Category Archives: Business and Economy

Is It the Death Knell For Dominion’s Pipeline?

By Peter Galuszka

For more than a decade, hydraulic fracturing drilling for natural gas and oil has transformed the American energy picture, leading to big revivals in such energy fields such as Marcellus in West Virginia and Pennsylvania and the Bakken field in the Dakotas.

It has prompted Dominion Energy and its utility partners to push forward with an $8 billion or so Atlantic Coast Pipeline that will take Marcellus gas through Virginia all the way to South Carolina. The project, tied up in court fights, has been enormously divisive as property owners have protested the utilities’ strong arm methods of securing rights of way.

But now there’s clear evidence that the fracking boom is over, and that has huge implications for the ACL project. The reason? Oil and gas prices have dropped thanks to a perfect storm of issues. There’s the coronavirus pandemic tanking the U.S. economy, bitter energy wars between Russia and Saudi Arabia, and the fact that fracking gas and oil rigs are enormously expensive and wells can produce for only a short period.

The Hill reported last week: “Oil sank to $23 (a barrel) from a high of $53 in mid-February, far below the break even point that producers need to drill new wells to maintain supply, and with volumes rapidly diminishing at existing wells.”

The newspaper points out that a fracking well can cost more than $10 million while a traditional well is only $2 million. As price pressure mounts, the number of wells nationally has plummeted from 790 to 772 in one week.  At the Bakken field, reports The Washington Post, producers are cutting costs.

The situation has clear implications for the ACL project which was conceived at the height of the Marcellus boom. Dominion claimed that the gas would be badly needed in coming years while others claimed there isn’t enough demand. Continue reading

Virginians Hit the Sauce

By Peter Galuszka

Virginians are stocking up on spirits, fearing that the ABC store system might shut down because of the coronavirus pandemic.

Last week saw sales of $30.1 million up from $4.5 million the previous week. While big, the volume has not surpassed the holiday seasons last year.

For days, there have been rumors that ABC stores would shut down.

Not so, says the ABC system. They are changing store hours to open at noon and close at 7 p.m., seven days a week

So far, one store in downtown Richmond has been temporarily shut down because an employee tested positive for the virus.

Governor Ralph Northam, hoping to ease the financial pain of restaurants now closed to dining inside, has urged them to ramp up their takeout and delivery sales by letting them include wine and beer.

There had been talk that cocktails might be included, but the ABC says no.

A local ABC store employee told me that there are big runs on large bottles and there are some shortages but generally, the delivery system seems to be working. ABC also offers online sales.

Among the best- selling brands are Jack Daniel’s Tennessee Whiskey and Tito’s vodka.

Bottoms up!

Northam: Take the Bricks Off the Life Rafts

My first post in two weeks. What the heck, I should join the parade and give a bunch of advice to our beleaguered Governor which he is likely to ignore.  This first appeared today in the Fredericksburg Free Lance-Star. It has one of those annoying “take a survey” paywalls, but in this case asks a question we should all answer. Try it.    

By Steve Haner

The assumptions underlying the most contentious debates of the 2020 General Assembly session are gone. Sixty days ago, activists were arguing that this was a rising economy and state government should mandate raising workers to a higher level.

This is a now sinking economy, and the General Assembly’s actions have piled bricks on the life rafts that workers in the commonwealth will need to survive.

The priority now is containing the spread of this respiratory virus, but soon it becomes reviving an economy that has come to a near stop. Nobody knows when or where unemployment will peak, but this is starting to look more like 1929 than 2009.

Gov. Ralph Northam’s lasting legacy will not be his response to the virus, but the speed of the following recovery.  Continue reading

How to Optimize the Lives/Jobs Tradeoff in the COVID-19 Epidemic

by James. B. Murray, Jr.

The debate now raging over the tradeoffs between saving lives and economic disruption is clouded by oversimplification. The solutions we ultimately adopt will not be some groundless elimination of protective measures on Easter Sunday, any more than they will call for quarantining everyone, everywhere until some arbitrary date in July or September. The answer must be much more nuanced.

America has three strategic goals to address, in this order: First, buy time until we can get our health care system capacity upgraded to handle the flood of cases that epidemiologists can predict are coming to each city and region of the country. Second, get our testing capacity and the infrastructure needed to deploy it, distributed across America so we can tell who is infected and begin the random testing needed to model mathematically where and when the virus will spread. Third, quickly develop a set of protocols that can be used to identify those who can go back to work and who may circulate publicly without risk to the most vulnerable.

We need only look at New York City, Italy and Spain to see what happens when the virus peaks in a community before the health care system is prepared. Everywhere across America, including here in Virginia, our hospitals are running low on personal protective equipment (“PPE” – like N-95 face masks, gowns, and gloves). Our doctors and nurses can’t care for the critically ill if they themselves are infected. Continue reading

Keep Cash Flowing

by Chris Braunlich

The government actions taken to flatten the coronavirus pandemic will most effect the smallest of businesses, as well as part-time and lower income workers such as restaurant wait staff, and ‘gig’ economy workers without benefits

For small businesses, an SBA loan (even at discounted interest) is no substitute for customers and cash flow. For workers, $1,200 checks from the feds (and unemployment checks) will be no substitute for a job.

When the St. Louis Federal Reserve Board president predicts unemployment will hit 30% and GDP will be cut 50%, it’s appropriate to assume that many of those small businesses may be gone when this is over. And if the businesses are gone, the workers they hire will be out of work even longer.

Steve Haner, the Thomas Jefferson Institute’s Senior Fellow for State and Local Tax correctly notes the best way to moderate the economic drop is to keep cash flowing through the economy. That is a role many of us can play. Continue reading

COVID-19 Economic Impact Estimates

by James A. Bacon

Thanks to its high share of federal government employment and a high percentage of jobs that can be performed remotely, Virginia is somewhat less vulnerable to job losses from COVID-19-related shutdowns of large sectors of the economy than other states, said Stephen Moret, CEO of the Virginia Economic Development Partnership (VED) in a Monday update to economic development partners.

“We expect a large increase in unemployment to happen quickly, led by the hospitality sector, with substantial job losses in retail as well,” he wrote. The short-term impact will vary substantially by industry sector:

  • Minor impacts for ~48% of total employment in Virginia (federal government, healthcare, K12 education, utilities, data centers, and agriculture);
  • Moderate impacts for sectors representing ~35% of total employment (professional services firms, IT firms, manufacturers, higher ed, real estate, construction);
  • Severe impacts for sectors representing ~17% of total employment (hospitality, retail (with a few exceptions, e.g., grocers), and small businesses generally (especially those in the non-traded sector), and movie production.

Any prognostication must be tempered by big unknowns, he said: (1) the size and speed of federal stimulus to offset social distancing impacts, and (2) the timeline for social-distancing measures to remain in place. Continue reading

A Look at Richmond and COVID-19

By Peter Galuszka

Here is a roundup story I wrote for Style Weekly that was published today that explains the effects of COVID-19 on the Richmond area. Hopefully, BR readers will find it of interest.

It was a tough piece to report. The impacts of the deadly virus are very complicated and multi-faceted. An especially hard part was trying to keep with the fast-changing news, notably the number of new cases and deaths. We were updating right up until the story closed Monday afternoon. It was hard to talk to people with social-distancing and closings.

The experience shows the delicate balancing act between taking tough measures to stem the contagion and keeping the economy going. My view is that tough measures are needed because without them, it will all be much worse, particularly more illness and death as the experience in Italy has shown.

Incredibly, our utterly incompetent president, Donald Trump, now wants to focus on the economy more than taking necessary containment steps. It’s far too soon for that. Regrettably, a number of Bacon’s Rebellion commenters are sounding the same irresponsible tune in keeping with their big business and anti-regulation laud of free market capitalism. Continue reading

Ranking Metros at Risk for COVID-19 Job Losses

Source: Brookings Institution

Virginia’s metropolitan areas are somewhat less exposed than other metros to the risk of job losses stemming from the COVID-19 epidemic, according to a new report by the Brookings Institution.

The Hampton Roads metro, home to substantial travel-and-tourism businesses in Virginia Beach and Williamsburg, is the most vulnerable with 16.5% of jobs in what Brookings defines as “high-risk industries.” Those disruption-prone industries include mining/oil & gas, transportation, employment services, travel arrangements, and leisure and hospitality. The least vulnerable Virginia metro was Winchester, with only 13.2% of jobs in high-risk industries.

Nationally, the percentage of jobs in high-risk industries ranges from a low of 9.1% in Madera, Calif., to 42.5% in Midland, Texas. Here’s a breakdown of Virginia metros: Continue reading

Employment Snapshot: Virginia Accommodations & Food Services

As we explore the economic impact of the COVID-19 virus (and a hike in the minimum wage), it’s worth taking a look at the number of Virginia workers potentially affected. These numbers come from a 2018 Virginia Employment Commission report on Virginia’s Accommodation & Food Services sector, the state’s fourth largest industry. Average weekly wages of $367 in 2017 were the lowest of all industries in the state. — JAB

How Virginia Would Fare Under President Biden, Part 1

By DJ Rippert

And then there were two. Today, Elizabeth Warren announced that she will withdraw from the presidential race. That leaves Joe Biden, Bernie Sanders and Tulsi Gabbard (yes, she’s still running) as the remaining candidates for the Democratic nomination. Given that Tulsi Gabbard has exactly one delegate (from American Samoa where she was born), the odds of her prevailing are so low that the race can safely be considered a two- man contest. Two weeks ago Joe Biden’s campaign seemed deader than disco. Then came Super Tuesday. Now he’s the front runner.

It seems worthwhile, then, to consider how Biden’s announced policies would affect Virginia if he were elected president this November. Politico keeps an updated list of the candidates’ positions on the issues which you can see here. Politico records the candidates’ positions using fifteen categories. This blog post examines the first five categories — criminal justice, economy (excluding taxes which is a separate category), education, elections and energy (including the environment and climate change). The remaining ten categories will be examined in future articles.

Continue reading

Bacon Bits on the Bay

Trophy rockfish from the good old days

By DJ Rippert

Political action regarding the Chesapeake Bay is increasing.  Here is a summary of some key issues ….

Menhaden victory. The Chesapeake Bay Foundation reports, “The Virginia House and Senate have passed bipartisan legislation to transfer management of Virginia’s menhaden fisheries from the General Assembly to the Virginia Marine Resources Commission (VMRC).”  The long-running battle over who should regulate Virginia’s menhaden fishery has been extensively covered by Bacon’s Rebellion. You can read some of the more recent posts here, here and here. This change in regulatory venue has been long demanded by environmentalists and opposed by reduction fishery Goliath Omega Protein.

Commentary: This is a very positive change for the Chesapeake Bay. Menhaden will still be caught in Virginia waters but the regulation of that fishery will now be scientifically managed by the VMRC. The simple fact is that the Democrats have removed one corrupt burr from under the saddle of Virginia’s state government. This change in attitude was catalyzed by aggressive federal action by the Trump Administration. Good for both Virginia’s Democrats and Trump’s Commerce Department. Specific kudos to state Senator Linwood Lewis, D-Accomack, Del. Ken Plum, D-Fairfax, Senate committee chair Chap Petersen, D-Fairfax, Governor Ralph Northam, and U.S. Commerce Secretary Wilbur Ross. Continue reading

Virginia’s Top Employment Cop Adds Enforcers

Virginia’s Powerful Top Employment Cop, Attorney General Mark R. Herring

By Steve Haner

The final state budget is still in negotiation, but it could add as many as five new enforcement staff to the Office of the Attorney General to seek out and prosecute discrimination in Virginia’s workplaces, using old and new definitions of what is prohibited. The price tag looks to be about $600,000 per year.

The Virginia Senate proposed budget amendments to that agency’s budget for three new people to enforce two pending Senate bills. The House of Delegates budget added five new lawyers and staff, based on its versions of those same two bills plus two additional bills granting the Attorney General new tasks and powers.

Some of the bills have been discussed previously on Bacon’s Rebellion. Both the House and Senate are passing versions of the Virginia Values Act (such as House Bill 1663 ) and both have bills to prohibit and punish discrimination against pregnant workers (see House Bill 827). That bill has not been discussed, but it creates the same opportunities for the aggrieved to sue in court for actual and punitive damages.  Continue reading

VA to Examine Company Payrolls, Hunting Bias

By Steve Haner

How bad is the climate for business in Virginia now? Just how much does this New Blue General Assembly detest and distrust evil capitalists? Let’s look at one little bill first noticed Monday in the long string of bills rushing toward Tuesday’s deadline for action. House Bill 624 won’t be the worst bill of the session, but it is very revealing of the new mindset.

Del. Chris Hurst, D-Blacksburg, sold this bill to the House of Delegates Monday with the common and debatable statistic that women earn 79 cents compared to every dollar earned by men. He wants the state to take on the role of ferreting that out worker by worker and devising a state-enforced solution. Doing so will mean $24 billion more paid to female Virginia workers, he claimed. Continue reading

Odd Bedfellows: Trump and Northam Administrations Combine to Protect Virginia’s Menhaden

By DJ Rippert

Cats and dogs sleeping together. The long running saga of the General Assembly and Omega Protein vs. environmentalists and the Virginia Marine Fisheries Commission (VMFC) took a major turn recently. Our General Assembly (buoyed by campaign cash from Omega Protein) sought to use inaction to thwart the VMFC’s scientific management of a small fish called the menhaden in Virginia waters. The VMFC enlisted its east coast umbrella organization, the Atlantic States Marine Fisheries Commission (ASMFC), to cut Omega’s menhaden limits. Omega resisted citing General Assembly inaction on reduced limits as tacit approval of higher limits. The ASMFC (along with support from the Northam Administration) appealed to the Feds and won. The lower limits will stand whether the General Assembly likes that or not. The net result is that the General Assembly appears to have been forced into a corner. It seems that no amount of campaign contribution cash will get them out of that corner. Beyond the Battle of the Menhaden, this contest forces a question – is the unholy alliance between our state legislature and various special interests finally starting to crack? Continue reading

Virginia Likely to Avoid “Marijuana Legalization Trap” in 2020

By DJ Rippert

Reefer madness. Virginia is notably lagging most other states in marijuana reform. Across America recreational marijuana is legal for adults in 11 states and legal for medical use in 33 states. Twenty-five states have decriminalized the possession of small amounts of marijuana. In Virginia marijuana is illegal, criminalized and unavailable for medical use. Yet change is blowing like smoke in the wind. As of today, there are six decriminalization bills pending in the General Assembly along with three bills for expungement of prior convictions, two legalization bills, and four bills to implement a medical marijuana regime in Virginia. Depending on which bills pass …  Virginia could be looking at a near-term marijuana environment much different than its prohibitionist past. However, there are some combinations of events that could lead The Old Dominion into unintended (and negative) consequences.

Roach trap. One likely outcome from the 2020 General Assembly session is that possession of small amounts of marijuana will be decriminalized while efforts to legalize the recreational and medical use of marijuana will fail. This could put Virginia in a very sub-optimal position if neighboring states legalize marijuana. Virginia is a small state bordered by five other states and the District of Columbia. A very high percentage of Virginians live within an easy drive of neighboring jurisdictions. If Virginia decriminalizes while neighboring states legalize, the result will be effective untaxed legalization in much of Virginia. A surge of Virginians will drive over various borders to bring back marijuana purchased legally elsewhere. Marijuana use would increase in Virginia while none of the financial benefits of legalization (via taxes) would accrue to Virginia. But how likely is it that neighboring states will legalize recreational marijuana in 2020? Continue reading