Greg Kozera: Manufacturing Follows Energy
It was Wednesday morning at SelectUSA in Washington, DC. Foreign companies we visited from Sunday through Tuesday returned to our booth. They were a little overwhelmed with, “All 50 states claiming to be Number One”. These companies knew as much about the USA as we knew about Germany and India when the Shale Crescent USA Team visited. Most foreign visitors know where New York City, Hollywood and Disney World are. They usually know where Texas is and assume that is where most of the oil and natural gas in the USA is produced. They would be wrong. These manufacturing companies came to our booth because we are not a state and represent a region. They asked for our help. Here is what we shared. Opportunity for the future is contained in knowledge of our past. You may find it helpful;
In the history of the world manufacturing typically follows energy. England started the industrial revolution because of their abundant coal. In the USA manufacturing happened initially in the New England states. Merchants built water-powered textile mills because they had hydroelectric power. Hydroelectric has limits. Cities like Pittsburgh, PA, Cleveland, OH. Weirton, WV and Charleston, WV became industrial centers because of abundant coal and natural gas.
The glass industry in the USA started in the Shale Crescent USA region (Ohio, Pennsylvania and West Virginia) because it had silica (sand) and plentiful natural gas. Dependable natural gas is essential to keep the molten glass liquid until it is time to cool it to become a product. If the natural gas supply was ever interrupted and the glass mixture cooled and hardened, the kiln had to be replaced at great expense. Shutting down the plant.
Charleston, became the birthplace of the U.S. chemical industry in the early 20th century. The first ethane cracker plant in the world was built in Clendenin, near Charleston by Union Carbide in 1921. It was built there because of abundant and economical natural gas and oil near-by. Sistersville Tank Company, still in business in the Ohio Valley, provided some of the tanks and pressure vessels.
Cities like Cleveland, Weirton and Pittsburgh became centers of the United States steel industry. Coal for making coke for steel was close by. Water from rivers was abundant and used for cooling and shipping products. Steel requires iron ore which was shipped in from Minnesota via the Great Lakes. It made more sense to ship one raw material to Pittsburgh. Finished Steel was shipped to Michigan for the automobile industry and to manufacturing plants in Ohio and Pennsylvania who made consumer products. Like today most of the U.S. population and consumers were within a day’s drive of the manufacturing plants.
When the USA and the region’s oil and gas depleted in the 1970s the USA became dependent on Middle East Oil. Without energy the region lost manufacturing and petrochemicals, first to the Gulf Coast and then to Asia. West Virginia, Ohio and Pennsylvania became the rust belt.
The technology of modern horizontal drilling developed in the early 2,000s creating the Shale Revolution. By 2012 the energy crisis was over and the USA was leading the world in oil and natural gas production. If the Shale Crescent USA region were a country it would be the number #3 natural gas producing countries in the world behind only the rest of the USA and Russia. With the return of energy to the region so has manufacturing like the Shell Cracker near Pittsburgh, Nucor steel in West Virginia and Intel outside of Columbus. Smaller plants like TCL from India and Formed Energy are under construction in the Ohio Valley. Our region is again making rubber gloves and other products previously made overseas before the pandemic. Local companies are expanding. This isn’t like 1950s manufacturing. It is clean and high tech.
Economically abundant energy is essential to manufacturing. Natural gas isn’t just fuel, it provides the molecules needed to manufacture thousands of essential products like healthcare PPE, medical equipment, household appliances, automobiles (including EVs), aircraft and thousands of other products like solar panels.
Manufacturing requires dependable electricity. Our power grid, PJM, is the most stable in the country currently because our baseload power is primarily natural gas in Ohio and Pennsylvania and coal in West Virginia. Wind and solar can be used as intermittent fuels knowing they have 100% back up with natural gas. Electric rates vary by sector i.e. commercial, industrial, residential and by state due to demand, generation cost and regulation. According to the U.S. Energy Information Agency (EIA) in May 2024 based on All Sectors in Cents per Kilowatt hour;
Ohio 11.02, West Virginia 11.13, North Carolina 11.33, Pennsylvania 12.62, New England 21.48, California 26.37, Hawaii 39.38
Data centers, AI along with EVs and weather extremes are expected to push electricity demand and prices higher. In places where baseload nuclear power and coal are being shut down and replaced with renewables, (like California) brownouts and blackouts along with higher prices are expected. This makes the SCUSA attractive for high electricity using manufacturers, data centers and other industries.
Companies from around the world are looking to bring manufacturing back to our region because of SCUSA’s economical dependable energy, abundant water and river system and location in the center of 50% of U.S. consumers. These companies bring high wage jobs, money to invest and hope for a bright future for people in the region.
Companies we talk to understand the importance of minimizing transportation costs by building where their energy, feedstock and customers are. Currently there is no solution for increased Chinese emissions except Chinese government promises. SCUSA studies show manufacturing can be done in SCUSA cheaper than in China. Increased SCUSA manufacturing can reduce global emissions by reducing ocean transportation and Chinese imports made with their coal fired electricity with significantly higher fuel emissions.
What once was, can be again. U.S. manufacturing creates hope giving jobs, grows our economy and improves the global environment. High energy manufacturing follows abundant energy.