Tag Archives: Rural development

Illuminating Rural Poverty in Virginia

Last week Augie Wallmeyer delivered a speech to the Virginia Historical Society on the “Extremes of Virginia.” If you haven’t read his book by the same title, listen to his speech. (Clicking on the image takes you to the Virginia Historical Society Facebook page, where the speech can be viewed.)

A Town that Refuses to Die

The past twenty years have been unkind to Halifax County. The Southside Virginia locality has seen wave after wave of plant and business closures — some caused by the restructuring of the tobacco industry, others from globalization and the offshoring of traditional manufacturing industries. The dislocations have been so traumatic that Bloomberg writer Craig Torres used Halifax and the town of South Boston as a mini case study of the downside of the nation’s free trade orthodoxy.

Reflecting a common view, the Heritage Foundation wrote in 2000 that free trade would create “prosperity that benefits every citizen.” While it still is possible to argue that free trade has benefited Americans overall, the impact has been uneven. And hundreds of small-town communities across America like Halifax County were the losers. No wonder, suggests Torres, that Halifax County swung toward avowed protectionist Donald Trump.

Torres spends much of the article describing how economists have begun questioning free trade dogma. He also recounts how the Halifax-South Boston community has undertaken the hard work of reinventing itself, a process that, he says, “might be working.” The jobs gap has closed. Halifax now has 5.1% unemployment, down from nearly 13% — only a tad higher than the nationwide rate of 4.3%. (Torres doesn’t discuss how many people are under-employed or dropped out of the workforce.)

The Southern Virginia Higher Education Center provides a variety of degrees and certifications in partnership with Virginia colleges and universities.

Look at the chart above, taken from the Bloomberg article. The post-NAFTA era of the mid-1990s was devastating to employment in Halifax County. While the U.S. economy as a whole prospered during the Internet boom, unemployment in Halifax shot up to 14%. The county managed to recover to national unemployment levels but got hammered again when the 2001 recession overlapped with China’s entry into the World Trade Organization. But the delta this time between Halifax and U.S. unemployment was somewhat smaller than it had been five years previously. Halifax got slammed in the 2008 recession as well, but the unemployment delta shrank yet again. Today the employment gap has almost disappeared.

Is Halifax County the story of a mill town that has successfully reinvented itself? Writes Bloomberg:

Some manufacturers are still around, from sports-car maker TMI AutoTech Inc. to Swiss industrial giant ABB Ltd. Both received incentives after expanding investment and adding jobs, the county industrial development authority said. The companies’ long-term plans for the region might hinge on whether the local workforce has the right skills; so South Boston and the county turned two former tobacco warehouses into a higher education center, offering college courses and vocational training, from nursing to welding to IT. Technicians trained there are getting hired at Microsoft Corp.’s data center in a neighboring county.

Torres explores what the Halifax example portends for the free trade debate. But the story has implications for a parallel discussion here in Virginia — can Virginia’s mill towns be saved? Or is money spent on economic-development efforts throwing money down the drain?

The evidence of Halifax County is admittedly anecdotal, but it is encouraging. The old economy is gone. It’s hard to imagine that there is anything left for globalization to destroy. Halifax has undergone an economic transition more wrenching than anything that inhabitants of Virginia’s major metro areas could imagine. But the community has adapted. In my humble appraisal, the agglomeration economics of the Knowledge Economy still favor the nation’s big metros and work against communities like Halifax over the long run. But it’s too soon to write off Virginia’s mill towns.

Northam’s Affordable, Not-So-Ambitious Plan for Reviving Rural Virginia

Ralph Northam, Democratic Party candidate for governor, grew up on the Eastern Shore, so it’s not surprising that he has given considerable thought to the challenges of economic development in Virginia’s small towns and rural communities. Earlier this week, he unveiled his plan for economic growth in rural Virginia.

If you’re looking for a “Marshall Plan” to reinvigorate rural Virginia, this is not it. The plan is not ambitious, and there may not be enough in it to get rural Virginians especially excited about Northam’s candidacy. But it has this virtue: Proposals don’t require spending vast sums of money, so they are at least feasible from a budgetary perspective. This is a plan that Northam, if elected, has a realistic chance of implementing.

Personally, I distrust “Marshall Plan” approaches to chronic social and economic challenges. Instead, in our fiscally constrained era, I’m a fan of low-cost, low-risk initiatives that will likely yield a positive return on investment. In that spirit, I’ll start by illuminated the most promising ideas in the Northam plan and work my way down the list.

Virginia’s Rapid Readiness Program. Northam proposes a “rapid readiness program” similar to successful workforce training programs in Georgia and Louisiana. “We could get this program started here in Virginia with a ten million dollar investment, with funding tied to business participants, number of projects delivered, and individuals successful trained,” states his plan.

Assuming that Northam is drawing upon the thinking of Virginia Economic Development Partnership CEO Stephen Moret, who set up the Louisiana program, the program would function as a extension of Virginia’s economic development effort by offering a workforce-training solution as an incentive for corporations to invest in Virginia. The program would differ from existing educational/training offerings by creating a team capable of providing customized training within a time frame required by corporations to get their operations up and running.

While the rapid readiness program would be applied across the state, rural areas arguably would benefit the most because such training applies most frequently to light manufacturing projects that typically locate in smaller communities.

I’m not sure $10 million is sufficient to fund this program properly. Regardless, there is a readily available pot of money — Northam and Moret no doubt would disagree with me about this — and that is the Commonwealth Opportunity Fund, which the state dips into to provide “incentives” for economic development projects. But as Moret himself said in a presentation to the State Council of Higher Education for Virginia two days ago, workforce is one of the top three factors (and often the No. 1 factor) that corporations consider when deciding where to locate. Incentives are a secondary factor. Shifting money from incentives to workforce training looks like a no-brainer to me.

Expanding renewable energy. Expanding solar generation is viable rural economic development strategy. Solar farms may create few permanent jobs, but they do increase the tax base, and they often pay streams of royalties to landowners (depending on how particular deals are structured).

“In my home county of Accomack on the Eastern Shore,” says Northam, “the commonwealth’s largest solar farm is in the process of being built, which will ultimately power several data centers owned by Amazon.”

Northam says he is committed to working with Virginia’s electric utilities and the General Assembly to “remove barriers that stand in the way of developing and expanding clean energy efforts.” Note the phrase “remove barriers.” Northam is not asking for new subsidies or tax breaks. Solar doesn’t need subsidies; market forces increasingly favor solar. Rather, Northam wants to remove obstacles that inhibit businesses, entrepreneurs and homeowners from building rooftop solar and solar farms.

Utility-scale solar like the Amazon Web Services farms in Accomack need little help — Dominion Energy and Appalachian Power have ample incentive to deploy solar on a large scale. The barriers exist at two levels: local zoning codes and state regulatory policy. Local governments need to make their zoning codes more solar friendly. Meanwhile, state lawmakers need to craft “net metering” legislation that balances the interests of independent solar producers with those of electric utilities who maintain the electric power grid that everyone depends upon.

Broadband for all. Most people would accept the proposition that broadband Internet service is critical infrastructure for economic development today. The problem is that sparsely populated rural areas are not attractive markets to Virginia’s big broadband providers.

Northam points to a pilot project in Southside Virginia in which Virginia’s Tobacco Commission, Microsoft, and the Mid-Atlantic Broadband Company utilize unused portions of the television broadcast spectrum to push out high-quality wireless broadband. So far, more than 100 households have been connected, and the number could reach 1,000 by year’s end.

“Under this innovative public-private program, Virginia’s share of the cost is $500,000, leverage private investment for a total investment of $1 million,” states the Northam plan. “This commonwealth should look to replicate this successful program across rural Virginia.”

How so? He would pull together disparate broadband initiatives across the commonwealth under the direction of a cabinet official “who will be responsible for getting more people connected.” Northam also advocates legislation similar to that adopted in Minnesota that creates a clear set of metrics, including upload and download speeds, to evaluate broadband access. Whatever else you say about these proposals, it doesn’t sound like they will break the bank.

Expanding the University of Virginia-Wise. Northam proposes increasing the educational offerings of the University of Virginia-Wise to encompass high-need, high-growth disciplines such as cybersecurity, unmanned aerial systems, energy, and computer engineering and programs. Expanding UVa-Wise would cost about $15 million initially, Northam says, with a possibility of scaling up funding over time.

We have a unique opportunity … to transform UVA-Wise into an international destination for students and researchers. This will have a tremendous effect on the regional economy because when you can attract students and top talent from around the world for research and development, grants will follow. And with grants and applied research, business opportunities will soon follow. And structured correctly, these businesses will not only start up in Southwest Virginia, but they will remain and grow.

The idea of creating “innovation districts” around college campuses is a hot one right now, and anyone who has seen the Virginia Tech Corporate Research Center can readily understand the potential for economic development near college campuses. But Tech is the top research university in the state. Whether its success can be replicated on even a modest scale by a tiny, largely unknown newcomer is questionable. Tech has invested hundreds of millions, maybe billions, of dollars, over decades building academic programs, hiring star faculty, recruiting graduate students, and assembling the administrative infrastructure it takes to win research contracts.

Competing for research dollars is tough. Well established institutions such as Old Dominion University and the College of William & Mary have seen their research programs falter in recent years. It is a stretch to suggest that a $15 million investment in Wise would spark the miraculous transformation that Northam describes.

Startup tax plan. To help attract and retain new business in rural and economically depressed regions of Virginia, Northam proposes a “zero BPOL and merchant’s capital tax for new startup and small businesses .. for the first two years. This will drive economic activity and startups to rural areas, and result in no loss in existing revenue to local governments.” Once local businesses take root, they will start paying taxes — a win-win.

It’s good to see a Democratic Party candidate advocating tax cuts! But the proposal lacks crucial detail. BPOL and merchant’s capital taxes are local taxes. How does Northam propose eliminating those taxes for two years? Will the state just command localities to change their ordinances? Will the state reimburse them for lost revenue? Does he have the remotest idea of what the initiative would cost? Finally, while the BPOL and merchant’s capital taxes are near the top of the list of things that small businesses in Virginia hate, is there any body of evidence suggesting that a mere two-year reprieve will stimulate more startups?

There’s more to Northam’s plan, but the other proposals, which address workforce development, are statewide in nature and don’t address peculiarly rural issues. So, I won’t dwell on them here.

Perhaps the best thing that can be said about this plan is that Northam isn’t making extravagant promises that he can’t keep. These narrow-bore proposals won’t exactly spark a rural Renaissance, but for the most part, they seem politically and fiscally feasible.

Rural Virginians Will be Really Old by 2040

Image credit: StatChat. Click for more legible image.

Like every other state in the union, Virginia’s population is getting older. The trend is particularly pronounced in rural jurisdictions, as seen in these maps compiled by Shonel Sen with the Demographics Research Group at the University of Virginia and published in the StatChat blog.

Everyone seems so focused on immediate problems that localities have given little attention to what things will be like in 23 years when the 65+ demographic comprises more than 20% of the population across most of the state. Given the inability of most Baby Boomers to accumulate much wealth, how many of these elders be poor? Given the tendency of young people to move away, will the rural elderly have caretakers? Given the pressures on rural hospitals and the increasingly acute shortage of doctors, will the elderly have adequate access to health care?

I suppose it’s human nature to ignore distant problems until they become immediate problems, so I’m guessing nothing will be done until these issues reach crisis proportions. This is America. That’s how we roll.

Dominion Explores Pumped Storage in SW Virginia

Graphic credit: Dominion Energy

Much to my astonishment, Dominion Energy is taking a serious look at building a pumped-storage hydro-electric power plant in Virginia’s coalfields. I wrote about the idea back in February but it struck me as a long shot. So much for my superficial impression. It now transpires that Dominion is identifying potential sites in far Southwest Virginia and hopes to narrow the list later this year.

If Dominion decides to proceed, it will notify potentially affected landowners and set up meetings to gain public support, according to Dominion spokesman Greg Edwards. Though still in the early exploratory phase, Dominion describes the prospects as “very exciting.”

The potential impact is enormous. The pumped-storage power station would have a capacity of 1,000 megawatts, making it even bigger than Dominion’s coal- and wood-burning Virginia City Hybrid Energy Center, which cost $1.8 billion to build and generates $6 million a year in tax revenue for Wise County. “We’re talking about revenues way in excess of what Virginia City generates,” Edwards told the Coalfield Progress.

The idea behind pumped storage is to move water between reservoirs at different elevations. Dominion would let the gravity-fed water run turbines, as shown in the company-supplied graphic above, during periods of peak power demand when the cost of electricity is expensive, and then pump the water back to the upper basin when electricity is cheap. The concept is the same as Dominion’s pumped-storage dam in Bath County, the world’s largest.

Pumped storage will be increasingly attractive as eastern utilities increasingly rely upon wind and solar power, which are intermittent sources of electricity. A pumped storage facility could help even out fluctuations in electric production due to variations in wind and sunshine, or even shift power production from periods of peak solar output during the mid-day to peak demand in the late afternoon/early evening. The massive scale contemplated for the project — 1,000 megawatts, roughly equivalent to the capacity of a state-of-the-art gas-fired facility — suggests that Dominion could be considering the plant for load-shifting purposes. And that could be a game-changer.

Source: Dominion 2017 Integrated Resource Plan. Click for legible image.

Dominion’s Integrated Resource Plan foresees the need for a new nuclear power plant by 2030 (under the strictest CO2 regulatory regime), up to five new gas combustion turbines by 2032, and more than 5,000 megawatts of solar power by 2040. I am entering the realm of speculation here — none of this comes from Dominion — but the addition of a giant pumped-storage facility to Dominion’s generating fleet might enable the company to shift more aggressively to solar power and still maintain grid reliability. Potentially, depending upon transmission line limitations, pumped-storage could eliminate the projected need for four 240-megawatt combustion turbines. (How such a shift would impact the demand for natural gas supplied by the proposed Atlantic Coast Pipeline is a big unanswered question.)

The idea originated with coalfield legislators, not Dominion. Del. Terry Kilgore, R-Gate City, Del. Todd E. Pillion, R-Abingdon, and Sen. Ben Chafin-Lebanon, amended the state code to add pumped-storage hydroelectricity generation and storage to the list of projects which, if built in the Virginia coalfield counties, would be deemed “in the public interest.”

Learning of the proposal during the General Assembly session, Dominion quickly began exploring the idea. Early media reports emphasized the idea of using underground mines as a holding tank for the water, but Edwards told the Coalfield Progress, “We’re not wedded to underground.”

So far, Dominion’s investigations into potential sites have involved working with maps and satellite imagery. The company has looked at “literally hundreds” of possible locations. Even if Dominion finds a suitable site, however, it could take seven to ten years until a pumped-storage facility became operational.

Coping Gracefully with Depopulation

Map credit: Virginia Department of Mines, Minerals and Energy

A Roanoke Times editorial asks a provocative question: “Should we just let Appalachia go?” Instead of trying to rebuild a new economy in far Southwest Virginia, should the commonwealth just allow the region to depopulate?

As the editorial points out, the Appalachian mountains and hollers were sparsely populated through the 18th and 19th centuries. Then, in the late 1800s there arose an industrial economy that ran on coal. “Coal happened. Railroads happened. People — many of them immigrants — poured into Appalachia. Roanoke was not the only boom town to spring up then. So did lots of other communities deeper in coal country.”

After an efflorescence during the last 70s/early 80s, coal went into decline. Mechanization eliminated jobs. Thicker, efficient-to-mine coal seams played out. Environmental regulations drove up the cost of mining and combusting coal. And natural gas began displacing coal in the utility market. As long as high-quality metallurgical coal used in steel making can be mined in Appalachia, mining will never totally disappear. But coal will be a shadow of the industry it once was.

Virginia’s coalfields have tried to diversity their economies, but they suffer enormous competitive disadvantages. They are geographically remote, far from large urban centers and interstate highways. They have a paucity of flat land suitable for industrial development. The workforce is poorly educated, substance abuse is widespread, and most ambitious young people who earn college degrees leave for better employment prospects elsewhere. And the quality of amenities and public services is low so that everyone who made significant wealth in coal mining moved out of the region. There is no moneyed business class to spark an entrepreneurial revitalization.

Some coal counties refuse to die. Wise County has been especially creative in trying to reinvent its economy around broadband, data centers and solar energy. Recent state legislation that would favor pumped storage as a complement to solar farms has Dominion Energy giving a serious look at the region. The economic impact of such a facility, if ever built, would exceed that of Dominion’s $1.8-billion Virginia City Hybrid Energy Center, which burns coal and biomass. But the economics of these dreams remain unproven.

“It’s hard to see what industries exist in which Appalachia has a comparative advantage as vast as it had in coal,” the Roanoke Times quotes economist Lyman Stone as writing. “I’m not saying none do or could ever exist; I’m just saying that if they can or do, they don’t seem extremely clear right now.”

In Stone’s estimation, without coal mining to prop up the economy, Appalachia’s population has a long way to fall. He writes: “We can’t let hopes blind us to realities. On some level, population must be associated with economic activity to support it. Coal mining is still declining, and when it’s completely gone, it’s not clear how much economic activity will remain, and therefore how much population can be sustained.”

Bacon’s bottom line: As much as I hate to acknowledge it, Stone’s prognosis is correct. The 21st century economy belongs primarily to populous urban areas. I wouldn’t discourage coalfield residents from trying to salvage their communities — indeed, I very much hope they succeed. But even if creative-thinking localities such as Wise succeed in diversifying their economies, data centers, solar farms and pumped-storage facilities employ very few workers beyond the construction phase. Such projects would bolster the local tax base, enabling counties to maintain basic services, so they are worth pursuing. But they won’t reverse the depopulation of the region.

The coalfield counties, like other remote, rural counties in Virginia, need to think how to decline gracefully. Hard-hit cities and towns in the Midwestern rust belt are learning how to cope with shrinking populations, and perhaps it’s possible to learn lessons from them. What rural counties do not need to do is invest scarce resources in desperate, long-shot bids to turn around their economies. The circumstances are dismal, but living in denial of economic reality will only make things worse.

Fifteen Nucleii for the Rebirth of Southwest Virginia

Stephen Moret, CEO of the Virginia Economic Development Partnership. Photo credit: Roanoke Times

Southwest Virginia is on track to lose 1,000 residents each year for the next decade, Stephen Moret, chief of the Virginia Economic Development Partnership, told attendees of the Southwest Virginia Economic Forum in Wise, yesterday. The region needs to add 250 new jobs per year over and above the new jobs already coming just to stay stable.

Achieving a 1% annual growth rate will require adding three times the number of new jobs each year, he said, as reported by the Roanoke Times. “Yes, it’s a big challenge. Yes we’re up against a lot nationally, but this is something we can achieve if we’re focused enough, aggressive enough, committed enough.”

Moret proposed a six-point plan to jump-start the region’s economy. As summarized by the Times, he recommends:

  • Expanding computer science programs at higher education institutions.
  • Increasing workforce development training to match business needs.
  • Altering Virginia’s tax structure to reduce taxes on technologically advanced manufacturing businesses.
  • Offering higher incentives to companies willing to relocate or expand in rural Virginia.
  • Spending money to market rural Virginia — something the commonwealth doesn’t currently do.
  • Creating mixed-use developments attractive to young professionals as a way to improve quality of life factors.

You can download a copy of Moret’s presentation from Google Docs. The presentation begins his aspirational goals for Virginia and VEDP, then places Virginia’s rural development challenges in a national context, and ends with a few ideas to advance economic development in the coalfield region (i.e., far Southwest Va.)”

Bacon’s bottom line: These ideas all sound reasonable… but five of the six require more money, either directly through higher expenditures or indirectly through tax breaks. Unfortunately, there’s not a lot of extra cash floating around, either at the state level or the local or regional levels. Perhaps the Tobacco Region Revitalization Commission, which has an annual budget of about $30 million, is in a position to fund the workforce training initiatives, incentives and marketing programs. Perhaps the higher-ed sector can reallocate funds to expand computer science programs. But it won’t be easy finding the resources for new initiatives.

The most original idea — indeed it’s such a departure from the usual thinking about rural economic development that it slaps you like a mackerel across the face — is the recommendation to create mixed-use development attractive to young professionals. This notion has much to commend it, not the least of which it doesn’t require subsidies or tax breaks, and is fully within the power of local governments to implement, subject to market constraints.

I would like to expand upon the idea. By my count there are four cities — Bristol, Radford, Galax and Norton — in Southwest Virginia and more than 40 incorporated towns. The towns range in size from Blacksburg (population 44,200) to Clinchport (population 67) in Scott County — both the largest and the smallest in the Commonwealth. Many of these cities and towns have walkable Main Streets or downtown districts capable of supporting mixed use development.

Blacksburg is a unique case. Its vibrant downtown district is an extension of Virginia Tech, an economic powerhouse unmatched elsewhere in the region, and its success cannot be replicated. But I have frequently referred to the example of Abingdon, which I believe can serve as a template for communities not endowed with a major research university. Abingdon has built an attractive, walkable downtown around the nucleus of the historical Barter Theater, the Martha Washington Inn and a stock of historic brick buildings. The town has become not only a place where people want to visit but where people want to live.

Counties, cities and towns need to fundamentally shift their thinking — as embedded in zoning codes, comprehensive plans, and capital spending plans — from subsidizing rural sprawl to creating walkable urban nucleii. Capital spending plans should invest in expanding the grid street networks from their Main Street/downtown cores. And if they have any cash to spare, municipalities should invest in sidewalks and streetscapes (and, if demand exists, cycling lanes) with the goal of making streets more hospitable to pedestrians. But they need to do it right. Place making is a complex discipline, and investments should be guided by the principles of Smart Growth or New Urbanism. Finally, cities and towns need to get comfortable with the idea that mixing offices, retail and residential is a good thing — it’s what more and more people want.

The big challenge is overcoming stagnant or shrinking populations. It’s hard to justify investing in new buildings in walkable, mixed-use districts if there is little demand. That’s where a regional marketing plan could prove invaluable. But instead of spending marketing dollars on trying to attract light industry (as I presume Moret intends), or even young people, who will be a hard sell without abundant jobs, I would suggest spending it on attracting retirees looking for inexpensive places to spend their leisure years. Such a campaign should not aim at retirees generally but (a) emigres who may have sentimental or family attachments to the region, or (b) retirees seeking to live an active, outdoors lifestyle.

By my hasty, back-of-the-envelope calculation, Southwest Virginia has at least 15 communities of sufficient scale to create small, intimate, walkable places where people with significant disposable income might be willing to live. (My list is hardly definitive, and likely would need to be revised, but the guiding idea is sound.) These are the potential nucleii for rebirth. These are where the tobacco commission should be investing in broadband, where the state and counties should be funneling infrastructure dollars, and where institutional assets such as schools, colleges, museums, libraries, community centers should cluster.

Southwest Virginia needs to reinvent itself for the 21st century economy. Light industry, data centers, solar farms, call centers and back-office operations are all part of the equation. But creating places where people actually want to live is indispensable as well. Kudos to Moret for raising the issue.

Nobody Cares about You, Southwest Virginia, and Maybe That’s a Good Thing

Downtown Abingdon, one of Virginia’s great walkable places.

The Roanoke Times tells a hard truth to the readers of Southwest Virginia: “Nobody cares about you.”

Democratic Governor Terry McAuliffe, says the Sunday editorial, has done nothing to help the counties of the far Southwest whose finances were devastated by the collapse of the coal industry. The Democratic Party in Virginia has “evolved into almost strictly a suburban-urban party that has no natural interest in anything west of the Blue Ridge.”

And the Republicans? After promising to help the coal industry, President Trump has proposed slashing funding for energy research and zeroing out a program that pays to convert old mines into industrial sites. Concludes the editorial:

What’s the takeaway from all this? We’re on our own. We cannot count on either Richmond or Washington to help us. Maybe from time to time one of them will come through with some unexpected grant to help with some piece of infrastructure and we should be grateful. On a day-to-day basis, though, it’s clear that both the state and federal governments have come to a bipartisan consensus: Southwest Virginia doesn’t matter to them.

What is the down-on-its-luck region supposed to do? Businesses need to get more engaged, says the Times. Local government needs to focus more on economic development. Voters need to be more demanding.

The Times is right. Other regions are indifferent to the fate of Southwest Virginia. They have their own problems and their own funding issues. Other regions insist that they’re getting a raw deal from the state. (Talk to a Northern Virginian some time. NoVa may be rich, but its citizens feel short-changed and aggrieved.) And every region pursues its own self interest. The bigger piggies muscle closer to the trough, leaving the weaker piggies behind. It’s Darwinism in a political setting.

Southwest Virginians would be well advised not to pin their hopes on the largess of others. What, then, can they do?

They could start by acknowledging some harsh realities. First, coal is never coming back. Natural gas, wind power and solar power are far cleaner and far cheaper. Economics will dictate than any new electric-generating capacity in the United States over the next decade will be either gas or renewable. Existing coal plants will serve out their economically useful lives, and then they will be phased out.

Second, manufacturing might rebound, but it will never provide the large-scale employment it did a generation ago. Some manufacturing operations may repatriate from overseas back to the U.S., and corporations will continue to invest in plant expansions. But robotics, artificial intelligence and other forms of automation mean that manufacturing processes will create require fewer and fewer jobs as time goes on. The return on investment on traditional economic development strategies — recruiting manufacturing investment — will continue to decline.

Third, the agglomeration economies of the Knowledge Economy will continue to favor metropolitan areas with large, diverse pools of skilled, educated labor over small, semi-skilled labor pools of rural communities. The Roanoke-Blacksburg area, with its access to Virginia Tech, its faculty, graduates and entrepreneurial spin-offs, conceivably can achieve economic escape velocity. But no other city or town in the region has that potential. Meanwhile, young people who succeed in obtaining a college education will continue to emigrate from the region — just like they’re doing in every other rural community across the country.

Making the challenge even more difficult, Southwest Virginia lacks an advantage possessed by other rural areas in Virginia such as the Shenandoah Valley, the northern Piedmont, and the Chesapeake Bay tidewater — proximity to large, affluent metropolitan areas. A location within easy driving distance of big metros will support an economy of resorts, vacation homes, retiree communities and weekend-getaway amenities for city dwellers.

What options does that leave Southwest Virginia? Not many. But the region is not destitute of assets. The Virginia Tobacco Region Revitalization Commission still has millions of dollars to dispense. The region just has to take care not to squander its limited resources on chimera like new Interstate highways, inter-city rail service, manufacturing subsidies, our outright follies such as government-supported golf courses, convention centers and other long-shot efforts to stimulate development.

I’ve written before about the Aspen model of economic development, built on active outdoor recreation — not just skiing but hiking, rafting, rock-climbing, mountain biking, kayaking, fishing, all-terrain riding, and so on — as well as a fabulous, walkable downtown. The walkable downtown is a critical element of Aspen’s success, and there is no reason that Virginia can’t replicate the formula in many of its small towns.

Call it the Abingdon model instead of the Aspen model. The town of Abingdon in Washington County is one of the most charming places in Virginia, and it is set in an area of great natural beauty. It has become destination that people are willing to travel hours to visit. Abingdon is proof that the strategy can work.

Wise County is another innovative community, exploiting its investment in broadband to recruit data centers. Data centers don’t support many jobs, but they do pay taxes that broaden the tax base. The county also is exploring opportunities to supply green energy to the data centers. Regional authorities should map the electric transmission grid, enact solar-friendly zoning ordinances and comprehensive plans, and encourage solar developers to consolidate properties capable of hosting utility-scale solar farms.

America is a big place, and while most rural areas (outside the fracking hotspots) are hurting. But some communities are faring better than others. Some are doing innovative things. Southwest Virginia can learn from the example of others. Perhaps it’s not a bad thing that no one else cares about the region. In the long run, dependence and handouts accomplish less than resilience and self reliance.

Rappahannock Water Quality Endangered by Fracking?

Rappahannock River

Rappahannock River. Image credit: American Rivers.

American Rivers has listed the Rappahannock River as the fifth “most endangered” river in the United States. The environmental group claims the river is threatened by industry interest in hydraulic fracturing (fracking) operations in the Taylorsville Basin lying thousands of feet beneath the river. The quality of drinking water of three million people in eastern Virginia are at stake.

The Rappahannock joins company with the Lower Colorado River (the most endangered), which is threatened by excess water consumption; California’s Bear River, which is imperiled by a new dam; the South Fork Skykomish River in Washington, which is jeopardized by a new hydropower project; and six other rivers. These rivers are not necessarily the most polluted. Rather, American Rivers highlights in its “America’s Most Endangered Rivers 2017” report ten rivers whose fates will be affected by the political process in the upcoming year.

The watershed of the Rappahannock, the longest free-flowing river in Virginia, encompasses all or parts of 18 counties, the report notes, and supports thriving agricultural and seafood sectors as well as recreational activity.

American Rivers is concerned that 85,000 acres in five counties along the tidal Rappahannock are leased for oil and gas exploration. Only one of the five counties has enacted a land use ordinance to protect against the impact of fracking. Last year, Governor Terry McAuliffe approved new regulations that would require baseline water testing and monitoring along with the disclosure of any chemicals used in the fracking process. The oil and gas lobby introduced legislation to weaken the regs in the 2017 General Assembly session, but the effort was beaten back. Says American Rivers:

It is clear that the threats that industrial gas development and fracking pose to the rural and agricultural communities along the Rappahannock River are not going away. The first line of defense lies with local government, which has the power to establish local protections to protect the drinking water for millions of citizens.

Last  year Prince George County amended its zoning ordinance to require hefty setbacks for gas wells, effectively making 91% of the county unavailable for drilling. But Westmoreland, Essex, Caroline, and King and Queen Counties have yet to act.

Here’s the source of concern: Gas companies must drill through the Potomac Aquifer to reach the gas in the Taylorsville Basin, which is reported to contain more than 1 trillion cubic feet of gas, equivalent to two-and-a-half times the volume of gas consumed in Virginia in a year. Fracking injects sand and chemicals under high pressure to fracture the rock sufficiently for oil and gas to flow through it. Although oil and gas companies seal off drill holes where they pass through aquifers, environmentalists claim that potentially toxic chemicals still can leak into the Potomac Aquifer and, from there, eventually into the Rappahannock River.

Bacon’s bottom line: Environmental groups are adamant that fracking represents a danger to the aquifer and water supply. The oil and gas industry is equally insistent that fracking poses minimal risk. Each side cites seemingly authoritative studies. Who knows?

The Taylorsville Basin contains maybe one-fortieth the volume of gas contained in the famed Marcellus Basin, which has transformed energy economics in the United States, but it’s nothing to sneeze at. The gas has an economic value of $2 billion to $4 billion, maybe more, depending upon the current price of natural gas. That represents a lot of economic activity for five economically depressed rural counties.

Admittedly, a billion dollars or so in local payroll and royalties won’t be much consolation if fracking ruins the water supply. But more than 8,000 wells have been hydraulically fractured in Southwest Virginia with no documented instances of surface or groundwater contamination, according to state geologist David Spears.

The McAuliffe administration made a prudent decision, it seems to me, to establish a baseline of data on Potomac Aquifer water quality and to require gas companies to disclose the chemicals they use in fracking. If chemicals used in fracking are not found in the aquifer but suddenly appear after drilling begins, it is not unreasonable to conclude that fracking created the problem. Conversely, if none of the chemicals show up in the aquifer, no harm is likely being done.

Regardless, the American Rivers report signals that the Taylorsville Basin is on the radar screen of national environmental groups. I expect they will pour considerable resources into fighting development of the basin. Linking that fight to the conservation of the treasured Rappahannock River is shrewd public relations.

How National Monopolies Drain Rural Economies

Dilapidated buildings along Main Street in Pamplin City, Prince Edward County. Photo credit: OnlyInYourState.com.

Virginia’s rural communities suffer from huge disadvantages when competing for job-creating corporate investment. Low density makes it expensive to install high-bandwidth Internet service. The small size of rural communities makes it difficult to support the amenities that skilled, educated workers are looking for. And, most important, corporations prefer locating in metropolitan areas with “deep” labor markets where they can tap employees with specialized skills.

Perhaps we can add one more disadvantage to the list: a national economy increasingly dominated by monopolies and cartels. So suggests Lillian Salerno, a former Texan who served as deputy under secretary for rural development in the Obama administration.

“For decades,” she writes in a Washington Post op-ed, rural America has been punished by bad policy that places too much power in the hands of distant financiers and middlemen through the formation of monopolies, which undermines small, local businesses and drains communities of resources.”

New business formation has plunged since the Great Recession, and nowhere more dramatically than in counties with fewer than 100,000 people. Why? Because, Salerno says, the federal government stopped enforcing monopoly laws.

This slow-rolling wave of corporate mergers has left almost all major markets — airlines, telecommunications, health care, retail, milk, seeds for growing crops, hardware, even cowboy boots — dominated by a cluster of mega-corporations, cloaked behind a plethora of brand names. These behemoths now hold unprecedented power over thousands of once-thriving community economies.

Corporate concentration has hit farmers, ranchers and agricultural workers especially hard, she writes. Many markets are monopolized by a single company that dictates the terms of business to suppliers. The seed industry has dwindled from 600 independent companies two decades ago to six today. Similar levels of concentration exist in the pork, chicken and dairy industries.

I don’t know if Salerno is right or not — I would like to see more specifics — but her argument is worth close examination. If her theory holds up, it is discouraging indeed for rural economies, for a decades-long drift toward a cartel-dominated economy is not easily reversed. If it’s any consolation, monopolies are not good for most metropolitan economies either.