Labor Day is back to school time, and for most business people it falls during the season they are beginning to look at plans or budgets for next year. A sizable number of contractors run their fiscal year starting in October, so it’s a particularly forward-looking time for the construction industry.
One concern that is driving calls I’m getting to talk about next year’s planning is that the three-year ride we’re on here is coming to its end. That’s a very real possibility, especially in light of the normal ebb & flow of the business cycle. Western PA has been particularly blessed with significant private sector investment since the mid-decade, and it’s been because the new industries that have been blossoming here have taken deeper roots, not because of the common cry that Pittsburgh always lags the national market by a year or so. First of all that’s not true. We used to lead the national cycle because manufacturing lead the cycle. Our region has lagged the national economy the last 20 years or so because of the dynamics of replacing 100,000 or so jobs.
That aside the national economy will affect ours during the next few years, if only because so many Pittsburgh-based businesses now work throughout the country. So it’s possible that we won’t escape this recession entirely. The amazing and frightening inflation in fossil fuel costs have created a new hot industry in western PA that may pick up the ball when the arenas and hospitals are finally built.
The big real estate deal of the year in 2007 nationally was the Westinghouse Nuclear project in Cranberry Woods. That project was driven by Westinghouse’s off the chart growth in contracts worldwide. Their frantic pace of hiring actually slowed the project’s preconstruction because their head count kept growing 10-15% every time the program was redesigned. Lost in all the Westinghouse euphoria though was the expansion going on at Bechtel Energy, the company that competes with Westinghouse and operates the Bettis Atomic Lab in West Mifflin. Their hiring of new engineers was in the hundreds also, and Bechtel also invested millions in a new facility in Monroeville. Bechtel’s problem was scale. It’s a little like working out, losing 25 pounds, and then standing next to Brad Pitt at the singles bar. No matter how good you look, no one’s going to be paying any attention to you.
The sneaky little secret right now seems to be the pace with which companies are reacting to the high energy prices to spend capital on coal exploration, and to take advantage of the Marcellus Shale formation that runs northeast through the region. The billion dollar waste coal-to-energy plant Ray Bologna is planning in the Beech Hollow section of Robinson Township in Washington County has been quietly moving ahead, with Bechtel Energy pre-qualifying early contracts. We’ve read about Consol & CNX Energy’s successes but with less fanfare Atlas Energy has been spending millions opening up new gas wells throughout Fayette and Washington and Greene.
Marcellus Shale offers a potentially rich source of nat gas that has been attracting national players. Baker Hughes recently selected a design-build team of A. Martini & Co. & Desmone Associates to construct an 85,000 office and shop in New Stanton. I got a call earlier this week about a Texas-based company looking at more than 100,000 square feet for a new office in the region. My guess is this is the tip of the iceberg.
Just an hour east of here you can see evidence of the expansion of wind power generation in Somerset. That’s just one of a handful of windfarms in Somerset and Cambria Counties. Another is planned next year for Fayette. Aside from the local construction jobs, that industry has grown expertise in design and construction of wind farms. Monroeville contractor Walbridge East has done a few farms in the past couple years, but is in the mix on a handful of others around the country.
It’s easy to forget the role western PA played in our nation’s energy boom a hundred years ago. But if you drive up through Butler to Oil City you get reminded that oil was discovered in PA first. We sit on some of the largest natural gas deposits in the western hemisphere, along with the aforementioned mines. And George Westinghouse has a little to do with the birth of practical electrification.
There’s an even chance that American conservation efforts and some global politics will conspire to deflate the price of oil again, or that it will stay at record high territory, or even that it will bounce up and down like CMU professor Lester Lave predicts. Whatever scenario plays out, the likelihood is that more energy-related construction is coming to western PA. My optimism comes from my experience that if I know about 2 nice projects coming to the region, there are probably 10 more I don’t know. Maybe I’m on top of things-but I wouldn’t count on it.