Chesapeake Energy: Even when things are good, they aren't so good August 8, 2007
Chesapeake Energy plans to build a $35 million headquarters right here in Charleston, WV at NorthGate Park near the airport.
It will be a huge shot in the arm to the area economy and something we should all celebrate.
Now, if you want to talk about “good-paying” jobs, my guess is the employees at Cheseapeake have the housekeepers at the Racetrack beat, but I digress.
And, my guess is it won’t be long before the unions and trial lawyers and Manchin declare victory and that West Virginia is now, truly Open for… (sorry, I can’t bring myself to say it)
But, in all of this positives that Chesapeake will build here, you can’t help but look at two major aspects that affected their decision and why West Virginia is still undoubtedly anti-business.
The first was the obvious, newsmaking announcement of the delay early this year due to the huge $400 million verdict leveled against Chesapeake. The fact that we were able to keep Chesapeake from bolting was I’m sure no doubt due to Manchin cajoling the leadership into believing that West Virginia was changing. Kudos to Joe.
Chesapeake’s comment about it? Well, we hit a few speedbumps, but we feel we can overcome it.
They ALREADY sound like a long-time West Virginia business just accepting that West Virginia is a tough place to do business, but they were going to do it anyway.
But, the one item later in the article that no one seemed to notice was what struck me.
Chesapeake had to scale back its original plans slightly to accomodate West Virginia’s cost of doing business.
According to Chesapeake, West Virginia labor costs are 20% higher than Oklahoma.
Kapow!
Look, this is a company that should be cherished by West Virignia. Despite the verdict, despite the anti-business climate, despite the significantly higher labor costs, they STILL plan to do business here.
Unfortunately, most businesses aren’t going to be willing to overcome all those obstacles.
And, that’s the crux of our problem here.
Do we win once in awhile? Sure.
We won Hino Manufacturing recently.
How? Well, because we were willing to change around our tax structure to bring them here (while other, older businesses continue to pay those taxes that we left Hino off the hook from - if it makes sense to lure Hino here, wouldn’t it make sense to help out your other businesses in the same way?).
And, now, despite their trepidation, we have finally landed the Chesapeake headquarters for their Eastern US operaitons.
Why? Well, because Chesapeake was willing to build DESPITE higher labor costs, an unfriendly court system and a general kick-business-in-the-pants climate.
And, I’m sure labor and the trial lawyers will weep with excitement that we now don’t need tax reform or tort reform or any reforms because everything is just hunky-dory.
But… but… these examples show exactly what is wrong with West Virginia’s business climate.
Most businesses aren’t willing to simply suck it up and pay 20% higher labor costs. Most business aren’t willing to simply suck it up and face our difficult court system. Most businesses simply go the path of least resistance and greater savings. After all, if you have no connection to West Virginia, why in the world would you accept higher taxes and significantly higher labor costs if you don’t have to?
Thank goodness for Hino Manufacturing and Chesapeake Energy.
But, they should teach us a valuable lesson.
Their cases show the glaring problems that we must fix if we want to actually compete in the marketplace for businesses who aren’t willing to simply… suck it up and pay more to be here.
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7 Responses to “Chesapeake Energy: Even when things are good, they aren't so good”
Chesapeake locating here has more to do with the Natural Gas underground in Braxton, Gilmer, Clay, Kanawha, Wood, Ritchie, Webster, Fayette, Jackson, and Wood Counties more than it does our business climate, Joe Manchin, or Charleston.
Sadly, labor costs are more HERE because of taxes, Comp and the regulatory burden, not because workers will actually “take more home”.
Sprouse, why don’t you take the time to figure out what it costs to “do business” in every state of the union and see where WV compares, to say, a state like California? I would be it is VERY expensive to do business in CA, yet more people flock to it. Why? Better workforce - educated, diverse skill sets, motivated. I spend more money training employees than I do in workers comp and unemployment claims. Perhaps you should think outside of that little box of small-minded conservatism that you embrace.
Ask Pilgrim’s Pride about workers compensation costs. Thier costs to cover 1/10 of their total work force that is based in WV is as more than the 90% of their workforce based out of state.
California isn’t exactly a beacon to businesses anymore.
They have the second highest workers compensation rates behind us in the nation (still less than half of what ours are). Their stagnant economy was a major factor in the recall of Gray Davis. Much of the growth in Arizona and Nevada is directly attributed to people fleeing the People’s Republic of California.
As far as training and education, West Virginia ranks in the top 10 on per K-12 pupil expendatures, and number two (only behind Connecticut) when comparing per pupil expendatures to per capita income. It was pretty convenient of the National Education Association to compile these stats in a single report.
Our test scores continously rank right at or just slightly below national average. They are not low enough to lead to the nation’s “least educated workforce”.
Additionally, we subsidize free college for any student that has a room temperature IQ and enough motivation to pull a 3.0 GPA on modern public education curriculum.
Even though our K-12 system is nowhere near the worst in the nation and we give away the Promise Scholarships, our stats still indicate our workforce has some of the lowest educational attainment in the nation. Why is that?
The fact is that too many college graduates leave the state because the only decent paying jobs here are litigation, healthcare, mining, and government. The job prospects for IT and engineering professionals here are laughable. I cannot believe how little real competition my firm has IN this state.
Can you name someplace in WV that is hiring an Oracle database specialist?
As far as our workforce’s “lack of motivation”, I suspect that is due to the many of the most motivated among the workforce have already left for better jobs and better pay elsewhere, and we are stuck with a whole bunch of jealous children raised on eight decades of Democrat class warfare.
West Virginia has not been ran by “small-minded conservatism” since 1932. One party, dominated by organized labor, has written every law, every tax, and every budget for the last 75 years. Even when facing a Republican governor (less that 1/3 of the time over the last 75 years), Democrats have still had a veto proof majority all but 6 of the last 75 years, along with a Supreme Court that has elected Democrats with one exception.
Over that entire 75 years, well over half of the candidates endorsed by labor have won. Big goverment tax and spend liberals own this state. That is why CATO says we have the smallest private sector portion of the economy between US and all the Canadian provinces. That is why the US Chamber says we have the most unfair court system in the nation. Don’t even begin to get me started on taxes.
Hot Tub Dave, I’ll take Sen. Sprouse’s “small-minded” conservatism over the tax-and-spend, good ol’ boy, up the trial lawyers’ behinds, never-met-a-tax-cut-we-liked, slam-small-business-every-chance-we-get, talk-about-tourism-but-tax-the-hotels-to-the-max, liberal, pseudo-socialist Democrats who’ve driven WV to economic ruin over the last 70+ years ANY DAY.
You can stick up for this bunch of socialist clowns but you simply don’t have the facts or history on your side. Learn the lesson.
Hot Tub Dave - What is your point? Do you not consider training your employees to be a cost of doing business? What is the big-minded socialist solution?
Well, as a Libertarian who has started businesses in several states, I have yet to see issues in WV. As for my “solutions” I have yet to see the true numbers of what tort costs us in WV. I also look at how many coal companies defaulted on their workers comp premiums in the past (don’t turn around and say they are too high - you knew it when you did business in the state.)
The Chamber of Commerce is all for business socialism. They would recommend we pay employees $1 as it would “help business.”
We have the lack of trained people because it’s a chicken/egg problem: What comes first the jobs or the education? Some argue that Education committment comes first to create the option for jobs. North Central is doing well, and an old employee of mine did find some Oracle work up there. He moved out of state though. Why? The salary was too low. He went to Pittsburgh and his Salary bump more than made up for the Cost of Living difference. And his spouse could find work. Litigation jobs are plentiful everywhere in the US, and I don’t see where we have more lawyers per capita than anywhere else.
If I called Sen. Sprouse ideas as “small minded conservatism” then I was mistaken. I’d say it is more “simple minded”. He offers up strawmans w/out offering solid facts.
HTD - I hate to pick on a fellow Libertarian, but maybe you could follow Vic’s lead and make your posts a little more simple-minded so that I can understand.
Are you saying that you don’t see any problems in WV? We are last place in almost every economic indicator. We pay more for education and get worse results than almost anywhere except D.C. Just making coal companies pay their premiums isn’t going to get us back up to 49th place.