WASHINGTON — Energy Secretary Rick Perry said Tuesday that Appalachia will help the U.S. gain a sizable share of the global petrochemical market because of the near-exponential growth in natural gas production the region has experienced in the past decade.
“We have done good work in developing the abundance of the Permian Basin and the Gulf of Mexico — and there’s still much more we can do — but we also have a special opportunity in the Appalachian region,” Perry said in a speech at the annual National Petroleum Council Meeting.
Perry said that, because of the low-cost resources in the Marcellus and Utica shales in West Virginia, Eastern Ohio, and Western Pennsylvania, the Trump administration would support an ethane storage hub located in the region.
Perry quipped that, were Appalachia an independent country, “[it] would be the third-largest national gas producer in the world,” he said.
Without a hub in the region, all of the natural gas liquids extracted from the shales are shipped elsewhere or burnt off, which removes potential economic profits or literally burns them in the air.
Last summer, West Virginia, Ohio, and Pennsylvania officials formed an agreement, called the Tri-State Shale Coalition, to work together to collaborate to promote the region for shale gas-related investment first while still conducting a healthy competition for the location of the Appalachian Storage and Trading Hub that Perry’s report suggests should be built.
All of the members of the coalition realize that, no matter which state ultimately hosts the storage and distribution hub, it would be a significant boon for new business investment and infrastructure for all three states.
“Instead of competing, our three states are working together to promote the region as a center for shale-related manufacturing,” West Virginia Gov. Jim Justice said in a news release at the time.
Perry’s annual report to Congress laid out the realities of a hub in the region by comparing it to two hubs that already exist in the Gulf and the Permian Basin. The report analyzed the possibility that an Appalachian hub could give the U.S. a greater share of the global petrochemical while at the same time boosting expansion efforts in the Gulf.
The gas in that corner of Appalachia is very wet, which means it carries those highly valued NGLs (natural gas liquids) which, when separated and refined, can become different fuels, like propane. Or the NGL ethanes can become plastics or resins or a variety of products found throughout households, farms, and businesses across the country for everyday use.
“Unfortunately, even though Appalachian natural gas and ethane are on par with being the cheapest in the world, we’re not truly using that opportunity,” Perry said of the excess. “And in some cases, we’re actually burning it away.”
“I think there is opportunity there to do more — and we must, if we are to continue our era of unprecedented energy abundance,” Perry said.
“At the request of Congress, we’ve spent a significant amount of time studying the matter … and there is an incredible opportunity, the potential for establishing an ethane storage and distribution hub in the Appalachian region and for building a robust petrochemical industry in Appalachia,” he said.
Perry said the report notes Ohio, Pennsylvania, and West Virginia’s combined share of U.S. natural gas production has skyrocketed from 2 percent in 2008 to 27 percent last year. And in 2025, ethane production in the Appalachian basin is expected to be 20 times greater than it was in 2013.
“This is an economic opportunity for a region that surely needs it.”
In an area where coal once reigned as king, the development of the Marcellus and Utica shales has brought back hope and jobs to the communities located in the hills and hollers of West Virginia, Pennsylvania, and Ohio. A study by IHS Markit last spring said the basins in these three states will provide nearly 40 percent of the country’s gas production within in the next 25 years.
IHS Markit findings concluded the region will “provide a significant financial advantage” when compared to the Gulf Coast, pointing to the same valuable wet natural gas Perry referenced in his speech.
Perry said an Appalachian petrochemical industry would strengthen U.S. energy and manufacturing security by increasing geographic production diversity.
“It would help our nation better withstand natural disasters such as a hypothetical — but one that always had my attention when I was governor — a hurricane that ravages the Houston Ship Channel, causing catastrophic damage and shutting down both regional energy production and ethane production capacity, over 95 percent of which is currently located in Texas and Louisiana,” he said.
“Don’t think for a second that I’m about pitting one section of the country against the other, we need it all and just like in the electricity sector, resiliency matters to the marketplace,” he said.
Perry said he sees a new Appalachian petrochemical industry as a complement to, not conflicting with, efforts in the Gulf Coast: “It may even strengthen them, since Appalachian capacity would serve regional demand for NGLs, freeing Gulf Coast production for other markets, including exports overseas,” he said.
All three states are in various stages of building or in talks for ethane cracker plant development. Shell has already broken ground on a $6 billion ethane cracker plant in Beaver County, Penn., just outside of Pittsburgh. PTT Global Chemical is considering a Belmont County ethane cracker in Eastern Ohio. And China Energy Investment Corporation Limited is in talks with West Virginia state officials to invest $83.7 billion in shale gas development and chemical manufacturing projects in the Mountaineer State.
More than 70 percent of North American plastics customers are within a 700-mile radius of Pittsburgh, a city central to all three cracker locations — making a strong argument that a potential ethane hub is a natural fit for the region.
