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East Texas stays afloat during slower days

Light in the East

For consumers and businesses alike, economic slowdowns can create headaches during months when the budget is tight, and the industries of East Texas are no exception. Logging, chemicals, oil and gas production and manufacturing industries have long been the economic drivers for the region, and all are affected by factors outside the region.

Texas' oil and gas industry has boomed and busted right along with worldwide supply and demand. The Texas timber industry--which became a billion-dollar industry in 1996--rises and falls with construction around the state and nation. Sales of tools and equipment manufactured to serve both industries experience similar fluctuations.

Tight belts
For East Texas, 2002 got off to a slow economic start. According to May 2002 sales tax data, several cities and counties reported local sales that were below 2001 figures.

Angelina County, home to Lufkin, reported a 6.94 percent decline in year-to-date sales tax rebates compared with 2001. Similarly, Gregg County, which includes the cities of Kilgore and Longview, reported a 1.27 percent decrease from 2001. Bowie County, which includes Texarkana, was down 14 percent in January but was up 2.74 percent by May 2002.

"Overall, business is slower," says A.P. Merritt, president of Kilgore's Merritt Tool Company Inc. In business since 1928, Merritt manufactures equipment for natural gas drilling operations as well as aviation parts for Boeing aircraft, both commercial and military.

Merritt says the oil fields have slowed once again and, in turn, that has slowed drilling for its companion, natural gas.

"Natural gas requires deeper drilling," says Merritt. "But with the price of gas depressed like it's been, they're stacking [drilling] rigs in the yard instead of using them out in the field. Everybody's tightening their belts and just trying to survive."

Ruben Martin, president of Martin Resource Management (MRM), a Kilgore-based company that transports chemicals, hydrocarbons, fuels and propane gas and employs several hundred people in the area, agrees.

"October, November and December were probably the (slowest) three months I've seen in almost 30 years in this business," says Martin. "Then in January the numbers started to come back up." Martin says it stayed that way in February and was getting better in March.

Turning tide
With any economic rise, there comes a fall. Likewise, a rise will follow a downswing, and there are signs things are beginning to turn around.

"Gas prices are starting to turn around within (March)," Merritt says, "but I still feel like there has to be some stability before oil and gas production goes back up. It's all cyclical. There are very few industries around that aren't."

MRM's Martin says even the attacks of September 11 had an effect on part of his business, "bunkering"--or selling--fuel to ships sailing into Mobile, Ala.

"The effect wasn't immediate, but by October we started to see a slowdown," Martin says. "The numbers went way down in October, November and December. But again, we saw those numbers start to come back up in January."

Merritt says checking the open road is a good way to find more economic indicators that things are changing.

"A friend told me once, 'If you want to know about the economy, talk to the truckers,'" says Merritt. "One I talked to said that in 25 years (business) has been the slowest he's ever seen. But then he said that it's starting to come back."

Taking the lead
Another major employer in the area is Eastman Chemical Company. Eastman has been planted firmly in East Texas for more than 50 years. The company's 6,000-acre Longview facility once employed nearly 3,000 people, and even though that number is about 2,000 now, it is still one of the largest employers in East Texas that isn't a school district.

"For several months, Eastman has operated at less than capacity," says James Ray, vice president and general manager of Texas and Asia Pacific Operations with Eastman. "This is not unusual considering the state of our business, but we are aggressively working to assure our facility is more fully utilized."

Ray says despite a reduction in work force, Eastman's production numbers have continued to increase. He credits technological changes and effective employees for those gains.

Furthering the facility's commitment to a future in East Texas, Eastman has addressed how its plant fits into the region's environment.

"Eastman has always considered pollution prevention activities to be an ongoing part of our environmental management program," says Mike Childress, Eastman's manager of Communications and Public Affairs. "Since 1988 we have voluntarily implemented several emissions reduction projects that have reduced our VOC [volatile organic compounds] and NOx [nitrogen oxide] emissions by approximately 60 percent for each constituent."

Eastman is spending about $300 million to develop new power generation facilities that will help eliminate coal-powered steam generation units and replace them with a cleaner alternative.

Building the future
Bill Wellborn, president of the Lufkin Economic Development Council (EDC) says the council always sees both success and failure of businesses during times of economic slowdown.

"It's a mixed bag really, there's always winners and losers," says Wellborn. "I like to think that we're holding our own. [The] timber [industry] is a little slower simply as a result of economic slowdown. But the good news is some companies which are already here are talking expansion."

Almost a quarter of all jobs in Lufkin are in manufacturing.

Abitibi Consolidated is a Canadian-owned paper company that has invested more than $300 million to expand and modernize its paper mill in Lufkin, saving about 650 jobs. American Color Graphics, which prints newspaper inserts, spent more than $7 million on equipment modernization projects.

Wellborn says the unfortunate byproduct of modernization is sometimes a reduction in work force.

"Reinvestment is good, but on the other hand sometimes a faster machine doesn't require as many people to run it," says Wellborn.

Despite the slower economy of 2001, Wellborn feels like there have been signs of a turnaround at the national level, and that usually means the impact at the local level is a little ways down the road.

"I hope that's the case, if the national picture is showing recovery," Wellborn says. "The national indicators usually lead the local ones by a little, and if [the theory] worked coming in, you'd think it would work going out."

Up the road at Longview's EDC, Hunter Hillburn agrees things may just be turning around.

"We've seen an increase now in prospect activity here within the early part of 2002," Hillburn says. "We're looking at some new industry coming in."

Exactly what types of industry may be surprising to some in an area long dominated by the oil and gas industry. Hillburn says the area has diversified to more of a manufacturing-based economy and the economy may be shifting again.

"We're working towards building infrastructure, including fiber-optic lines and the necessary workspace that will attract high-tech companies," says Hillburn. "Our public school system also needs to be something that is attractive to the worker in the high-tech field. They themselves are educated, and they want the same for their children."

Hillburn adds that improved schools and job opportunities might also prompt more home-grown talent to continue to work and live in their hometown and that they are committed to making a difference.

"The economy is shifting all the time," Hillburn says. "Where it will end up, nobody knows. What it's all about for us is creating good jobs for the people here. Whatever it takes to get that done, that's what we'll do."

Clint Shields

Climbing timber

The "Piney Woods" area of East Texas did not get its name by accident. Timber and logging-related industry have long been drivers of the region's economy. According to many industry analysts, however, the national timber market is, like many others in the U.S., going through a down cycle.

Edwin H. Barron, associate director of Forest Resource Development with the Texas Forest Service says that is true, but adds it's poised to rebound.

"Timber prices are down," Barron says. "Our industry has gone through some painful adjustments, and we have seen some local economies hurt by mill closings, but the changes were inevitable."

Barron adds that Texas enjoys a large and quickly expanding market for paper and solid-wood products, and has the modern infrastructure to support it.

"Today, most of the old, inefficient mills are gone. The capacity is more in balance with demand, and our mills now are typically world-class operations," says Barron. "Our timber base is the most productive at any time in recent history. We fully expect our industry to come out of the current recession well equipped to take advantage of strong markets in Texas."

There is room for expansion. According to Barron, Texas produces only about 25 percent of the lumber consumed in the state and about the same percentage of other paper and wood products.