Site Selection Magazine Gives Texas and Pennsylvania High Rating for Capital Investment

By Vernon Trollinger, March 7, 2013, News, Small Biz

Site Selection Magazine Governors CupYou’d think all the ominous grumblings coming from inside the DC Beltway heralded yet chillier gloom and doom to come. But lo and behold, investment is WAY up. The Dow has been hitting new record highs and unemployment unexpectedly dropped in February. Bloomberg News quotes Robert Lutts, chief investment officer of Cabot Money Management, as saying, “There’s an underlying element of support for the labor market and it’s really driven by housing and potentially construction finally coming back.” Are tender green shoots of recovery tentatively emerging from their ice-bound dormancy?

The World’s Best Garden…Texas

Well, it certainly seems that way for Texas. Site Selection Magazine awards the “Governor’s Cup” each year to the governor of the state with the highest number of qualified capital investment projects the previous calendar year. To count qualify, these projects must be in the private sector that feature one or more of the following criteria:

  • an investment of $1 million
  • create 50 or more jobs
  • construction of a new space of at least 20,000 square feet.

This year, Governor Rick Perry won the award with Texas launching 761 qualifying projects during 2012. By comparison, Ohio came in second with 491 projects, while Pennsylvania was third with 430. Perry credits the Texas legislature with creating a stable tax and regulation policy that lets entrepreneurs to keep more profits and expand their businesses. Other states have taken notice of what Texas is doing and adopting similar policies.

Not surprisingly, businesses are also paying attention to the cost of doing business in Texas. As Site Selection quips, “Lots of companies need to be in Texas. But increasingly companies want to be in Texas.” Governor Perry has no qualms about encouraging their advances. In California, where companies suffer slings and arrows of outrageous policies, Gov. Perry visited that state recently, inviting them to check out Texas (California scored a modest 112 and did not make the top ten in Site Selection magazine).

Houston By Any Other Name

Texas’s towns and cities figured significantly in Site Selection’s assessment. Chief of these was Houston, the largest city in Texas, which also earned the title of of Top Metropolitan Area in the U.S. Even though it also achieved the top ranking for 2011, Houston still led other metropolitan centers, with 325 facility deals, outshining the bulk of its competition, as Chicago (311), Dallas-Ft. Worth (224), Atlanta (165), and hard-working Detroit (144) rounded out the Top 5.

According to Fred Welch, vice president of regional economic development for the Greater Houston Partnership, all aspects of business have been shaped in Houston by the state’s low-tax burden. Businesses in energy, life sciences, chemicals manufacturing, company headquarters, and high-tech companies are profiting and expanding throughout Space City. Site Selection Magazine quotes Welch saying, “The cost of doing business affects these companies. They come into the region and operate profitably. In some cases, these are business units that left the country 10 or 12 years ago, and they are coming back.”

Welch cites numbers that aren’t just sound and fury. In fact, they’re pretty darned impressive:

  • Chevron Phillips Chemical Co. and Dow chemical invested $5 billion and 1.7 billion respectively.
  • Ineos USA is spending $1 billion on a new ethylene plant
  • LyondellBasell is spending $500 million to expand its ethane and methanol R&D center.
  • Nearly $60 billion in energy projects are being developed in one stage or another in the Houston area.

And that’s only a sample.

It’s no secret that chemicals, machinery manufacturing, professional services, and data centers have all figured heavily in the Texas growth formula. Yet, more significantly is the tide of energy investment that is lifting all boats in both Texas and Pennsylvania. Gas shale plays in Texas have brought billions of investment dollars from Exxon Mobil, Anadarko Petroleum, Shell Oil, and Phillips 66. The huge Marcellus shale in middle and western Pennsylvania has increased employment by extraction and pipeline companies by 127% from 2009 Q3 to 2012 Q3 with 1,414 hire in 2012 Q3 alone. Site Selection also cites development nearing $4 billion in liquid natural-gas (LNG) operations as well as rehabilitation of several antiquated petroleum refineries that supplied the Northeast and employed thousands of workers in the Philadelphia metropolitan area.

Readiness and Preparation are Keys to Sustain Growth Trends

Energy sector growth both in domestic crude oil and natural gas production has been at historic levels. Crude oil production has topped 7 million barrels/day (bbl/day), while natural gas production has held this year at about 80 billion cubic feet per day (bcf/day). They key here is that while petroleum powers cars, more and more uses are being found for natural gas, including as a vehicle fuel and more importantly, electric generation.

So, while Texas maybe leading the way across the nation when it comes to increased business investment, entrepreneurship, and development, it will also find itself contending with sustained population growth in its largest cities. Like other parts of the country, Texas is already grappling with the problem of high demands for electric power. An increasing population will have an increased energy demand.

Supplying that demand won’t be easy. Thankfully, if the past has shown us anything, growing demand will spur more innovation in Texas’s energy industry as well as encourage development in diverse sources of energy, such as wind, solar, and other renewable energy sources. And by effectively preparing for the expansion of the oil, natural gas, and renewable energy market, states like Texas and Pennsylvania will continue to receive the benefits of increased capital investment.

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A native of Wyomissing Hills, PA, Vernon Trollinger studied writing and film at the University of Iowa, later earning his MA in writing there as well. Following a decade of digging in CRM archaeology, he now writes about green energy technology, home energy efficiency, DIY projects, the natural gas industry, and the electrical grid.

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