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Tuesday September 20, 2011
W.Va. seen as big winner in shale gas development
by The Associated Press
The Associated Press
MCT REGIONAL NEWS/BUSINESS

By George Hohmann

Charleston Daily Mail, W.Va.

McClatchy-Tribune Information Services

Sept. 20--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."