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Chapter III: West Virginia’s Economy: Industry Focus


West Virginia’s energy sector was hit extremely hard by the COVID pandemic in 2020, with payrolls falling by more than 20 percent in the coal and natural gas industries when compared with a year earlier. In the first half of 2021, employment in the mining sector has rebounded somewhat, but coal employment and production remain well below where they stood before the pandemic effectively shut down large parts of the national economy.

Our forecast calls for a slow recovery in the energy sector, with jobs continuing to be suppressed through the end of 2021. However, we expect the sector to see a rebound starting at the beginning of next year through 2023, with a gradual taper through the end of our forecast in 2026.

Figure 3.1 shows a line chart comparing coal and natural gas production in West Virginia. Coal is forecast to rebound in 2021 and 2022, while natural gas will see its growth slow in 2021 compared to the past two years before picking up in subsequent years

Figure 3.20 is a two-line graph that compares quarterly house price indices for West Virginia and the US from 2006 and into the forecast period (2021 to 2026). WV is expected to record a slower rate of house price growth than the US by an appreciable marg


National coal production in 2020 fell to levels not seen since 1965, according to US Energy Information Administration (EIA 2021). West Virginia was no exception to this rule, as production plummeted in both the northern and southern parts of the state through much of 2020. Employment followed this decline, falling by more than 22 percent on average from 2019 levels.

REGIONAL ACTIVITY Coal production in West Virginia was just over 67 million tons in 2020, a decline of nearly 28 percent from 2019 levels of 93 million tons. Production was down considerably in the state’s northern and southern coal-producing regions. However, the decline was more precipitous in the southern region, where production fell more than 34 percent, from 46 million tons in 2019 to just over 30 million tons a year later. Production in the northern coal basin fell by about 10 million tons (21 percent), from 47 million in 2019 to 37 million in 2020.

Figure 3.3 uses a two-line chart showing coal production in the northern and southern coal-producing regions in West Virginia. The southern coal region has suffered greater production losses than in the northern part of the state, though the northern coal

As of the first two quarters of 2021, coal production is on pace to rebound throughout the year but is expected to continue to be suppressed compared with 2019 levels. Production is up about 19 percent statewide in the first half of the year compared with the same period in 2020, which corresponded with the most widespread economic shutdowns and lowest production. However, the recovery has so far been mostly confined to the northern coal region of the state. Production in northern West Virginia has nearly returned to pre-pandemic levels, with production in the first half of the year totaling nearly 23 million tons, compared with about 25 million tons in the same period in 2019. The southern part of the state has produced only 16 million tons in the first half of 2021, a decline of more than 33 percent from the same period before the pandemic.

EMPLOYMENT Coal industry employment in West Virginia—including mining and support services—fell by more than 3,100 jobs in 2020, from 14,136 in 2019 to 10,997 in 2020, a decline of more than 22 percent (see Figure 3.1). As with production, the employment losses were more pronounced in the southern coal region, with about four-fifths of the employment declines coming in the state’s southern coal mines. According to data from US Mine Safety and Health, employment in the northern part of the state has recovered somewhat in the first half of the year as production has come back, with employment levels nearly even with where they were pre-pandemic. Employment in the southern coal mines has yet to recover, however, and remains well below 2019 levels.

Figure 3.4 compares coal mining productivity in the US vs. northern and southern West Virginia. Productivity is much lower in southern West Virginia and has increased over time in the stateís northern coal-producing counties.

EXPORTS The coal industry faced a broad-based decline, with domestic electric power and industrial sectors both reducing demand at approximately the same rate of 22 and 24 percent, respectively. Overseas demand for the state’s coal fell at an even higher rate, however. Coal exports were down more than 36 percent in 2020, falling from about $2.3 billion in 2019 value to about $1.4 billion the following year.

Exports declined to nearly all the countries that purchase coal from West Virginia. India remained the top destination country, with $354 million in total sales, followed closely by Ukraine with $329 million. These totals were down by 9 percent and 34 percent, respectively from their 2019 totals. Exports to the Netherlands was down by nearly two-thirds in 2020, falling from $283 million in 2019 to just under $102 million in 2020.

One bright spot in the overseas market is China. For the first two quarters of 2021, China has significantly increased its imports of West Virginia coal to $306 million, far outpacing any other country. If this pace continues through the end of the year, China will have imported nearly 15 times as much coal from West Virginia as in 2020, when the country purchased $38 million in total value.

Figure 3.5 is a line chart that shows the value of coal exports from West Virginia since 2005. Exports are a growing share of final demand for the stateís coal but have been very volatile. Coal exports have been increasing over the past several quarters a

FORECAST Our forecast indicates that the worst may be over for the state’s coal industry. We forecast that the second quarter of 2020 will mark the bottom of production and job losses in the state, and the industry will begin a slow recovery over the course of the next few quarters.

However, our forecast shows that production and employment is not expected to return to pre-COVID levels during the next five years. We forecast production will peak in late 2022 at about 75 million tons annualized, well below 2019’s total volume of 93 million tons. Employment is expected to make a recovery over the next two years but remain about 2,000 jobs below 2019 levels by the end of our forecast in 2025.

Natural Gas

The COVID-19 pandemic continues to negatively affect the natural gas industry in West Virginia. Industry employment fell by more than one-quarter in 2020 as drilling activity in the state’s shale fields fell by nearly two-thirds. While production continued to post gains through the end of the year, the falloff in new drilling in 2020 has slowed production gains in the first half of 2021.

STATE TRENDS Employment in the natural gas industry fell by nearly 26 percent in 2020, but the job losses were not uniform across the industry. Employment in new well drilling and support services declined much more steeply than in extraction. Oil and gas support services jobs fell by fell 37 percent from 2,900 jobs in 2019 to just over 1,800 in 2020, a decline of roughly 1,100 jobs. Drilling jobs fell by 27 percent, from more than 1,400 jobs in 2019 to approximately 1,050 in 2020. Oil and gas extraction jobs also declined, but at a slower rate of 9 percent, falling from 2,130 jobs in 2019 to 1,930 jobs in 2020, a decline of 200 jobs.

Drilling rig count data bear out the uneven distribution of job losses. The average number of active oil and gas rigs in the state fell by half from 18 in 2019 to just over 9 in 2020. The rig count was the lowest in the third quarter, when there were only about 7 active rigs in the state, a decline of almost two-thirds from the previous year.

Figure 3.6 measures total natural gas production in the Marcellus/Utica states of Pennsylvania, West Virginia and Ohio with a stacked area chart. Natural gas production in Pennsylvania, West Virginia, and Ohio has risen significantly between 2005 and 2021

Natural gas production performed well overall in 2020 and was up more than 20 percent for the year, moving from 2.2 trillion cubic feet (Tcf) in 2019 to nearly 2.6 Tcf in 2020. However, the lack of new wells began to slow production growth starting in late 2020 and into the beginning of 2021. Year-over-year production in each of the first three quarters of 2020 was up more than 22 percent, but production growth slowed to below 10 percent in the first and second quarters of the new year.

PRICES Natural gas prices in the Marcellus region fell significantly during 2020, with the average price at the Dominion South hub declining from $2.12 per thousand cubic feet (Mcf) in 2019 to $1.40 per Mcf a year later, a drop of nearly 34 percent. The average price at the benchmark Henry Hub declined less sharply, from $2.56 per Mcf to $2, a drop of 22 percent. While the two prices had been converging in recent years, the spread between the local gas price and the benchmark Henry Hub rose for the first time in five years to 60 cents per Mcf. Prices at both hubs have risen steeply in the first half of 2021, however. The price at the Henry Hub averaged $3.24 in the first half of the year, compared with $2.44 per Mcf for the local Dominion hub.

Figure 3.7 features a county-level map showing the volume of natural gas produced in 2020 for each of the stateís 55 counties. The stateís northwestern counties continue be the largest producers of natural gas and natural gas liquids.

COUNTY PRODUCTION TRENDS Capitalizing on its position in the Utica shale formation, Tyler County has become the largest producer of natural gas in the state. The county produced nearly 598 billion cubic feet (Bcf) of natural gas in 2020, which was up about 38 percent from the previous year’s total of 432 Bcf. Marshall County’s production continued to rise rapidly, moving from 276 Bcf to 432 Bcf, a gain of nearly 57 percent, which moved the county into the second spot among the state’s natural gas producers. While Doddridge, Ritchie, and Wetzel counties each produced more than 200 Bcf, growth rates for these counties slowed in 2020, with Doddridge’s production falling by 8 percent and the other two counties coming in below 5 percent growth. Meanwhile, Brooke, Monongalia, and Harrison counties saw rapid growth above 35 percent in 2020, though production in each county remained below 200 Bcf for the year.

Figure 3.8 contains a two-line chart showing natural gas spot prices at the benchmark Henry Hub and Dominion South hub that serves the Marcellus region. The two prices have diverged since 2014, with the Dominion South fetching a lower price, but the margi

PIPELINE CONSTRUCTION With the cancellation of the Atlantic Coast Pipeline (ACP) project, and the completion of two other smaller projects, natural gas pipeline construction jobs fell sharply in 2020. Employment in pipeline construction fell from just under six thousand jobs in 2019 to less than three thousand in 2020, a decline of about 51 percent. The ACP was a $5 billion project that would have transported gas from the Appalachian region to consumers in North Carolina and Virginia. Duke Energy and Dominion Energy canceled the project in July 2020, citing increased costs due to multiple lawsuits and the potential for additional work stoppages.

During 2020, two other smaller pipeline projects—the Buckeye Xpress and Hammerhead Pipeline—completed construction. The Hammerhead Pipeline is a new pipeline that added an additional capacity of 1.6 Bcf per day between Pennsylvania and West Virginia, while the Buckeye Xpress was an expansion of an existing pipeline.

Currently, the Mountain Valley Pipeline remains the only large-scale state-to-state pipeline construction project under construction in the state. Valued at $6.2 billion, the pipeline is expected to run more than 300 miles from West Virginia to Virginia, opening an additional 2 Bcf per day in new transmission capacity by 2022. The project has been delayed multiple times due to potential environmental impacts, but in August, the pipeline project received a key environmental impact statement recommendation from the US Federal Energy Regulatory Commission.

FORECAST With drilling capacity recovering over the first half of the year, we forecast that natural gas production will continue to climb over the course of 2021. In the long term, our forecast shows production growth slowing to about 8 percent per year on average over the course of 2021-2026.

Natural gas employment is forecast to rise to about five thousand jobs by the end of 2021, as drilling activity remains suppressed until the latter part of the year. The industry is expected to recover measurably in 2022 and then continue to grow through the end of the forecast period.

Electric Power Generation

Employment in West Virginia’s electric power industry was down somewhat in 2020. There were no major plant retirements in the state, but power companies trimmed jobs in response to declining demand for electricity during the pandemic year. The industry remains under pressure as capacity utilization at the nations coal-fired power plants continued their decline.

NATIONAL AND STATE TRENDS Coal-fired power plants continued to lose market share to natural gas plants nationally in 2020. The share of generation coming from coal-fired power in the US fell to just over 19 percent in 2020, coming in below renewable energy (20.6 percent) for the first time on an annual basis. Generation from natural gas also climbed in 2020, raising to nearly 40 percent of total power generation. Overall, average utilization at US coal-fired power plants—as measured by capacity factor —continued to decline, falling from 40 percent utilization from 46 percent a year earlier.

Figure 3.9 is a line chart with three lines showing the share of electricity generation coming from the fuel sources of coal, natural gas, and renewables. Coal has fallen below renewables through most of 2020 and 2021.

West Virginia power plants generated about 57 gigawatt hours (GWh) of electricity in 2020, which was down from nearly 64 GWh the previous year, a drop of approximately 11 percent. The percentage of generation from coal in the state hovered between 87 to 92 percent of total power generation throughout 2020 and early 2021. Following generation declines, statewide employment in the power generation industry fell by about 7 percent in 2020, declining 283 jobs to 3,630. Capacity utilization at the state’s coal-fired power plants continued to decline as well, falling from about 53 percent capacity factor in 2019 to about 46 percent in 2020. Capacity factors at out-of-state plants supplied by mines in West Virginia remained low at 37 percent.

Figure 3.10 provides a bar chart showing the capacity utilization percentage for coal-fired power plants using West Virginia coal. Utilization has declined to below 50 percent for West Virginia plants while out-of-state power plants supplied by West Virgi

REGIONAL TRENDS: In August 2021 Wheeling Power received approval from the West Virginia Public Service Commission to increase electricity rates in order to pay for environmental improvements at the Mitchell Power Plant in Marshall County (“West Virginia PSC” 2021). Joint owners Wheeling Power and Kentucky Power (both subsidiaries of American Electric Power) stated that the upgrades would allow the plant to operate through 2040. However, regulators in Kentucky rejected the rate increase, agreeing to a plan that would keep the plant open only through 2028 (Tony 2021), leaving the plant’s future uncertain. An analysis by the BBER found that the 1,560-megawatt (MW) plant supports 661 jobs in the state (Christiadi et al. 2021).

The Mountaineer and John Amos power stations are also threatened after the Virginia Company Commission denied in August an application by Appalachian Power to upgrade wastewater treatment facilities. Appalachian Power received permission from the West Virginia PSC for the rate increases, but it is unclear how the company plans to move forward after failing to get permission from the Virginia regulator. Without the environmental upgrades the plants would have to close by 2028. The BBER study found that the Mountaineer and John Amos power plants support 980 and 1,030 jobs, respectively, in the state.

A natural gas power plant in Brooke county has been canceled after opposition from a variety of interest groups within the state. Energy Solutions Consortium announced in October 2020 that it would not pursue a loan guarantee from the state Development Authority to build the plant. ESC’s other plant scheduled for construction in Harrison County remains in the planning stages, while a third plant—Moundsville Power in Marshall County—has also been canceled. Longview Power abandoned plans to build 70 megawatts of utility-grade solar on a nearby property in Pennsylvania after negotiations with the landowner failed (Beard 2021). However, the company has said it intends to continue searching for an alternate site for the solar farm and is also on track to build a 1,200-MW natural gas plant on reclaimed mine land adjacent to the current facility in Monongalia County.

FORECAST: Utilities employment is forecast to remain relatively flat for the rest of 2021, followed by a period of decline through the end of our forecast period. Total employment is expected to fall under five thousand jobs in 2022, a decline of about 2 percent from 2020 levels, and remain suppressed through 2026. This forecast relies on the continued operation of all three of the West Virginia power plants mentioned above at least through 2028, after our forecast period ends.

Manufacturing in West Virginia

West Virginia’s manufacturing sector struggled during 2020, as the COVID-19 pandemic led to an unprecedented decline in activity across the US and global economies in the first and second quarters of the year only to be followed by major disruptions in the supply chain and labor markets that continue to this day. Overall, the sector recorded its largest annual decline in payrolls and output since the Great Recession and several subsectors have had difficulty recovering to pre-pandemic levels due to input shortages as well as ongoing labor supply problems related to unfilled job openings and workers being quarantined or isolated as a result of covid exposures.

Even with the major challenges the sector has faced during the pandemic, and a large portion of the past 20 years in general, manufacturing remains a key part of the state’s economy for several reasons. First, the sector enables West Virginia to engage in global economic trade since many of the state’s leading exports are intermediate and finished manufactured goods. Secondly, the manufacturing sector accounts for 7 percent of all jobs and roughly 10 percent of total economic output in West Virginia, yet some areas such as the Potomac Highlands and portions of the Kanawha and Mid-Ohio valleys retain a sizable manufacturing footprint. In addition, areas such as the Eastern Panhandle have experienced nascent growth in their manufacturing bases in recent years thanks to an influx of new facilities.

CHEMICALS The chemicals sub-sector accounts for roughly one-fifth of jobs in West Virginia’s manufacturing sector’s jobs as well as nearly 40 percent of the value of the sector’s economic output. Most of the state’s chemical manufacturers lie along the Kanawha and Ohio River valleys and produce organic and inorganic compounds that are primarily used in industrial applications, but composite materials such as resins and synthetic fibers also factor into the industry’s portfolio of products.

However, the chemicals subsector contains a wide assortment of industries aside from the manufacture of intermediate compounds for industrial processes, as petrochemicals, soaps and other cleaning compounds also account for a significant (and growing) share of the subsector’s activity in West Virginia. Indeed, the opening and build-out of Procter & Gamble’s $500 million facility at the Tabler Station site in Berkeley County has been the sector’s most significant development in many years. As the site’s operational capacity has progressed and new product lines have been added over the past couple of years, the workforce has increased to more than 1,400 people. Furthermore, the facility has helped to spawn the co-location of several packaging and logistics firms at the site. The pandemic has caused some disruptions to the facility’s operations, largely as a result of worker quarantines/isolations due to covid exposure and supply chains that have been constrained throughout the economy. At the same time, however, many of the facility’s product lines have seen increased demand over the course of the pandemic as businesses and households have placed more focus on surface cleaning and hygiene.

Figure 3.11 uses a pie chart to break down the share of manufacturing employment by subsector. The chemicals subsector accounts for 1 in 5 of all manufacturing jobs, followed by wood products (13%) and fabricated metals (9%).

While most segments of the West Virginia’s chemicals subsector have at least stabilized, the state’s small pharmaceuticals industry was dealt a major blow in late-2020 as Viatris announced that it was ceasing productions at its Mylan oral dose manufacturing plant in Morgantown. The company began by eliminating half of the onsite jobs in July and will effectively shutter the facility in early-2022. Altogether, the closure will result in the loss of roughly 1,500 jobs, though Viatris announced the company’s research and development labs in the Morgantown area would remain open. Viatris is also currently engaged in talks with West Virginia University to convey the production facility over to WVU Medicine for future use as a research facility or some other purpose.

TRANSPORTATION EQUIPMENT The state’s transportation equipment subsector is made up of a growing auto parts supply chain scattered throughout the Kanawha and Mid-Ohio River valleys as well as a mix of civilian and defense aerospace equipment production. Auto parts manufacturing has been the fastest-growing segment of West Virginia’s manufacturing base over the past decade, and in fact is the only one to record consistent increases in jobs and output since the early 2010s. Overall, auto parts plants have added jobs at an average annual rate of 2.5 percent since 2008. Much of this growth is connected to Toyota’s ongoing investments at its powertrain manufacturing facility in Putnam County, but other developments such as Hino Motors Manufacturing’s new truck assembly plant in the Parkersburg Area (and its subsequent expansion), and investments by companies such as NGK Spark Plugs and Allevard Sogefi have helped to position West Virginia as a nascent player in the US auto manufacturing supply chain.

Unfortunately, the auto manufacturing industry has experienced significant turmoil during the pandemic due to a global shortage of semiconductors used in auto electronic components, which has led to production pauses at Toyota’s plant on several occasions. In addition, Hino Motors was forced to halt operations at its Parkersburg area facility as certification issues for its large truck engines during the third quarter of 2020 and the plant has remained idled since then as the company irons out the compliance issues. Hino recently announced it would restart its assembly operations in October 2021.

The state’s aerospace industry has struggled at times over the past decade, but the collection of aviation services and aircraft engine and parts manufacturing firms in North Central West Virginia have enjoyed solid growth in recent years thanks to increased efforts to build out the region’s commercial travel options. Moreover, the Applied Ballistics Laboratory (ABL) in Mineral County has recorded some job gains in the past year or so thanks to new contract awards for building and testing advanced rocketry. The facility should see additional expansions as Northrop Grumman has announced that it will hire several hundred workers over the next few years.

WOOD PRODUCTS Although West Virginia’s wood products and furniture manufacturers have enjoyed some degree of recovery from the national housing market’s collapse in the late 2000s, growth has been somewhat uneven over the past few years. Issues such as the softwood labor dispute with Canada had an appreciable impact on the domestic lumber supply chain that hurt a lot of domestic sawmills and framing lumber producers. Furthermore, the Verso Corporation’s paper mill closure in neighboring Maryland has eliminated a source of demand.

The biggest story over the past 18 months, however, has been the chaos across the industry’s supply chain caused by the COVID-19 pandemic occurring at the same time as demand for new housing has surged. Capacity utilization rates for sawmills and other raw lumber processors have only recently climbed back to levels seen prior to the pandemic. Framing lumber prices skyrocketed to historic highs earlier in 2021 due in part to a combination of labor shortages and out-of-sync tree harvesting schedules squeezing domestic supplies, particularly in the Southern US. Homebuilders have slowed the pace of new housing starts over the course of 2021 in order to smooth out these supply chain issues, which has allowed production to slowly catch up with these healthy levels of new home demand.

Figure 3.12 uses a stacked column chart covering the years 2006 and 2020 to show the employment trajectory in West Virginiaís five largest manufacturing sub-sectors. Overall employment in these subsectors has declined from nearly 40,000 in 2006 to 30,000

Sector Outlook

The forecast calls for West Virginia’s manufacturing sector to see markedly improved conditions in comparison to its performance from the past ten years. Some of these gains will reflect a rebound in activity as the impact of the COVID-19 pandemic wanes over the next year and supply chains begin to stabilize, but several subsectors are poised to build upon healthy growth observed over the past several years. Overall, manufacturing sector employment in West Virginia is expected to increase approximately 0.7 percent annually through 2026. The state’s aerospace equipment and motor vehicles and parts manufacturers are expected to be among the leaders in job growth going forward, along with food and beverage production as well as machinery manufacturers.

CHEMICALS OUTLOOK In a reversal from previous reports, the chemicals subsector is expected to be the weakest in terms of employment growth during the outlook period. However, we anticipate the ongoing job losses associated with the closure of Mylan’s plant in Morgantown will account for most of the subsector’s weakness over the forecast horizon. Indeed, outside of the losses associated with Mylan, prospects for the chemicals subsector in West Virginia are positive on balance, due in large part to its growth in the Eastern Panhandle. P&G is expected to expand capacity over the longer term at its state-of-the-art operations in Berkeley County as production from other older plants in North America are shifted to the newer, more efficient operation. Also, the plant will likely foster further growth vis-à-vis suppliers and logistics firms moving into the area, which could then in turn promote clustered manufacturing and supply chain development the area’s proximity to major population centers and availability of access to two interstate highways.

Insulation materials manufacturer Rockwool (ROXUL) recently began operations at its $150 million facility in Jefferson County, while Clorox continues to build out its Berkeley County plant where it will produce Fresh Step, Everclean and Scoop Away cat litter. The plant is expected to commence operations in the first half of 2022, resulting in the addition of just over 100 new jobs.

Continued growth in natural gas exploration and development will provide stimulus to the chemicals subsector as well, particularly as downstream development efforts in the tri-state area come closer to reality with the upcoming completion of Shell’s ethane cracker in Beaver County, PA. Prospects for the proposed PTT Global Chemical ethane cracker in Belmont County, Ohio, have become less certain as one of the investing partners backed out, though PTTGC indicates they are still committed to move forward with the long-awaited project once an alternative partner is identified.

AEROSPACE AND AUTOS The commercial aircraft parts and aviation services industry in North Central is slated for additional growth going forward as Pratt & Whitney, Bombardier and others invest in regional operations. At the same time, Northrop Grumman recently announced its intentions to hire as many as 500 workers over the next several years as the company expands the ABL facility to work on new rocket-based technologies for defense programs. West Virginia’s auto manufacturing industry is expected to add jobs at an overall rate of roughly 2.5 percent annually over the next five years, with most of the increase attributed to Toyota and Hino re-starting or expanding production that has been hampered by supply chain disruptions for semiconductors.

Figure 3.13 breaks down job growth by manufacturing subsector over the past 10 years using a horizontal bar chart that compares it to the expected growth between 2021 and 2026. Motor vehicles and food & beverage will grow the fastest while the chemicals s

At the same time, Toyota is also forging ahead with new investments at its Putnam County plant, particularly the $110 million investment to double production of transaxles for hybrid vehicles. Both Toyota and Hino could see additional capacity upgrades over the long term as production of electric and hybrid vehicles become an increasingly larger share of the US consumer and automotive fleet. In an effort to incentivize their use, provisions ranging from tax credits for electric vehicle purchases to the installation of hundreds of thousands of battery recharging stations across the country are featured in the Infrastructure Investment and Jobs Act and the 2022 budget reconciliation plan that are currently being debated in Congress.

OTHER SUBSECTORS Wood products and furniture manufacturers are expected to increase payrolls at an average annual pace of nearly 1 percent through 2026. The combination of strong homebuilding activity and the supply chain returning to normal conditions will buoy sawmills and other early-stage fabricators. The nonmetallic minerals subsector is expected to outpace the broader manufacturing sector in terms of employment growth during the outlook period, particularly during the first half of the forecast horizon. Several large highway and bridge construction projects funded by the state’s Roads to Prosperity program will boost demand for cement and concrete. In addition, the Biden Administration’s infrastructure package and budget reconciliation bill provide for aggressive levels of spending on surface transportation and other big-ticket projects that use these building materials.

The fabricated metals industry is expected to see employment post an average annual decline of more than 0.3 percent over the next five years. It should see a moderate increase in payrolls during 2021 and 2022, but given its ties to the coal industry, businesses such as roof bolt manufacturers and machine shops will struggle as overall coal production in Southern West Virginia continues its long-term downward trend and steam coal output in Northern West Virginia weakens as more electricity generation shifts over to natural gas and renewables.

PRODUCTIVITY Real manufacturing output is expected to rise at an average annual rate of nearly 1.7 percent between 2021 and 2026. At the same time, the manufacturing sector will see weak productivity growth over the next couple of years as companies currently face labor constraints due to the pandemic and will need to increase hiring activity in order to expand production – or in the case of some manufacturers, to satisfy a backlog of orders that accumulated during the pandemic. Nonetheless, the average value of real output per manufacturing worker in West Virginia is expected to begin rising again by late-2022 and will increase at a healthy pace for the remainder of the outlook period.

Figure 3.14 shows the historical change and forecast of real manufacturing output per worker between 2006 and 2026 using a column chart. Productivity has increased from $125,000 per worker in 2006 and is expected to reach $180,000 per worker by 2026.

MANUFACTURING EXPORTS Following several years of relative stability, chemicals exports declined during 2019 and 2020. Most of the state’s chemicals exports stem from the wide array of commercial- and industrial-use resins and polymers produced by chemicals manufacturers located throughout the Ohio and Kanawha Valleys. During 2020, the inflation-adjusted value of chemicals exports slipped to $1.3 billion, the subsector’s lowest export total since the Great Recession. Most of this weak reading can be attributed to the global pandemic outbreak during the first half of the year, as most industrialized countries shut down large portions of their economies in order to slow the spread of COVID-19. Shipments are on pace to rise moderately during 2021 as the Delta variant of SARS-COV2 led to a pullback in global economic activity during portions of the second and third quarter.

Aside from chemicals, exports from West Virginia’s other major manufacturing subsectors totaled $1.3 billion in 2020, a 13 percent loss compared to the previous year. Industrial machinery and an array of transportation equipment (car engines, aircraft parts) comprise a significant share of the goods exported by West Virginia companies. Exports of machinery slumped to less than $144 million during 2020, but preliminary data for 2021 suggest global shipments will double to roughly $300 million.

Figure 3.15 charts the level of exports from West Virginia's top five manufacturing sub-sectors between 2006 and 2021 (estimated) using a stacked column chart. The chemicals subsector has consistently had the highest value of exports, followed by transpor

Figure 3.16 is a table that lists the top 10 manufactured products that were exported internationally from West Virginia in 2020. Of $3.1 billion worth of exported goods, auto engines are the leading manufactured export, at $650 million.

Guest Insight: West Virginia Grown: Local Agriculture’s Impact and Outlook

By Kent Leonhardt, West Virginia Agricultural Commissioner

Agriculture has been a cornerstone of the U.S. economy since Pilgrims first arrived at Plymouth Rock. With some of the best farmland in the world, the United States is the second largest agriculture producer right behind China. Agriculture and related industries contribute over $1 trillion to the U.S. gross domestic product each year. In West Virginia, the impact of agricultural commodities is equally significant, accounting for $800 million annually to our economy. If timber products are included, that number jumps to nearly $5 billion. According to the latest U.S. Census of Agriculture, the Mountain State’s approximately 24,000 farm operations rank 25th in poultry and egg production, 27th in Christmas trees, 30th in fruits, tree nuts and berries, and 38th in cattle.

Poultry is by far the largest contributor to West Virginia’s agriculture economy, bringing in nearly $300 million annually to the State. Additionally, some of the world’s best turkey genetics are developed right here in West Virginia. Following poultry, West Virginia farmers primarily focus on raising cattle, an industry worth around $157 million annually. Just like our turkey industry, West Virginia’s cattle herd has some of the best genes available for these livestock. A focus on animal husbandry makes sense, given that the State lacks flat land usually needed to grow staple crops such as corn or wheat. At the same time, our mountainous territory is an asset providing a natural barrier to disease outbreak.

The Mountain State leads the nation in small, family-owned farms, which is much different than the large, corporate agriculture we know in the Midwest. This means producers must focus on different markets and products that require less land and time to manage. Throughout the pandemic, the importance of a robust local agriculture system has been evident. As federal production facilities managed outbreaks within their workforce, it caused food shortages in grocery stores. To keep up with demand, local agriculture producers stepped in to provide supplies to citizens of West Virginia.

What we have learned thus far from the COVID pandemic is that agricultural production is more than just an economic driver for the State, it’s security. Having a safe, secure food supply is essential when facing potential emergencies. Keeping nutrition at a premium for our citizens is vital to fighting off diseases, as well as keeping morale high, and both are necessary for healthy communities. As federal facilities struggled to maintain production while consumer demand increased, in West Virginia we worked to ensure local suppliers could remain operational.

As a result, our State experienced record increases in both meat processing, as well as sales through local farmers and markets. As local demand continued to rise during the pandemic, West Virginia agricultural producers were in an optimal position to take advantage of the intensification of consumer awareness about food quality and source. If there was ever a time for West Virginia to tap into local food consumption as an economic driver, increase food security, and further develop the state’s ability to respond during a crisis, it is now.

The West Virginia Department of Agriculture (WVDA) and its partners have been working tirelessly to enhance the impact of the state’s agricultural sector. To help foster economic growth, we have spent a tremendous amount of time to modernizing West Virginia’s agriculture laws. Some of the law that we have adjusted over the past five years had not been updated for almost seven decades. Our mission has been, and continues to be, to find ways to reduce barriers on local producers and bring necessary regulations into the 21 st Century.

Some of the significant changes to date include streamlining regulations for small producers and businesses. In addition, we have analyzed industries, such as dairy, which have struggled in recent years, to try and better understand what has contributed to their decline. In the case of dairy, this led the Legislature to move sole authority over that industry to WVDA to better allow for regulation informed by subject-matter experts. We have also adjusted rules and regulations to produce non-potentially hazardous foods and milk to allow new market opportunities.

Farmers markets saw significant change with the move under the WVDA. Permits, previously issued on a county-by-county basis, were consolidated into a single statewide permit, thereby lowering the cost to do business at markets around the state. Permits for many products have been eliminated entirely. Businesses like Mama Faye's Fudge & Confections in Greenbrier County can now sell their products in retail locations, and not just through farmers markets. By removing many regulations from non-potentially hazardous foods, which include certain types of baked goods and other low-risk food items like hard candies and dried herbs, home businesses are now poised to flourish.

To move the economic needle in a positive direction for our State, we must also leverage programs that can further economic development opportunities through agriculture. WVDA’s mission is to protect the State’s food supply and foster economic development through agriculture, and the Department has developed numerous programs with that goal in mind. The most prominent of these is the West Virginia Grown program. Started in the 1980s, West Virginia Grown is a consumer-facing program designed to market products produced, processed and made in West Virginia to consumers. By placing the West Virginia Grown logo on a product, our members are assuring buyers that product was grown or processed, with quality ingredients, in the Mountain State.

As local food continues to grow in popularity and consumers turn to healthier, fresher options, branding West Virginia food products will be vital to increasing potential market opportunities. Just like our Tourism Department must market West Virginia’s beauty as a must-see destination, we at the Department of Agriculture are focused on giving our local producers a competitive edge in the crowded food and beverage space. This is an important component to helping grow and diversify our economy, as well as expanding and strengthening local food systems. When consumers buy West Virginia Grown products, those dollars go right back into our communities.

As we seek to expand opportunities in the food and beverage sectors in West Virginia, it is imperative we invest in resources to foster that expansion. For example, the WVDA laid the groundwork for this investment last year, when it worked with the Legislature to establish an Agriculture Investment Fund. Even though there are not yet appropriated dollars, we hope to mirror a program after states like, Kentucky, Virginia and Michigan. These states have experienced significant positive economic outcomes, such as an increase in agribusinesses and other related enterprises that create jobs and provide significant contributions to the economy. These states have tackled various issues by investing resources to foster economic growth directly into the agriculture sector. West Virginia is poised to do the same.

Five years ago, WVDA established its Agriculture Business Development division. The focus of this new division is to support start-up and scale-up agribusinesses here in West Virginia by providing professional services and assistance, while also working to attract new food and beverage businesses to the state. Our goal was simple: to take agriculture seriously and recognize it as the powerful economic driver it is and can be. We also wanted to create better relationships with our partners to share that mission and collaborate on existing efforts. These efforts have assisted many organizations of various sizes to start-up and scale-up during this time.

A prime example is Buzz Food Services located just outside of Charleston. Thanks to collaboration with our Agriculture Business Development division and other state partners, Buzz is expanding its operations to include a top-of-the-line, USDA-inspected livestock slaughter and processing facility and leveraging abandoned mine land funds to do so. This is a huge opportunity not only for local farmers, who tend to send their cattle to large stockyards in the Midwest, but also for local restaurants and consumers who want to purchase meat raised and processed in the Mountain State. In addition, their new facility will employ well-paying, technical jobs that our state desperately needs. Local meat processing experienced a 200% increase during the pandemic, so focusing on ways to expand these operations will prove to be an economic driver.

To replicate these successes across West Virginia, we must continue to search for opportunities to improve the agricultural business environment of the state. Any good battle plan starts by reviewing and conquering barriers to the success. To the extent that government is one of those barriers, we must start there, continuing our efforts to modernize regulations while also investing in programs that support the agriculture industry. We have started down a good path of reducing barriers on small businesses while providing more resources for growth, but we will need real commitment from state leaders to create a more viable pathway. For an example of how some programs have been applied to create market access for agribusinesses in West Virginia, see the infographic.

Figure 3.21 represents an infographic of the results several different government programs have provided to agribusiness companies in the state of West Virginia. The programs helped to extend funding for more than 90 businesses and millions of dollars in

Enticing agribusinesses to the State will require all the tools at our disposal for business attraction and expansion. This includes having matching dollars to help the exploration and development of these industries. In the past five years, the WVDA Agriculture Business Development team has developed strong relationships and project alignment with the West Virginia Economic Development Department. Together, I know we are making great strides towards creating specific tools geared towards agriculture, but a greater investment will be needed to advance this work.

Going forward, West Virginia must fund programs to foster economic growth specifically in the agriculture sector. The State’s premier agriculture branding program, West Virginia Grown, helps local businesses brand and market their products, but all the effort to-date have been made without any dedicated budget funding. Any successful branding program needs a certain amount of market leverage to get consumers to buy into the message being promoted. Without those up-front dollars, we can’t effectively educate consumers, both in and out of state, to look for West Virginia Grown products.

Agriculture has changed a lot in the last fifty years as the average age of the farmer continues to rise and fewer young people are entering the industry. This has forced the landscape of agriculture to embrace technology and think differently about workforce development to meet shifting consumer demands. Despite its prolific agricultural production, the United States is not immune to crisis, political landscapes or unfair trade deals. Therefore, agriculture is more than an economic driver for any state that is looking to preserve our way of life; it is national security.

Nonetheless, there is a great deal of potential for agriculture and other downstream industries in West Virginia. This potential will only be realized with additional state investment and resources. If the Mountain States takes a proactive approach toward needed investments, the industry will flourish. We must make real commitments toward agriculture business development by recognizing agriculture for the economic driver it is and can be. Our citizens, health, future, and economy can only benefit.