MONACA, Pa. — Economic “game changer” is not a phrase often used in Appalachia and rarely a phrase proclaimed in unison by politicians from both parties at the same time on any subject. Yet since 2016, when Shell Chemical announced it was building a $6 billion ethane cracker plant here, an economic revolution began that is far from reaching its potential.
Mention “cracker plant” in most parts of the country and people think you are making a Nabisco product, but the cracker plant in Beaver County is all about a molecular “cracking,” in which extreme heat “cracks” ethane molecules to form new ones that will eventually produce more than a million metric tons of polyethylene, a type of plastic used in all kinds of common household products.
Creating the fertile building blocks for plastic also creates a vibrant market for new jobs, and not just blue-collar ones but also chemists, computer scientists, and engineers, all of whom are needed in this burgeoning energy economy.
The gas found here in the Appalachian region of Western Pennsylvania, Eastern Ohio, and West Virginia is low cost and “wet,” meaning it carries highly valued natural gas liquids, or NGLs. When separated and refined, it can become different fuels, such as fertilizer or propane.
The project has already created 1,000 new jobs and is expected to top out at 6,000 during the construction and preparation phases over the next decade before the plant is fully operational. The plant itself is expected to employ more than 600 people permanently, a mix of labor, engineers, and chemists, with Shell analysts predicting it will provide work for two to three times that number in its supply chain.
In his annual report to Congress late last year, Department of Energy Secretary Rick Perry recommended that a new ethane storage and distribution hub be built somewhere near this plant, something that could potentially renew prosperity in the tri-state region of Pennsylvania, Ohio, and West Virginia.
The DOE’s recommendation was a response to a congressional inquiry about the feasibility of establishing an additional large ethane storage and distribution hub for NGLs somewhere in the United States. Congress asked because the nationwide boom in crude oil and natural gas production from shale formations has revitalized global energy markets and presented opportunities for industry to establish additional storage hubs.
The Appalachian ethane hub would be similar to others run by private industries in Kansas, the Gulf Coast, and the Permian Basin. Perry argues that creating one in the middle of the country, surrounded by the region’s rich natural resources, would increase America’s global market share and solve long-term national security concerns about the impact of a major natural disaster by placing production at different locations around the country.
“One of the things that I always worried about as a governor was a Category 5 hurricane coming up the Houston,” said the former Texas governor. “I’d seen the modeling of that and it’s really ugly. Without a proper evacuation, there is the potential of over a million people losing their lives. I’m not talking about displaced, getting flooded out. I’m talking about dying. Now obviously we got pretty good at dealing with those types of approaches with hurricanes and evacuations, but still the economic impact is massive.”
When Hurricane Harvey hit Houston in 2017, 17 cracker plants, accounting for 60 percent of national ethylene and propylene capacity, shut down. America’s ability to make basic plastics suffered for weeks.
“When you have as much of your country’s petrochemical industry in one place, it makes a lot of sense to have an alternative,” he explained. “And actually, we need it as a country.”
“I have not been as excited about a prospective project with anything I’ve done before, including in Texas, as I am about this,” Perry said in an interview with the Washington Examiner.
Traditionally, Appalachia is thought of as coal country. Coal created steady jobs, many of them dangerous, to the people who lived here and kept the heat and lights on for most of the country for generations.
But new production methods, such as hydraulic fracking and horizontal drilling, have changed the regional energy picture and now allow extraction of vast amounts of natural gas from the region’s shale formations. Many sons and daughters of coal miners, and former miners themselves, are finding safer, well-paying energy jobs in the shale industry.
Central High School in Waynesburg, Pa., just south of here in Greene County, has developed a student certification curriculum in the shale industry that has high school seniors walking off stage in their graduation gowns and into jobs paying salaries that can start at $70,000 a year.
“This is real. It can transform the Appalachian region for generations to come and put America in a position dealing with our petrochemical industry that is very, very important to our national security,” Perry said.
In 2012, the governors of Ohio, Pennsylvania, and West Virginia competed to win the cracker plant, offering tax breaks to Shell. But they also boasted of their industrial space, highway systems, waterways, and freight rail lines. States’ permitting processes and the level of community buy-in and support for the project also played a role in the competition.
In an interview with the Washington Examiner, Pennsylvania Gov. Tom Wolf, a Democrat, praised his predecessor, Republican Tom Corbett, for his efforts to prevail over West Virginia and Ohio.
Wolf is a former state revenue secretary and small-business owner and he emphasized how distribution costs can hit hiring and raise consumer prices. An Appalachian ethane hub would lower these costs for businesses across the Mid-Atlantic and Great Lakes regions, spurring further economic growth.
His former family business, Wolf Home Products, is the kind of a Mid-Atlantic business that would prosper by being near an ethane hub because it makes synthetic decks, railings, and cabinets.
“All the stuff that has that high level of plastic is made in Texas, because that’s where the gas has been, so we would have to ship it all the way across the United States,” Wolf told the Washington Examiner.
“Pennsylvania is a central place to distribute in that rich market from Maine to Florida, including the province of Ontario, because in eight hours, you can reach Maine, Ontario, and really, the North Carolina-Virginia border. And with a couple extra hours, you can get down to places like the Carolinas and Georgia and Florida,” he said.
“If we now have this natural resource in Pennsylvania, Ohio, and West Virginia, that three-state area is the only place in the world where you have the natural resource in abundance, right in the middle of the richest market in the world,” Wolf explained. “The other places, if you put it at, like Texas, Louisiana, they’re great natural resources, but that’s not where the market is. Alberta, you know, rich in natural resources, that’s not where the market is. Saudi Arabia, rich in natural resources, not much of a market.”
“I think Secretary Perry is right,” he continued. “It won’t be long before people in business, like my old company, take a look at this and say, ‘Do I still want to transport that stuff all across the country? Or do I want to make it right here and save that five or 10 percent in transportation and shipping costs?’”
Wolf predicts that all three states will benefit from the hub, with workers hopping across state lines and sending money back to their states, families, school districts, and communities. “And it won’t be long before you start to see all kinds of manufacturing spread up around things like the cracker plant.”
Newly sworn in Ohio Gov. Mike DeWine, a Republican, is also optimistic about the proposed ethane hub, but he still has to close another deal. Ohio is waiting on final confirmation for a new cracker plant in the Ohio Valley. The project proposed by Thailand-based PTT Global Chemical and its partner, Daelim Industrial Co. of South Korea, has already seen millions of dollars invested in planning and property purchases by both companies.
“I am excited about the potential investment of an ethane cracker in Belmont County,” DeWine said. “A positive final investment decision on this project would further leverage the region’s low-cost shale energy resources and bring thousands of jobs to the region.”
For its part, the West Virginia energy economy received a shot in the arm in November 2017 when China Energy Investment Corporation and West Virginia officials signed a memorandum of understanding outlining a roughly $84 billion investment commitment in natural gas industries that would span two decades.
The Chinese conglomerate’s first visit to the region was canceled last summer, when the Trump administration began its trade war with China. But China Energy Investment General Manager Ling Wen told reporters in late August that the company remained “extremely aggressive in pushing forward with this project.”
Some of the region’s congressional members are pushing the ethane hub project at the federal level. West Virginia Sens. Joe Manchin, a Democrat, and Shelley Moore Capito, a Republican, introduced the Capitalizing American Storage Potential, or CASP, Act last year, which would make the Appalachian ethane hub eligible for the Department of Energy’s loan guarantee program.
“The Appalachian storage hub is a vital American energy infrastructure project that will enhance energy and national security while leveraging the region’s unique energy resources for the long-term economic benefit of families, manufacturers, and communities in nearby states and across the nation,” said Manchin in an interview with the Washington Examiner.
“I have been working with the Department of Energy, state leaders, and regional stakeholders to develop the storage hub in the Appalachian region. That’s why I introduced a bill highlighting the eligibility of a regional storage hub for the Department of Energy’s Title XVII loan program,” explained Manchin. He fought for continued funding of the loan program specifically for this reason, as it is “a perfect way to help move this project forward.”
According to Perry, the recommendation proposal is in the right hands. “I’ve briefed some of the president’s staff on it. They are very, very excited about it. I mean, the president doesn’t make any bones about wanting to help that region of America, to revitalize from an economic standpoint. We talk about the coal and the nuclear side of it. But this one has substantially a bigger footprint, I think, a more positive economic opportunity,” he said. “And from a national security standpoint, I think it can’t be overstated.”
But he lamented the scant public energy devoted to the project. “My one criticism is that we just haven’t brought the bright light of public scrutiny to this yet. We want to make this a national issue,” he said, “and frankly the federal government really doesn’t have that big a role to play here.”
Perry thinks Washington is better off as a hands-off facilitator, giving green-light support to the states and the private sector: “The message we need to send is we’re gonna be good partners, we’re gonna get permits done in a timely and an expeditious way, and we’re not gonna get in your way.”
The ball is now in Congress’ court. The CASP Act proposal has languished on the Senate legislative calendar since last May, and congressional action on regulatory and permit requirements will have to occur before the project can advance further.
“We look forward to working with the members of Congress. This ain’t a Republican-Democrat issue. This is an American issue,” said Perry. “Those molecules of fuel down there are not blue or red. They’re red, white, and blue.”
