January 2013, Vol. 240 No. 1

Editor's Notebook

Editor's Notebook: A Crazy World

Pot is in and Twinkies are out. Such a crazy world, I am thinking on this brisk Dec. 5 afternoon as the mini-bus carries six of us media types through the hinterlands of western Pennsylvania to our next stop during this state-sponsored tour of the Marcellus Shale.

Pennsylvania is doing quite well in the opening pages of the book that is likely to rewrite the economic history of my forlorn home state. An item in The Pocono Record, one of my hometown newspapers, reports job growth for the natural gas industry in Pennsylvania has risen 150% over the past three years and supports more than 238,000 jobs in the state. And it’s just getting started.

That’s the message the Pennsylvania Department of Community & Economic Development wants the rest of the country and the world (I am told the state has 24 offices in various countries lobbying for new business) to hear about, so they are sponsoring this two-day tour of several manufacturers benefiting from Marcellus development. The agency works on a skimpy budget which is to be expected under the conservative Republican governor, Tom Corbett. Corbett is determined to squeeze the size of state government and has already trimmed payroll by 10%. On the other hand, he is using every inducement to encourage new business development – including changing the onerous corporate tax code – in a state that has seen no activity the past 50 or so years except for the mass exodus of businesses.

These are hard-scrabble communities where life has never been easy even in the best of times, much less the endless economic decline that has left little in the downtown areas other than second-hand shops. Jeannette, 40 miles from Pittsburgh, literally grew up around the century-old compression and turbine complex run by the Elliott Group, a company renowned for its turbo machinery. On this 102-acre complex, some 600 workers design, manufacture, install and service machinery for prime movers and rotation equipment. Business is booming today, they tell us, with orders for equipment such as compressor trains and controls coming in from refineries, gas processing and chemical plants as well as LNG terminals.

A lot of the business is worldwide, but much of it is emanating from Rust Belt companies that hadn’t bought parts or equipment in years but now suddenly want to improve their productivity because with natural gas as a cheap feedstock, they feel they can be truly competitive.

“The North American parts business has grown dramatically and it’s based on North American-based equipment,” boasts Art Titus, Elliott’s affable Chief Operating Officer. The Rust Belt, he says, is either being reactivated or being run into the ground. With more companies switching from oil to gas-based feedstock, the news seems overwhelmingly positive.

But Elliott’s turnaround is actually much more than a byproduct of the Marcellus Shale. In 2000, Ebara, a Japanese conglomerate, bought Elliott and planned to reduce the decaying complex into just a service center. An Elliott executive was able to convince them that the business could be saved with some effort and investment. So the Japanese put in $100 million and on this day we are visiting Elliott’s new $17 million, 140,000-square-foot headquarters, the Centennial Building, commemorating their 100th anniversary in Jeannette.

As they were rebuilding their business, Elliott executives and new, enlightened leaders of Local 1145 of the United Steel Workers realized they had to end their adversarial relationship and work as partners to save the business and the many hundreds of jobs that provide the economic lifeblood of this region. Management became transparent in its dealing with the union whose leaders realized they had to be practical in their demands.

Now they are like one big happy family. The union is easily the company’s biggest cheerleader. “I AM Elliott,’’ shouts Unit President Alan Rudik, who sits alongside Art Titus during our lunch.

This isn’t the first time that officials representing the steelworker’s union have told me how important the Marcellus is to the job market. It’s just one of the lessons we’re learning from the shale revolution.