A Company Thinks Money

In 1978, Mobil Oil went on a bit of fishing expedition in the waters off of Alabama’s Gulf Coast. In the process, the company wound up landing a big one for the state.

Mobil was responsible for drilling the first exploratory well in Alabama offshore waters that successfully tapped into oil and natural gas reserves. Attempts had been made to find such reserves as far back as the early 1950s, without success. But those wells barely exceeded 10, 000 feet in depth. Mobil officials were convinced there was oil and gas to be found in Alabama’s waters, so they went more than 21, 000 feet deep in search of the resources.

Before the end of the year, Mobil had tapped into gas reserves that tests indicated were capable of producing 12.2 million cubic feet per day. And with that, one of the state’s most lucrative industries was born.

By 2005, a total of 80 wells had been drilled in Alabama’s coastal waters. At its peak, annual gas production from these wells totaled more than 230 billion cubic feet. Coastal wells account for approximately 50 percent of the total gas production in Alabama, which ranks as one of the top 10 gas-producing states in the country.

According to Steve Russell, director of business retention and expansion for the Mobile Area Chamber of Commerce, approximately 2, 100 people in Alabama are directly employed by the offshore oil and gas industry, with a total annual payroll of more than $100 million. In addition, the industry is responsible for purchasing more than $200 million in supplies in Mobile and Baldwin counties alone.

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But the biggest benefit to the state has been the creation of the Alabama Trust Fund, an account that is funded by royalties from offshore drilling. As of last year, the fund totaled nearly $2.5 billion.

“We treat them at a lower cost than they had been treated at other facilities. That was my idea, and I really believe it produces the kind of health care that will sell to the insurance companies and to the government and to the people.” — Richard Scrushy, Business Alabama, August 1990.

In 1984, a new company called Amcare opened a small outpatient center in Birmingham designed to provide physical rehabilitation services. Within a year, the company changed its name to HealthSouth and took in $5 million in revenue. By 1995, HealthSouth had more than 850 facilities and 32, 000 employees, making it the largest provider of rehabilitative services in the country.

HealthSouth has experienced a number of ups and downs since then. At its peak in the early 2000s, the company generated nearly $4.5 billion in revenue, with approximately 2, 000 facilities and more than 50, 000 employees. But an accounting and bribery scandal surfaced that eventually led to the conviction of 17 company officials, including founder and CEO Richard Scrushy.

So HealthSouth suddenly had to start rehabbing itself, and the company’s recovery has taken place just as quickly as its original expansion into the healthcare market. HealthSouth began a restructuring plan in 2006 and currently is the nation’s largest owner and operator of inpatient rehabilitation hospitals in terms of patients treated and discharged, revenues and number of hospitals.

HealthSouth has 103 inpatient rehabilitation hospitals, 25 home health agencies and 22 outpatient satellite clinics. The company has facilities in 28 states (including six in Alabama) and Puerto Rico, with 23, 000 employees nationwide and 1, 042 in Alabama. HealthSouth accounts for 9 percent of the total inpatient rehabilitation hospitals in the U.S., 19 percent of the licensed beds and 21 percent of the patients served.

HealthSouth had total revenue of nearly $2.2 billion in 2012, including nearly $150 million in Alabama alone. “Although we are the nation’s largest owner and operator of inpatient rehabilitation hospitals, we are privileged to have treated 9, 259 Alabamians in our six Alabama hospitals in 2012, ” says current HealthSouth President and CEO Jay Grinney.

Shown in his lab at Tuskegee Institute, George Washington Carver’s big idea was that small farmers could do better growing nourishing crops like peanuts rather than cotton.

Photo from the Alabama Department of Archives and History

One of the smallest products that the state produces has resulted in some of the largest revenues. The humble peanut is such an important part of the Alabama economy, especially in the southern part of the state, that the city of Dothan has a giant gold peanut statue standing proudly outside the Visitor Information Center.

It is an appropriate honor for two reasons. First, approximately 50 percent of peanuts produced in the United States are grown within a 100-mile radius of Dothan (though that includes parts of Georgia and Florida). And secondly, peanuts have become a golden crop for Alabama, creating an annual economic impact of more than $500 million, according to Randy Griggs, executive director of the Alabama Peanut Producers Association.

“There is just something about the area that adds unique flavor characteristics to the peanuts, ” Griggs says. “I don’t know if it’s the soil or the humidity, but something definitely serves to our advantage.”

In 2010, peanuts were grown in more than half of Alabama’s 67 counties, spread across a total of nearly 190, 000 acres. Houston County, where Dothan is located, led the way with more than 35, 000 acres devoted to peanut production, followed by Baldwin and Geneva counties.

Peanuts have played a pivotal role in the growth of Alabama’s economy since the late 1880s, when the cotton industry was plagued with problems, including the devastating effects of a boll weevil infestation. Many farmers turned to peanut production as an alternative. The movement intensified with the efforts of Tuskegee’s George Washington Carver, who spoke before the U.S. Congress about how peanuts could benefit the American economy.

More than 100 years later, Alabama farmers are regularly producing more than 400 million pounds of the crop every year.

The brainchild of Milton Cummings, president of Brown Engineering, and Joe Moquin, his successor — with the support of Wernher von Braun and the city of Huntsville — Cummings Research Park, beginning in 1963, emerged out of 3, 000 acres of former cotton fields.

Nearly 30, 000 people stream into Cummings Research Park in Huntsville to work. That would make the 3, 800-acre facility the eighth-largest city in Alabama in terms of daily employment.

“That’s kind of a ‘wow’ factor, especially when you consider that the salaries there are much higher than average, ” says CRP Director John Southerland. “These are professional and scientific type jobs. It’s a highly educated workforce doing a lot of engineering services, research and development, design, and those tend to be pretty high-paying jobs. It’s a significant part of our state.”

There are approximately 300 companies located in CRP, and Southerland says total payroll for employment is $2 billion a year. So payroll alone generates $280 million annually in state and local taxes. There also is the positive publicity that CRP produces by being the second largest research-and-technology park in the United States and the fourth largest in the world.

CRP was created in 1962 to support the manned space exploration efforts that were being led by famed rocket pioneer Wernher von Braun. The focus of the park remained primarily on aerospace into the 1980s. But Southerland says CRP has gradually diversified over the past 30 years and now includes research and development in defense, computers, engineering, information technology, life sciences and biotechnology.

HudsonAlpha Institute is a prime example of this diversity. The institute, which opened in 2007 on a 150-acre campus in CRP, combines life science researchers with biotech businesses, enabling the companies to develop products partly out of the discoveries made by the researchers.

“HudsonAlpha is a great example of why (CRP) is a huge boost to our state, ” Southerland says. “When the park started, there were people from every county in Alabama working there as part of that aerospace effort. So from the very beginning, this has been a state initiative.”

Malcom McLean first tested his concept of truck-to-ship containers by cutting a cell in the deck of a Pan-Atlantic ship at a shipyard in Chickasaw.

Photo of the container yard of the Alabama State Port Authority by Dan Anderson

Malcolm McLean came to Mobile in the mid-1950s with an idea that would dramatically change the shipping industry. More than a half century later, his idea is starting to change the Port of Mobile.

A native of North Carolina, McLean bought the Mobile-based Waterman Steamship Co. in 1956 with a plan of creating an innovative new way to load ships. Rather than spending countless hours unloading crates from trailer trucks and then using pallets and slings to slowly load the ship, McLean realized it would be more efficient for a dock crane simply to pick up the trailer portion of a truck and place the whole thing directly onto the ship.

With this method, the loading and unloading process became considerably quicker and easier, and the entire shipping industry was transformed. In 2007, Forbes magazine named McLean one of 15 people “who changed the world.”

Until recently, the Port of Mobile did not directly benefit from this change, primarily because the bulk of Alabama’s commodities in the 20th century – lumber, cotton, coal, iron ore – were not conducive to containerization. “We went along for a long time as a bit player, at best, in the world of containerization, ” says Jimmy Lyons, director and CEO of the Alabama State Port Authority.

But as Alabama’s economy shifted toward more sophisticated manufacturing, state officials decided that the port needed its own container terminal. The $300 million facility opened in 2008, and Lyons says the port has experienced 60 percent growth over the past two years. The ASPA provides more than 127, 000 direct and indirect jobs, with a tax impact of more than $500 million and a total economic impact of approximately $18.7 billion.

“We felt this was a business sector we needed to get into if we were going to continue to support the state economy the way we have for 85 years, ” Lyons says. “Our whole mission is to help Alabama companies be successful in global marketplaces, and the container terminal lets us do that.”

Cary Estes is a freelance writer for Business Alabama. He lives in Birmingham.

Text by Cary Estes

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