West Virginia's race against Ohio and Pennsylvania to attract an ethane cracker facility has united a number of industries hoping to best take advantage of the potential investments.
The ethane-rich natural gas plays in the Marcellus and Utica shale under the surface of West Virginia and its neighbors have sparked economic development discussions across the region.
By "cracking" ethane molecules under intense heat and pressure, ethylene is formed. Ethylene is a raw petrochemical feedstock used to produce a plethora of materials including plastics, couch cushions, paint materials and food packaging.
"Once they make ethylene, they can make polyethylene," explained Kevin DiGregorio, executive director of the Chemical Alliance Zone. "That's just a polymer of ethylene, a long molecule and there are all different types. You can then make all kinds of stuff … you can make probably 40 to 60 percent of the world's chemicals from ethylene."
Chemically speaking, ethylene is a very reactive molecule.
"It's a chemical that chemists really like, because they can do lots of different chemistries with it, because of that you can make lots of different products," said DiGregorio.
The Chemical Alliance Zone is an organization representing the chemical industry in the counties of Cabell, Kanawha, Putnam, Wayne and a portion of Marshall.
The CAZ and other organizations including West Virginia's Polymer Alliance Zone and the West Virginia Manufacturers Association, recently signed on as supporting partners of the Just Beneath the Surface Alliance. The group is dedicated to public education of the natural gas industry.
Other supporting partners are the Independent Oil and Gas Association, West Virginia Petroleum Council, American Petroleum Institute, West Virginia Business Roundtable, Charleston Regional Chamber of Commerce, Independent Petroleum Association of America, Mountaineer Energy Forum and Energy In Depth.
"We're really trying to go out to any audience that has an interest in this to get the message out," said Susan Lavenski, managing partner of Charles Ryan Associates, a public relations firm. "We're going to continue over the next year being very aggressive with the public education initiative and going into all these communities to get the word out and answer questions and be as transparent as we can."
Lavenski said the organization is arranging presentations at business meetings, rotary clubs, lunches and other community events to educate the public on the natural gas industry. The support of the chemical and manufacturing industry groups, she added, is a natural fit for the expanding industry and the added wealth it could provide the Mountain State.
"Let's assume we do get the cracker — what comes after that is what can be bigger to the economy and what can happen than even the cracker itself," Lavenski said.
Mutual interests
DiGregorio said a few years ago, he and others recognized it would be important to get the "gas guys and the chemical guys in the same room to talk," because so much of their industry is tied together in the state.
With increasing activity in the Marcellus and Utica shale gas plays, the industries' interaction is anticipated to increase even further.
"We're all in this together," he said. "… Everything we do is about collaboration. If we don't have the ethane in the natural gas, there's no chemical industry, if there's no chemical industry, we don't have manufacturing in the United States."
Doug Malcolm, director of government affairs for IOGA, said the partnership through JBTS extends the conversation further, allowing the chemical and manufacturing industries to weigh in on issues they are more knowledgeable about, but are still related to the gas industry.
"The more we talked about the downstream benefits to the chemical industry, the more we realized we're not the ones that should be talking about this, because we don't know enough about it," Malcolm said. "We can go out and talk about oil and gas and he can talk about the chemicals, and we have people there to answer questions about both sides of the formula."
State Senator Karen Facemyer, president of the Polymer Alliance Zone, said there is a lot of misinformation about the industry and its potential benefits.
"I think we need to continue to educate the public, which is what Just the Beneath Surface was lined up to do," Facemyer said. "We need to educate the public so they aren't so scared from all of the anti-‘s out there and some of the rhetoric that they hear from them."
Karen Price, president of the West Virginia Manufacturer's Association, said the companies she represents are looking forward to the potential of the ethane found in the wet gas regions of the state.
"It's pretty incredible," Price said. "I'll be with my members, and they tell me to look around. Everything here contains ethylene, including the clothes you wear and the cosmetics you're wearing."
Chemical industry follows materials
The chemical industry is no stranger to the Kanawha Valley or West Virginia. The presence of salt, oil, natural gas and other basic materials made for a chemical boom in the early 1900s.
"Traditionally, the chemical industry follows raw materials," DiGregorio said. "In the 1920s, you saw the first cracker built, basically a smaller version … in Clendenin. That's really where it was developed. They took ethane and made ethylene right then and there."
The "Kanawha Chemical Valley," and the jobs and companies that came with it, eventually began to taper off when companies started moving to places where resources were more plentiful. In the '70s, DiGregorio said, it was the Gulf Coast and Canada, because ethylene can also be produced from oil. In the 1990s, the chemical industry began to move overseas.
"It went overseas, not because of labor costs and regulatory environment like a lot of people think, but because of raw materials again," he said. "In Kuwait in the '90s, you could get, I think it was ethane for a nickel a pound. On the Gulf Coast it was 30, 40 cents a pound."
Now, DiGregorio said, it may be West Virginia's chemical industry time to shine once again.
"We've got the raw materials here again with the Marcellus and Utica shales, so it will come back," DiGregorio said. "You'll see crackers built and you'll see downstream investments made."
The revitalization of the chemical industry could also help some gas drillers stabilize their own industry. Gas prices are at near-record lows, and drillers in wet gas fields are benefiting from finding shale gas that contains more than just the methane that is primarily used in heating and generation capacities.
"Even with gas prices at a low-point, they are still getting a premium for those liquids and that makes the wells viable, economic and worth drilling," Malcolm said.
‘Long-term economic revitalization'
Landing a cracker in West Virginia, as many officials are quick to relay, means long-term economic development. Not only does the cracker itself represent a number of jobs, but the spin-off jobs and downstream opportunities a cracker would create has the opportunity for an amount of growth West Virginia has not seen in some time.
"It's a long-term play," DiGregorio said. "… This is a 20 to 30 year economic development opportunity. It's not just today or tomorrow."
The size of the cracker itself, he added, would depend on the company that locates the cracker. A plant could have one or a number of processing facilities on-site or nearby to turn the ethylene into one of the many products that can be created.
"Just from a bigger picture thing — we're talking about the economic revitalization of West Virginia," Malcolm said. "Anything that's going to increase the chemical industry and the manufacturing industry in our state is good as a whole for West Virginia and is in turn good for the oil and gas industry."
Facemyer said the growth in the extractive, chemical and manufacturing industries from a cracker would generate benefits for all West Virginians.
"You've got a good opportunity to get good, living-wage jobs that pay good benefits," Facemyer said. "We've got a chance to build our state back up with the income coming in from income taxes and businesses taxes the industries pay and we can grow our state."
Even if the first ethane cracker announced goes to Ohio or Pennsylvania, DiGregorio emphasized, another cracker or at least the downstream businesses associated with it, could still come to West Virginia.
"You're going to see the whole region benefit," he said. "It's not going to be just a West Virginia play. If we get five crackers tomorrow, if that would happen and they were all in West Virginia, you would still see business go up in Ohio and in Pennsylvania."
A seemingly unopposed issue
While the state's natural gas industry has lately been getting a taste of the opposition coal has faced for decades, little obvious opposition to an ethane cracker facility has surfaced. DiGregorio said that is likely due to low likelihood of chemical danger presented by the ethane cracking facility.
"It's a pretty benign process as chemical processes go," DiGregorio said. "It's not a toxic molecule or any of those types of things. Like every chemical process, it is done with the environment in mind with a triple bottom line (of people, planet and profit)."
Additionally, DiGregorio added, West Virginians "have a long history of … being accepting of chemical industry."
The natural gas industry – at least on the scale of the horizontal wells being drilled in to the Marcellus were not nearly as customary to the Mountain State.
Malcolm said the new scale of horizontal drilling left state legislation and regulators behind when the technology first came to West Virginia.
"(For the chemical industry) the groundwork has already been laid, because of the history of the chemical industry, not only in the Kanawha Valley, but in other areas of West Virginia," he said. "With the Marcellus, drilling was taking place where they had never seen it before."
Malcolm added there were a few faults on behalf of the industry early in development of the massive shale play. Now, he said, public perception of the industry is beginning to shift as drillers take on an increasingly larger presence in the state.
"There may have been some problems early on in tearing up roads, or not talking to surface owners before coming on to properties," Malcolm said. "I think they were few and far between, but I think those are being resolved."
Malcolm, a petroleum engineer, said he is confident the natural gas industry will come out clean as further study of the industry continues.
"The science is going to prove us out," Malcolm said. "I hate to say wait ten years and you'll see everything is great, but I just know that is going to happen."
Good odds?
DiGregorio said in both confidential and disclosed conversations with companies that are interested in locating a cracker facility, he is confident in West Virginia's chances at landing an ethane cracker facility.
"They look and say we have some of the best sites, some of the best environments, our legislature has worked with the gas industry," DiGregorio said. "They see that West Virginia is a place to do business. We've been in the chemical industry forever; I don't know that we have any major challenges left to overcome."
Though the odds are good and certainly better than they were several years ago, he added, other states are competing as well. States like Ohio and Pennsylvania, DiGregorio said, may be just as confident in their own odds.
"They're all good looking ladies or men at the dance, and you just have to pick one — to some extent it comes down to that," DiGregorio said. "Every company has their own various criteria that they look at … they're all making their own decisions and we all look good in our own way. We think we look the best."
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