This report assesses the potential economic and fiscal impact on Accomack County and on the Commonwealth of Virginia associated with the extension of an existing Maryland natural gas pipeline, owned by Chesapeake Utilities Corporation (Chesapeake Utilities), to customers in Accomack County, Virginia. That assessment is based on: 1) an empirical analysis of baseline economic conditions in Accomack County and the impact the pipeline extension could have on the County, and 2) multiple interviews with private and government sector stakeholders in the region.

The principal findings from that assessment are as follows:

• Chesapeake Utilities has continuously expanded its distribution system along the Delmarva Peninsula over the last 50 years.

o The most recent expansion was the Del Mar Pathway Project, which began construction in 2020 and extended piped natural gas south into the Maryland counties of Wicomico and Somerset, across the state line to the north of Accomack County, Virginia.

o Chesapeake Utilities has completed a desktop evaluation of the potential expansion of natural gas utility service into Accomack County. Identified anchor tenant customers include Tyson, Perdue, the NASA Wallops Flight Facility, and adjacent enterprises.

o As with many infrastructure projects, the potential expansion of natural gas utility service to serve anchor tenant customers in Accomack County may require some amount of public support to make it economically viable. However, because the project is in a preliminary stage Chesapeake Utilities was unable to provide specific information on the level of public support that would be required.

• Accomack County, like many rural Virginia communities, faces multiple challenges.

o Between March 2012 and March 2022, the County experienced a 4.5 percent loss in employment as compared to an 8.0 percent increase in employment statewide in Virginia.

o Between 2011 and 2021, the County experienced a 9 percent loss in its working-age population (18 to 64) in contrast to a 2 percent increase statewide in Virginia.

• Accomack County does not currently have access to piped natural gas and that places it at a competitive disadvantage with other communities inside and outside of Virginia.

o Thirty-nine percent of households in Accomack County use propane or fuel oil for heat and water, as compared to 8 percent statewide in Virginia. In contrast, only 1 percent of households in the County use natural gas, as compared to 33 percent statewide in Virginia.

o Data provided by the Virginia Economic Development Partnership (VEDP) show that typically a third or more of industrial development prospects that were looking at sites of 25 acres or more in Virginia over the last five fiscal years expressly listed the availability of natural gas as a requirement.

o According to data from the U.S. Energy Information Administration, the price of natural gas per one million BTUs is:

• 57 percent less expensive than propane and 71 percent less expensive than electricity for residential users, and

• 62 percent less expensive than propane and 75 percent less expensive than electricity for industrial users.

• Mangum Economics conducted 21 in-person and virtual interviews with 35 private sector and government stakeholders to obtain their perspectives on the development potential of extending piped natural gas into Accomack County. The major themes from those conversations were:

o Natural gas is critical to securing the continued operation of the Perdue and Tyson chicken processing plants. Together, these plants directly account for approximately one-third of all private sector employment in Accomack County and indirectly support a large number of poultry operations, grain producers, and other businesses in the county. Both plants use propane as a main fuel source and purchase millions of gallons each year. The higher cost of propane compared to piped natural gas places these plants at a significant competitive disadvantage relative to other processing facilities across the country where piped natural gas is available.

o Other existing employers within Accomack County would also benefit from access to piped natural gas if it were available. For example, the Commonwealth Chesapeake power station, an intermittent “peak load" generation facility; Coastline Chemical, a company that blends and packages anti-freeze; SharpTech USA, a company that produces glycol and glycol-based products; and Accomack County public schools.

o The ongoing expansion of commercial space activity at the NASA Wallops Flight Facility is a potentially transformative economic opportunity for the county. Rocket Lab recently selected Wallops Island as the launch site for its new Neutron rocket and announced that it would be bringing up to 250 professional and technical jobs to Accomack County to support manufacturing and operations facilities that will be part of the Neutron rocket program. Like many newer rocket designs, the Neutron rocket uses liquid methane (natural gas) as a propellant.

o The extension of piped natural gas to Accomack County would also enhance the development of manufacturing, warehousing and distribution, controlled environment agriculture, and much-needed residential housing.

• Maryland counties bordering Virginia provide a real-world example of what could happen if piped natural gas was extended into Accomack County.

o Chesapeake Utilities’ Del Mar Pathway Project began construction in January 2020 and, among other improvements, extended piped natural gas to anchor tenants University of Maryland Eastern Shore and Maryland Eastern Correctional Institute in Somerset County, Maryland.

o Somerset County is immediately northwest of Accomack County across the state line and the two counties are similar. Both are rural, are experiencing declining populations, are less affluent, and face many of the other challenges that are common among rural communities.

o In addition to providing piped natural gas to the anchor tenants, the Del Mar Pathway Project also appears to have had a significant positive impact on Somerset County’s Princess Anne Industrial Park. Immediately after pipeline construction began, the park experienced “an explosion" of activity as multiple manufacturers announced plans to move to the park.

• Mangum Economics’ analysis of the economic and fiscal impact of the proposed extension of piped natural gas into Accomack County shows that:

o The downside risk of not proceeding with the project could include the ultimate closure of the Perdue and Tysons chicken processing plants which would cause a loss to Accomack County of approximately:

• 4,160 direct, indirect, and induced jobs.
• $183.5 million in associated annual labor income.
• $1.2 billion in annual economic output.
• $22.2 million in annual state and local tax revenue.

o At a minimum, the construction and operation of the proposed natural gas pipeline extension in Accomack County would likely support approximately:

• 143 direct, indirect, and induced one-time construction jobs.
• $7.0 million in associated one-time labor income.
• $21.2 million in one-time construction-related economic output.
• $1.0 million in one-time construction-related state and local tax revenue.
• Ongoing savings of approximately $6.9 million in annual fuel costs for existing anchor tenants

o If the availability of piped natural gas in Accomack County were to facilitate the recruitment of additional industries the economic and fiscal impact on the county could be significant. For example, if even one Snack Food Manufacturing Facility were recruited to the county along with one Precision Cleaning Service and one NonDestructive Weld Testing Service as suppliers to Rocket Lab, those additional industrial users could support approximately:

• 188 direct, indirect, and induced jobs.
• $10.8 million in associated annual labor income.
• $68.1 million in annual economic output.
• $1.2 million in annual state and local tax revenue.

This report was commissioned by the Virginia Economic Development Partnership on behalf of the Virginia General Assembly and prepared by Mangum Economics.

The estimates provided in this report are based on the best information available and all reasonable care has been taken in assessing the quality of that information. However, because these estimates attempt to foresee the consequences of circumstances that have not yet occurred, it is not possible to be certain that they will be representative of actual events. These estimates are intended to provide a good indication of likely future outcomes and should not be construed to represent a precise measure of those outcomes.