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Appalachian Business Council Working to Bolster Infrastructure to Advance Petrochemical Projects

Another group with varying business interests in the Appalachian Basin has been working quietly since late last year to identify weaknesses in regional infrastructure so that it's ready to support the growth expected from petrochemical and other shale-related development in the region.

The TriState Infrastructure Council (TSIC) brought together 21 members, including FirstEnergy Corp., Nova Chemicals Corp. and JPMorgan Chase. The group has been meeting monthly since last year with public and private sector leaders to identify gaps in Ohio, Pennsylvania and West Virginia's electric transmission, barge loading facilities, rail networks, bridges and roads, among other infrastructure.

Members have been thinking about how the region should "prioritize what is going to stand between us and getting full realization of the new potential opportunities from the petrochemical industry," said Kathryn Klaber, managing director of the Klaber Group. She is leading the council's work.

Klaber said TSIC has identified five priorities that require more attention from both the private and public sectors: development-ready sites, more funding for locks and dams, more natural gas liquids (NGL) pipelines and storage, housing for more workers and the region's regulatory climate.

"This is really a benchmark against what the Gulf Coast has," Klaber said of the desperate need for more NGL storage in the region. "It's the biggest, most daunting task for us here. It's a little bit of the chicken and egg. We need to have a reliable ethane and propane supply in order to have the reliable operation of major petrochemical facilities, but you're not going to build all that storage until you have the use for it."

Klaber made her comments on Monday before about 400 people at the Northeast U.S. Petrochemical Construction conference in Pittsburgh. About 30 miles northwest of the city, a unit of Royal Dutch Shell plc is nearly finished with the two-year process of preparing a 400-acre site in Western Pennsylvania, where it plans to move forward later this year with constructing a multi-billion dollar ethylene cracker. The facility would consume about 100,000 b/d of ethane and produce 3.5 million pounds/year of polyethylene.

Shell's Anca Rusa, project director of Pennsylvania Chemicals, said the company has removed two hills; 7 million cubic feet of dirt; installed utilities; relocated power lines and moved more than a mile of state highway to make room for the cracker on what was formerly the site of a zinc smelting plant. Primary construction is expected to take five years, with service expected sometime in the early 2020s.

TSIC's work is part of a broader effort to capitalize on Shell's investment. Pennsylvania commissioned a study released earlier this year that found the Marcellus and Utica shales hold enough ethane to accommodate up to four additional ethylene crackers.

Antero Resources Corp., Chevron Corp., XTO Energy Inc. and several other companies matched a $100,000 grant from the Claude Worthington Benedum Foundation to investigate the basin's NGL storage potential. Meanwhile, U.S. lawmakers from the region have introduced legislation to study the feasibility of a storage hub, provide funding and expedite the permitting process.

The American Chemistry Council also released a study last month that found if five ethane crackers and two propane dehydrogenation facilities were built in the region, it could attract $36 billion in capital investment.  Ohio, Pennsylvania and West Virginia have signed a cooperative agreement aimed at creating policies to promote the region's shale resources to boost the regional economy. Other groups, like Shale Crescent USA, have formed to brand the region as a low-cost business destination.

TSIC developed a geographic information systems database of an 82-county region spanning all three states. While geographic information system, or GIS, data for infrastructure already exists at the state level, the council's tool identifies gaps and prioritizes needs on a regional level.

In the coming months, the council plans to present its priorities to stakeholders that include public officials, business groups, investors and the general public. It also wants to create funding mechanisms such as public/private partnerships to match project needs. 

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