just minutes down the road in Philadelphia, Braskem chose Texas over Pennsylvania. Unless we get serious about business competitiveness, in all areas, we stand to lose the chance to complete a project as economy-changing as the one proposed in this economic model. Pennsylvania has an opportunity to shift geopolitical powers of the world by supplying our allies with responsibly sourced LNG to meet global demands. Thank you for your good work on this task force to help make this a reality.
Thank you for your time and now, I will do my best to answer any questions.