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W.Va. seen as big winner in shale gas development

From the Charleston Daily Mail:

W.Va. seen as big winner in shale gas development
by George Hohmann
Daily Mail Business Editor

CHARLESTON, W.Va.– The natural gas-rich Marcellus shale is about to usher in “a golden age in chemical manufacturing in the United States,” and West Virginia is poised to be a big winner, said Cal Dooley, president and chief executive officer of the American Chemical Council.

The low cost of producing natural gas and related byproducts from the Marcellus shale promises to make the United States second only to the Persian Gulf in terms of the cost of feedstock for the chemical industry, Dooley said.

“We use natural gas as a source of energy and as a feedstock — like flour is to a bakery,” he said.

Becoming a low-cost producer would be a far cry from the situation that prevailed from 1995 to 2005, “when we were a high-cost producer” and the United States lost 140,000 chemical manufacturing jobs, Dooley said.

If production of natural gas from shale deposits results in a 25 percent increase in ethane in the United States, it will result in $16 billion in capital investments over the next 10 years, according to a just-released analysis by the American Chemical Council. Those investments would generate about 400,000 chemical and related jobs nationwide.

Ethane is produced when processing plants remove the natural gas liquids found in “wet gas” from methane, which is natural gas. The ethane is then “cracked” to form ethylene, the basis of plastic. Wet gas contains other valuable liquids including propane, butane and pentane.

An ethane cracker would represent an investment of $1.5 billion to $2 billion, Dooley said.

If West Virginia attracts a cracker, about $3.2 billion would be invested in the downstream chemical facilities that would make products like dyes, paints, coatings and plastics, according to the council’s analysis. That would generate $7 billion in additional chemical industry output in West Virginia.

About 12,000 jobs would be created in the chemical industry and throughout the supply chain in West Virginia, the council estimated.

West Virginia would move up from being the 23rd largest chemical-producing state to being the 13th largest, Dooley said.

“We’re poised to have a new golden age in chemical manufacturing in the United States if we have the right regulatory policies that allow us to maximize production of shale gas and the conversion of that gas into other products,” he said.

“West Virginia is fairly uniquely positioned in terms of population centers, infrastructure and pipelines,” Dooley said. The state is within 500 miles of a majority of the U.S. industrial base and has ample river and rail transportation. “There does need to be some additional investment in pipeline capacity,” he said.

Dooley described it as “the most exciting opportunity in economic development in a generation, certainly in the chemical industry.”

Even if West Virginia does not attract a cracker, the chemical industry’s feedstock, ethylene, is easily moved around, so “there are benefits of looking at this as a regional opportunity,” he said.

“The regulatory policy has to be right,” Dooley cautioned. “As an industry, we have a vested interest that the production industry is responding to groundwater concerns.”

He noted that the chemical industry makes the fluids drillers use when they fracture rock to release natural gas. “We’re willing to step up and provide adequate disclosure of the chemicals used in hydraulic fracturing,” he said. “As an industry, we’re committed to their safety. The production side has to ensure they are deploying best practices and that their well bores meet all of the regulatory requirements.”

In every instance when water has been contaminated by a drilling project, “it’s been a well bore failure,” Dooley said. “You can test, you can manage that.”

Several communities have been so concerned about protecting their water sources that they have banned horizontal drilling and hydraulic fracturing. In a Morgantown case, a court said the state should regulate the industry, not individual municipalities.

“On the production side, I wish they (the drillers) had been a little more aggressive but I think they have their act together now and are doing a better job,” Dooley said.

“This is a once-in-a-generation opportunity if we get it right. We have to get the regulatory policies right to assure the public it can be done right, to make sure manufacturers can build the plants and make products in the U.S.”

The state Legislature “needs to step in to address these matters, to make sure the public is assured we can do this right,” he said. “Ohio put together a regulatory package we think is very solid.”

Dooley said he met with President Obama’s staff last month. At the time, the federal Environmental Protection Agency was proposing tougher ozone regulations.

“We took him (Obama) maps showing the regions with shale formations and the counties that would be affected if you imposed these new stringent standards, how they would overlay the Marcellus and Utica shales. You can’t talk about energy security and put in regulations that put these regions in a non-attainment situation.

“We applauded the president’s decision to pull back on the ozone regulations,” Dooley said. “A lot of this country is still struggling with high unemployment.”

Dooley had breakfast Monday with Sen. Joe Manchin. The West Virginia Democrat is advocating a five-year moratorium on new regulations. “We think the concept has some merit,” Dooley said.

“We need regulatory certainty, at least for a period, so companies can make the decision to invest. A $1.5 billion to $2 billion investment takes a long time to recoup. You need to have a degree of regulatory certainty. There are some regulations poised to come into effect maybe in a year, maybe two years, that create a dimension that creates uncertainty.”

The Marcellus shale underlies portions of West Virginia, Pennsylvania, Ohio and New York.

Royal Dutch Shell, one of the world’s major oil companies, said in June it plans to build a cracker in the Appalachian region. Earlier this month Acting Gov. Earl Ray Tomblin said he is “very optimistic” the state will attract a cracker.

Bayer Corp. has been promoting sites it owns at Institute and New Martinsville as excellent locations for a cracker.

The chemical industry directly employs 9,576 people in West Virginia and has a payroll of $686 million, according to the council.

The American Chemistry Council is a trade association representing 156 chemical and related companies ranging from large multinationals to small companies. The council says its members represent more than 85 percent of the chemical manufacturing capacity in the United States.

Contact writer George Hohmann at busin…@dailymail.com or 304-348-4836.

 

 

 

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