Who Wants to Topple Houston from Atop Energy World?

Dave Fehling/StateImpact Texas

A Shell station in downtown Houston

In Houston, where the business boosters count 3,600 local companies doing energy-related work, the title “World’s Energy Capital” is taken very seriously. And not just because of pride or profit.

“If you begin to lose the concentration in Houston as the Energy Capital, you start getting into, in my opinion, national security issues,” said Lane Sloan,a former long-time top executive with Shell.

Dave Fehling/StateImpact Texas

Lane Sloan at offices of the Greater Houston Partnership

He heads a committee with the Greater Houston Partnership with the goal of “perpetuating Houston as the Energy Capital of the World“. Sloan sees Beijing or Shanghai as the biggest threats to Houston’s position as China’s living standards rise and create new and enormous demand for fuel.

“It’s not going to the East Coast or the West Coast (of the United States). It’s going somewhere else in the world,” said Sloan of the Capital title. Losing the title would weaken the United States’ position in a world where energy and influence go hand in hand.

Dave Fehling/StateImpact Texas

Energy companies in downtown Houston

Not that many here think there’s a big risk of that anytime soon.

“You have to have some presence in Houston if you’re doing business in oil and gas no matter where you are in the world. (Because) no other place in the world has the whole package like Houston,” said Tyler Priest, an energy industry historian with the Bauer College of Business at the University of Houston.

Priest also points to ExxonMobil’s plans to build an enormous 385 acre campus north of Houston near The Woodlands. A reported 8,000 employees will eventually work there, drawn from ExxonMobil facilities all over Houston. ExxonMobil’s decision shows how one of the biggest companies in the world looks at Houston as “the” place to be in the energy business, said Priest.

ExxonMobil

CG image of ExxonMobil's new campus near The Woodlands, Texas

And yet, you don’t have to leave America to find a place where there is talk of becoming the next, big player in energy. Or at least one type of it. Look what they’re saying in Pennsylvania.

“I would say we sealed the deal as that energy capital when shale gas really became a major piece of our portfolio,” said Kathryn Klaber, president of the Marcellus Shale Coalition, a group that promotes drilling for natural gas in Pennsylvania.

The Marcellus Shale in Pennsylvania, like the Barnett and Eagle Ford shale formations in Texas, has been hot for natural gas drilling in recent years. Combined with the Pennsylvania’s coal industry and headquarters for nuclear power company Westinghouse, Klaber said her state is becoming a significant player in energy. Klaber said her office southwest of Pittsburgh is just a few miles from Houston, a tiny town in western Pennsylvania where there’s lots of drilling work.That’s right, Houston.

“You know, Houston PA may soon be misinterpreted as Houston, Texas,” Klaber joked.

Getty Images

Pittsburgh in western Pennsylvania where natural gas drilling is booming

But in all seriousness, Pennsylvania Governor Tom Corbett has said in his budget speech earlier this year that he wants to turn his state into “the Texas of the natural gas boom.” To do that, the state is trying to lure energy companies, many based in Houston, to set-up shop in Pennsylvania.

“I’ve had the pleasure of coming to Houston a few times,” said Klaber.

But while Texas companies are setting up operations in Pennsylvania, they may not be moving their top executives.

“We have not seen that yet and don’t expect to see the big corporate relocation. What we have seen is opening field offices,” said Sid Smith, a commercial real estate broker with Newmark Knight Frank in Philadelphia.

Smith said Pennsylvania is at disadvantage to Texas because of taxes and land use rules. He has a unique perspective: he was born and raised in Houston, Texas but has lived his adult life in Pennsylvania.

“It’s very confusing and  it’s a  pretty big barrier to entry,” Smith said of Pennsylvania’s rules and regulations. “Whereas, when you go to a Houston, it’s much easier, the corporate taxes are lower, and of course, we (in Pennsylvania) have a fairly significant income tax.”

Pennsylvania has made some changes and is debating others in those areas to make the state more competitive and “business friendly” as they like to say in Texas.

“A lot of regulations have been modernized even in the last few years to make it more predictable,” said Klaber with the Marcellus Coalition.