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West Virginia incentivizes armament production as global demand grows

In a troubled world, booming demand for American military weaponry has left the country in need of billions of dollars more in armaments than it can currently produce. 

West Virginia is trying to meet that need.

Though its footprint in the national defense sector is small, representing just .1% of the $558.7 billion in defense contracts authorized by the Department of Defense in 2022, the state has worked hard to grow its defense industry over the last several years, offering incentives that have brought major military manufactures within its borders.

U.S. Senator Shelley Moore Capito, left tours the Allegany Ballistics Laborory in West Virginia on Nov. 6.

Office of Sen. Shelley Moore Capito

As federal officials rush to drastically expand the nation’s production capabilities, West Virginia may be able to take advantage.

While U.S. arms production on the whole has been increasing over the last decade, a confluence of factors over the last several years has driven a dash to produce more.

The State Department reported U.S. arms sales to foreign governments increased 49% from 2021 to 2022, bringing billions of dollars of new orders on top of prioritized shipments to allied nations involved in conflicts abroad that have already drained the U.S. reserves of many ordinances.

The military wants more more quickly which has strained domestic arms manufacturers, but the industry is now awash in federal funds and backed by the political will to vastly expand national production capabilities.

West Virginia has a long history of arms production, with the first national facility established in 1794 by George Washington at Harpers Ferry. Then the state produced muskets, rifles, and pistols.

Today it plays host to one of the world’s most advanced weapons-making facilities, the Allegheny Ballistics Labrotory, which produces rocket motors, aviation sensors, electronics, and other important components at a scale considered integral to U.S. efforts to meet new weapons orders, arm allies, and replenish depleted U.S. stocks.

The facility, Navy owned and contractor operated, is key to ongoing efforts to boost production and has been the target of funds in major emergency military assistance packages.

In ongoing negotiations now over a new supplemental military aid package, West Virginia Sen. Shelley Moore Capito, a Republican, highlighted the facility’s importance during a hearing of the Senate Appropriations Committee.

“We do manufacture a lot of the munitions at the Allegheny Ballistics Laboratory in West Virginia, where we have over 1,600 people working and this supplemental does help build up that industrial base and industrial production at that facility and other facilities across the country,” she said.

Capito toured the facility on Nov. 6 saying in a statement afterwards that the visit was an opportunity to see firsthand how critical munitions production and military support for Ukraine and Israel relate directly to West Virginians.

“With our allies and partners under attack and tensions rising around the world, the work happening at defense industrial base facilities like ABL is more important now than ever before,” she said. “West Virginians can be certain that funding appropriated by Congress to defend our allies overseas is going directly to facilities like ABL that create American jobs and strengthen our country’s own defense industrial base.”

The sprawling complex in Mineral County is owned by the federal government, which has contracted its operations to several different companies over the decades. Its current operator, Northrop Grumman, moved in after acquiring a contractor that produced missile motors for the military on the grounds in 2018

It greatly expanded its operations in 2019, adding hundreds of new jobs to the facility under a state-backed effort benefitting from incentives created and expanded under the administration of Gov. Jim Justice. 

Northrop Grumman was the nation’s fifth largest private military contractor in 2022, and while its share of the total national defense budget pales in comparison to industry giants like Lockheed and Raytheon, the company, like the state it’s increasingly invested in, has steadily seized a larger share of the overall pie.

While several major arms contractors have facilities in West Virginia, Northrop Grumman, and specifically its operation at ABL, represent an outsized portion of total defense spending in the state.

“In a crude way Northrop is our gorilla, they’re a big driving force,” said David Satterfield, director of asset development for the Office of Research and Economic Development at West Virginia University and president of West Virginia’s chapter of the National Defense Industrial Association, an organization that promotes the growth of the U.S. defense industry. “That installation has always been a very important installation.”

Along with state efforts, the NDIA helps provide a “water cooler atmosphere,” bringing together defense contractors and manufacturers who might not have previously been in the defense space, Satterfield said.

In the past five years Northrop Grumman in particular has greatly expanded operations, leading the growth of the industry in West Virginia just as the state grapples with the collapse of its coal industry, a long-time leading employer in the state.

State incentives offered to promote the defense sector’s growth include like tax breaks for companies that create new jobs, include an economic opportunity tax credit that offsets up to 80% of the corporate net income tax, a manufacturing tax credit that allows for up to 60% of corporate net income tax, a high-tech industry tax credit, as well as sales and property tax exemptions for investments greater than $50 million.

In 2019, the state extended a $5 million loan to back a deal for Northrop to lease manufacturing equipment during its expansion, directly resulting in the creation of hundreds of new jobs , while also aiding in the state’s wider economic diversification efforts, Satterfield said.

“West Virginia has a strong and proud manufacturing base and manufacturers are successful in our state and make up a good percentage of our economic fabric,” he said. “One of the things that’s happened as we’ve moved from coal and the extraction industry is you have some really fine, small and medium manufacturers, machine shops, fabricators, and others that might have previously served the coal industry available to serve these other industries.”

Northrop is the third-largest manufacturing employer in the state and announced further plans to expand amid the glut of defense funding.

That includes an expansion at ABL to be completed next year that will add a new 113,000-square-foot facility meant to boost its “capacity within the defense industrial base to ensure delivery of current and future weapons to meet warfighter needs” it said in a statement.

The state’s defense sector also received a boost of funding in the U.S. fiscal 2024 budget to $155 million, including $55 million for ABL, and on Oct. 4, it was announced that Northrop was selected for another major government contract, this time to produce munition to replenish depleted reserves in a $178 million contract with the U.S. Navy to expand the Naval Industrial Reserve Ordnance Plant at ABL.

More growth on the horizon means more jobs for West Virginians, Satterfield said.

“Today, it’s a reality from the standpoint of West Virginia is working mightily to try and figure out what are the things that we can do to help diversify our economy and we see that the defense industry is one,” he said.

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