By IVEY DEJESUS
Marcellus Shale gas drilling activities, which span across parts of Pennsylvania, Ohio, New York, West Virginia and Kentucky, have been a boom to the U.S. economy.
A bellwether of the economy, the auto industry has seen its ups and downs.
Analysts are pointing to a strong year, but for a select number of car dealerships, 2012 is poised to deliver a bonanza in sales.
Across the rural swaths of northern and western Pennsylvania, the Marcellus Shale gas drilling industry has created a robust demand for cars — especially trucks — from dealers that typically serve economically stagnant towns and counties.
An influx of drillers, contractors and engineers — as well as the tide of locals cashing royalties from the lease of land to gas companies — have managers at car dealerships closing on sales faster than they can restock inventory.
“They are everywhere. They are all over,” said Brian Peace, a managing partner at Murray Mazda in Muncy. “There is a lot of money in our area. They aren’t crying anymore. They have CD’s and cash on hand … even the local restaurants. Everybody is doing better.”
Service contracts increased in excess of 30 percent in recent months, Peace said.
“A lot of these guys are out in the woods. They are hitting deer. It’s a chain reaction,” he said. “We fix a lot of stuff for Halliburton.”
Even dealerships on the fringes of Marcellus Shale gas drilling activities are tracking upticks in sales and service.
Jack Leitzinger, sales manager at Sutliff Auto Group in State College, recently sold 35 to 40 new trucks to employees of gas companies.
And times are good for anyone who had been unemployed.
“A lot of people that had been unemployed previously now have been getting solid checks for four, five months and are wanting new cars,” said Leitzinger, whose dealership serves Clearfield and Centre counties.
Steve Kaiser Jr., a general manager at the Fairfield Chrysler Jeep Dodge in Muncy, estimates an increase of 70 percent in business —sales and service — over the past 18 months.
“We are in a rural area and a lot of local people and local business are benefiting as well,” Kaiser said. “Small welders are now buying trucks and everybody who’s getting leases are buying stuff. Plus all the companies that are up from Texas and Oklahoma. They’re wanting service. The whole dealership as a whole is on the up from parts service to sales department.”
Kaiser is seeing green with the increase in special orders.
“We are stocking at least 20 to 30 more trucks than normal,” he said.
Kaiser carries mostly Ram trucks, which are manufactured in Mexico. He said the manufacturer has noticed the uptick in demand.
“They are aware and they are building the trucks faster, getting them out faster,” he said. “They are backing us up.”
Peace’s Mazda dealership also has been doing significant courtesy deliveries for gas companies. The company buys the specially outfitted vehicle from, say Texas, and ships it to Pennsylvania via Peace’s dealership.
Peace says the courtesy drop shipments — about five to 10 a month —yield long-term returns.
“I don’t make that much money but it acclimates them to our dealership so hopefully we’ll get service out of them,” he said. “A lot of these employees lack good credit. That sales end is harsh. They go from state to state and a lot don’t have good credit.”
He’s paying service staff more for overtime, but it’s worth it.
“We’re trying to get to the drillers,” Peace said. “They are priority to us”
Marcellus Shale gas drilling activities, which span across parts of Pennsylvania, Ohio, New York, West Virginia and Kentucky, have been a boom to the U.S. economy.
By 2035, the shale gas industry will support 1.6 million jobs and contribute an additional $200 billion in government revenues, according to a study by IHS Global Insight, an economic analysis and forecasting firm.
Marcellus Shale is poised to significantly impact local economies not only as the gas industry creates jobs — but as employees in gas-related jobs spend their income on food, housing, transportation, clothing, and other goods and services, IHS estimated.
For now, on the local level, that economic impact, has by and large, been measured anecdotally.
That’s because state and federal government data currently lags anywhere from 12 to 18 months, said Teri Ooms, executive director of The Institute for Public Policy & Economic Development in Scranton.
“In some cases, they are two years behind,” she said. “Having statistical analysis where we can trend is not feasible.”
Even projections, Ooms said, are difficult to calculate.
Over the past year, institute officials have canvassed residents of Bradford, Susquehanna and Wyoming counties to measure the economic impact of the gas industry.
“We talk to folks about housing, jobs, social services, all those things,” Ooms said. “Ironically, one thing mentioned is the increase in vehicle sales.”
That much — the lure of a new car — seems to be a constant in the face of economic prosperity.
“One of the things people like to buy are new cars,” Ooms said. “You get to your have-to first. You pay your bills. Reduce your debt. Then having a second vehicle or a new vehicle is a common luxury item that people want.”
Josh Hawkins, general manager at the Hawkins Chevrolet in Danville, recently sold a fleet of trucks to Enterprise.
“They bought a lot of trucks specifically for Marcellus Shale,” he said.
Five years ago, Peace, whose dealership has been in business since 1939, moved from its old location about a half mile to a new 16-acre site.
It was a prudent move.
The dealership leased 5 to 6 acres to Key Energy, a player in the Marcellus Shale exploration and drilling.
“They could drill in front of the dealership if they wanted,” Peace quipped.
Peace said no one, to his knowledge, has tried to cash in on the rush by inflating prices. It’s bad business practice, he said. But the opportunity exists.
“I know a couple of local restaurants that have two separate menus,” he said.
Auto industry analysts predict 2012 will be a decent year for the car industry — in part because of pent-up demand from owners of old cars.
But one thing seems certain: With the Marcellus Shale gas industry in its infancy, car dealerships that sit on top of this rich reservoir of fossil fuel should continue to enjoy high returns.
“If you look at the Department of Environmental Protection’s website, and look at the number of drilling permits as opposed to wells drilled, you see that we’ve only touched the tip of the iceberg,” Ooms said. “There is more drilling to take place and more economic growth.”
Factor in the Utica Shale, which sits a few thousand feet below the Marcellus and holds an enormous economic and mineral potential, and car dealerships across these rural swaths of the state can take glee in knowing they are sitting pretty.
Kaiser will continue to order his heavy-duty trucks and smile as he looks across the Muncy landscape.
“It’s good as a whole,” he said. “And they’ve been pretty nice people too.”
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