West Virginia Department of Commerce The Comeback Cracker

Recent Pages: The Comeback...

The Comeback Cracker

The Comeback Cracker: A game-changer for West Virginia's economy
Shell recently announced it is planning to locate an ethane cracker plant in Monaca, Pennsylvania. Just 12 miles from the border, it will make for an easy commute for the West Virginians expected to work at the hundreds of jobs the plant will create.

The expectation is that the Shell plant is one of likely several ethane cracker plants that will be built in the Appalachian region. Each plant means at least a $3.2 billion dollar capital investment, with thousands of people hired to build the plant and hundreds more who will land permanent jobs there. The plant is also expected to ultimately attract other manufacturing plants that will benefit from close proximity to the chemicals it will produce.

Play Video
“The gas-bearing shales that underlie West Virginia will yield so much ethylene that the United States will become the world’s lowest-cost source of feedstock in the world outside of the Persian Gulf.”

— Cal Dooley, CEO, President
American Chemical Council

“Our economic analysis showed there will be 12,000 jobs created in the area where the cracker is located, and they will pay some of the highest wages of any manufacturing job in the country,” said Cal Dooley, president of the American Chemistry Council. “These are high-paying, high-skill jobs. It’s a tremendous opportunity to enhance the economic welfare of thousands of West Virginia families.”

What ends up in the cracker plant actually begins thousands of feet underground, in geologic formations known as the Marcellus Shale. It stretches from Ohio to West Virginia, where the shale is rich in liquids, toward Marcellus, New York, the town for which the formation is named, and where the shale becomes drier. In just a few years, the Marcellus Shale has been developed into one of the world’s largest natural gas fields. But there is increasing interest in the even deeper Utica Shale. The Utica Shale is thicker than the Marcellus, it is geographically larger and it has already proven its ability to support commercial production. It has the potential to produce even more natural gas than Marcellus.

At the completion of the drilling phase, the shale is hydraulically fractured, which enhances the production of the natural gas.

The gas is then processed in a facility that separates ethane from the other liquids that include butane, propane and methane. The ethane is then fed to a cracker plant, where the molecules are literally “cracked” apart into a chemical called ethylene. Hundreds of products contain ethylene, including food packaging, diapers, vinyl siding, swimming pool liners, PVC pipe, automotive antifreeze, carpet backing, and detergent. The companies that make those products could see a competitive advantage to locating in West Virginia.

The Marcellus Shale is one of the world’s largest natural gas fields.
The Marcellus Shale is one of the world’s largest natural gas fields.
Photo Courtesy of Caiman Energy LLC

“The potential of the cracker may be the biggest thing that has ever happened to West Virginia’s economy,” said Nicholas “Corky” DeMarco, executive director of the West Virginia Oil and Natural Gas Association. “It’s not simply because of the cracker but also the manufacturing capabilities that we will have in addition to the direct natural gas industry jobs.”

This manufacturing is expected to not only put thousands of West Virginians to work, but also jump-start the entire American economy. From 1990 to 2005, the chemical industry lost about 17 percent of its employment in the United States. The primary reason was the volatility of natural gas prices and the relatively high price of natural gas available here. With a significant reduction in the cost of natural gas, because of the increased supply, we are now one of the most competitive and lowest-cost producers in the world. Just five years ago, it was more expensive to produce chemicals in the United States than in China or Western to produce chemicals in the United States than in the Middle East.

Click image to enlarge
Click image to enlarge
Courtesy of the American Chemical Council

“When we have the ability to produce the base chemicals less expensively, other manufactured products also have a competitive advantage,” Dooley said. “That’s what’s so exciting about having access to additional supplies of natural gas. It’s giving us an opportunity to see a renaissance of chemical manufacturing in the United States. Even beyond that, the restoration of manufacturing.” Economic development officials say making the case for a modern Appalachian cracker is undoubtedly one of the most complex projects they’ve encountered. “But fundamentally, the economic drivers are quite simple,” said Kris Hopkins of the West Virginia Development Europe. Today it’s only slightly more expensive Office. “Unlike previous resources that lured chemical manufacturers to the Gulf Coast and the Middle East in search of cheap feedstock, West Virginia is blessed with tremendous reserves of advantaged feedstock while also being located in the center of one of the largest petrochemical markets in the world.”

The process of attracting a cracker to the Appalachian region started two years ago, but intensified during the past year.

Governor Earl Ray Tomblin, West Virginia
“Our ability to bring back manufacturing is going to be built on a plan that cap italizes on our fossil fuel reserves, whether it’s natural gas, coal or oil.”

— Governor Earl Ray Tomblin
West Virginia

“Governor Earl Ray Tomblin has been instrumental in talking with several companies about the benefits of locating a cracker here, including the large amount of valuable natural gas in liquid form we have,” said Keith Burdette, cabinet secretary of the Department of Commerce. “He proposed the new law the Legislature approved that would give a plant a 25-year property tax exemption. We’ve been pro-active in creating a package that’s competitive with anywhere.”

To start, the talks were on a more basic level.

“We knew if we didn’t have an outlet for ethane in the area or no ethane outlet period, we were trapped in our drilling programs,” DeMarco said. “We were producing too much ethane to blend into the interstate pipeline. We started talking to the chemical plants about a solution, not thinking about a world-class cracker here. The more we talked, the more it made sense to do it in Appalachia.”

DeMarco says the key to job creation is offering manufacturers proximity to raw materials, helping them be more cost-efficient.

“We were told by several of the companies that are interested in developing crackers that manufacturing, especially in the chemical industry, left the United States for two reasons: the raw materials, the ethane, and the second was the utility costs. Now we have the ethane, and we have stable utility costs. We ought to be able to attract jobs back to this country.”

Other leaders in the natural gas industry see the cracker plant as natural fit for West Virginia, and a development that’s even more important to future generations than jobs.

“In West Virginia, you have a population that has a chemical industry mindset. We have the pipeline infrastructure, the ethane feedstock from the natural gas production, land, ample water, and a population that’s accepting of the industry,” said Charlie Burd, executive director of the Independent Oil and Gas Association of West Virginia. “No question the cracker will supply thousands of good paying jobs in this state. The multiplier of those jobs is probably eight-to-one in terms of the economic impact. And they are producing a product that will literally free us from foreign oil, if we can produce vehicles that run on natural gas. It’s a matter of national security.”

The cracker comes when West Virginia’s leaders are looking at ways to diversify the state’s economy. At the heart of that effort is energy. The goal isn’t so much to move West Virginia beyond coal, but rather to encompass all the state’s natural resources in a vibrant energy portfolio. Dooley says an energy policy that includes natural gas is vital to the country’s security.

“We have literally become the Saudi Arabia for natural gas globally,” Governor Tomblin said. “We have a minimum 100 years reserve that we can use for energy as well as the chemical industry using it for feedstock. This has been the most dramatic change that favorably impacts our domestic energy security that we have seen in the past 50 years.”

“We have some of the largest coal reserves in the world, and now we have some of the largest natural gas reserves. When you look at what we learned in this last recession, it is that people understand we need to make things. We need to be manufacturing products. You can’t provide opportunities to our citizens by relying on the service economy. The foundation of our ability to bring back manufacturing is going to be built on a plan that capitalizes on our fossil fuel reserves, whether it’s natural gas, coal or oil.”

Continue reading...

Return to Main Article

Now Hiring: Chemical Plant Operators

Caiman Energy Adds Capacity in WV Caiman Energy LLC
Caiman Energy has invested $500 million in Marshall and Wetzel counties, building pipelines and expanding its cryogenic processing and de-ethanization complexes at Fort Beeler and Taylor and its fractionation facilities near Moundsville, W.Va. With an additional 210 million cubic feet per day coming online by the end of the summer, the company expects fractionation capacity to reach 42,500 barrels per day by October 2012.

Jack Lafield, President & CEO Caiman Energy LLC
"West Virginia is an energy state worth investing in. They've set clear rules and built a strong, stable business Climate.”

– Jack Lafield, President & CEO Caiman Energy LLC