How Natural Gas Could Benefit Southeastern Pennsylvania The Most

Forbes Energy Blog has a guest post from Navigant on why exporting liquefied natural gas (LNG) is a good idea for America.  Exporting LNG is also a must for Pennsylvania in maximizing the economic benefits of the Marcellus beyond just the drilling regions.

Southeastern Pennsylvania already has the rough infrastructure to make it a LNG export hub with the existing crude oil refineries along the Delaware River.  Moreover, the Delaware is naturally capable of handling the tankers necessary to transport the LNG.

The good news for the construction industry is if a concerted effort to convert petroleum refineries to LNG refineries were to become a reality billions would need to be invested.  That is also the bad news because with natural gas prices currently very low the investment currently does not make economic sense.  However, as the article points out there are signs that may change and the benefits of exporting LNG may soon be too big to ignore.

The conversion of the petroleum refineries along the Delaware to LNG refineries is something that political leaders in Southeastern Pennsylvania have raised from time to time.  Now is the time they should get serious about it.

Liquid Assets

Check out this trailer for the PBS documentary “Liquid Assets.” Sums up nicely the need to repair our crumbling infrastructure. It also indirectly makes the case for PPP’s especially in the area of water and sewer systems where private companies (like Philly’s own Aqua American) can upgrade, repair, and manage these systems far more effectively and much cheaper than the public entities they currently belong to.

Interesting Study on State of Our Water Sytems

Underground Construction has an article on the results of a study concerning the current state our water systems.  The results are bad news for those that live in areas that are prone to water main breaks (like Philadelphia) and potential good news to the contractors that will be required to perform the work to fix, maintain, and upgrade these system.  Here are some statistics that I found interesting:

“The average age of the failing water mains is 47 years old and 22 percent of all water mains are over 50 years old. The study also found that 8 percent of all installed water mains are beyond their useful life and the use of trenchless technologies will continue to increase with directional drilling as the most widely accepted technology with a higher satisfaction rating and 74 percent of utilities are considering it in the near future.”

These statistics one again prove that infrastructure will be a growth area for contractors for the considerable future.

Investing in Unready Projects

In an earlier post, I outlined what a common seanse infrastructure bill should look like.  As the Wall Street Journal reported yesterday, President Obama is apparently not an avid reader of Supplemental Conditions because he is getting ready to market a new “investment” in infrastructure spending program that misses the mark entirely.  I understand that many underemployed construction firms see a new infrastructure spending program as a silver lining to the dark cloud that hangs over the industry right now.  Indeed, the AGC is all but begging to for this bill to be passed.  But, as the Journal alludes to, any new infrastructure spending program is likely to have little impact on the economic realities the industry faces.  First, many of the so called shovel ready projects are at least 3 years from the first shovel being put into the ground.  Additionally, President Obama’s plan will undoubtedly require the use of project labor agreements thereby funneling the spending to union only construction firms and leaving an overwhelming majority of construction firms out in the cold. 

What we need is not targeted spending, but pro-growth policies that will benefit the entire market place.  Public spending directed at 11% (the percentage of the construction industry that is unionized) is simply not going to do it.  Yes, infrastructure spending is nice – and necessary – but it is also useless without vibrant private sector projects.  Unfortunately, no amount of President Obama’s “investment” can get those projects going.

Common Sense Infrastructure Spending

Today’s Wall Street Journal discusses competing infrastructure spending bills making their may through the House and Senate respectively.  After years of infrastructure programs laden with pork and bridges to nowhere coupled with a disastrous “stimulus bill,” which resulted in job loss instead of creation, it is important that investments in our nation’s infrastructure be both pro-growth and fiscally sound.  Here are a few ideas on what needs to be included in a pro-growth fiscally sound infrastructure bill.

1. THE GOAL OF AN INFRASTRUCTURE BILL SHOULD NOT BE JOB CREATION.

Too often, the primary purposed of government spending is job creation. However, as with the stimulus bill, billions of dollars are spent creating few — if any — jobs. Instead, Congress’ primary goal in funding infrastructure projects should be to fund projects that promote commerce. For example, as Robert W. Poole pointed out in the Weekly Standard there is no interstate route between the rapidly growing metro areas of Las Vegas and Phoenix. Moreover, infrastructure spending has not reflected demographical shifts in the American population. Therefore, Congress should seek to invest in infrastructure projects that will promote commerce in the parts of the country that have growing populations and centers of commerce and not in areas of the country where population is declining, like the Northeast.

2. REQUIRE OPEN AND FAIR COMPETITION FOR INFRASTRUCTURE FUNDS

Congress should insist that a large number of contractors should be able to compete for infrastructure contracts. This means that Congress must ban Project Labor Agreements from being used on any infrastructure project it funds. Project Labor Agreements are a de facto requirement that the contractors bidding on certain government contracts be union contractors. According to Labor Department statistics, only 14.5% of those employed in the construction industry are members of a union. Therefore, by requiring the use of union labor through Project Labor Agreements an overwhelming majority of those working in the construction industry are denied a chance at employment. Moreover, because union labor is typically more expensive than its non-union counterpart, requiring open and fair competition for infrastructure projects will assure that taxpayers are getting the best price possible for the work that is being performed.

3. TAXPAYERS MUST BE GIVEN VALUE.

Besides not spending money on earmarked pork projects, Congress should insist that infrastructure spending is not used to reward special interests, which artificially inflate costs. Therefore, Congress should scrap any requirement that new infrastructure projects follow the David-Bacon Act, which inflates project costs by requiring that contractors pay their employees a certain hourly wage. While workers should earn a decent wage, Congress should not mandate wages that bear no relation to the market rate wages that would be paid by a private employer for the same work.

Also out should be any “Buy American” provisions. While I am sure taxpayers prefer to buy American made goods, they should not be forced to subsidize American manufacturing, which is declining for a variety of factors and will not be helped through Buy American clauses in infrastructure contracts.

Finally, all “green” requirements should be stripped from infrastructure spending unless it is conclusively shown that it will save the taxpayers’ money. The purpose of infrastructure spending should not be to promote dubious global warming and sustainability causes.

4. FUND SMART PROJECTS

Congress should not fund projects that are obsolete the moment they are completed. The cost of the project should be evaluated over the long term not just at the time of funding. However, taxpayer value and long term costs control cannot be achieved unless projects are constructed to adequately handle future growth.

5. HAVE STATES COMPETE FOR MONEY.

States should be required to compete for infrastructure spending. They should be required to submit plans that show the proposed infrastructure project will meet the criteria set forth above. This will assure that unnecessary pork laden projects that generate little value to the taxpayer do not get funding and growth creating cost effective projects do.  Competition for funds will keep costs down and create value.  A infrastructure “bank” will not.  Over the long term the “bank” will become another government agency hamstrung by special interest rules and in need of a bailout.

Congress can easily accomplish all of these goals in an infrastructure spending bill.  It is important to invest in our national infrastructure.  Indeed, the Constitution all but mandates it.  However, after years of waste, now is the time to get back to investing in infrastructure rather than wasting money on it.