Shale Daily / NGI All News Access

AGA: Chemical Firms Betting Billions on Cracking Plants

The United States is seeing a resurgence in ethylene cracking facilities as chemical companies, which left the country a decade ago because of high natural gas feedstock prices, are returning to build new plants and reopen mothballed facilities due to lower gas prices brought on by the boom in shale production, said the head of the American Gas Association (AGA) Friday.

"The chemical industry, which had fled offshore in the '90s and early 2000 because of the [high] cost of the feedstock natural gas, are coming back and they're bringing billions of dollars...and the states are now competing to get this [cracking business]," AGA President Dave McCurdy said during a press briefing at the association's headquarters in Washington, DC (see related story and Shale Daily, April 25).

Crackers convert ethane -- a wet gas extracted from shale gas -- to ethylene, a feedstock used in making plastics. In the Southwest and Marcellus Shale basins, ethane previously was flared, but now it's a "real resource," he noted.

The association represents gas distributors and supports state regulation over federal regulation of shale gas development and the accompanying hydraulic fracturing (fracking) practice, McCurdy said (see Shale Daily, Nov. 4). "We don't need another layer" of federal bureaucracy, he noted. The states understand the local hydrology and geology of the shale basins better than federal regulators.

Gas distributors have learned over the years the importance of engaging local stakeholders on the issues of increased noise, truck traffic and emissions, and shale producers must do the same, McCurdy said.

AGA's new chairman, Larry Borgard, noted that 10-15 years ago "we were always talking about the North Slope of Alaska." Five years ago it was the Outer Continental Shelf, and now it's all about shale gas. Natural gas reserves have been estimated at 2,100 Tcf. "I don't know what comes after trillion."

Borgard, who is president of the Utilities unit of Integrys Energy Group Inc. in Chicago, is optimistic about the future of natural gas vehicles (NGV). The market will "absolutely balloon going forward," he said.

He believes the conversion to NGVs is a compelling option for fleet owners now, but demand in the passenger market is "probably a little ways off" due to the initial costs involved. Many trucking companies "are investing lots of money in the natural gas vehicle market," said Borgard (see Shale Daily, Nov. 21).

Congress and the states have taken notice of the growing interest in NGVs (see related story). In April House lawmakers introduced the NAT GAS Act to set the nation on course over the next seven years to rely on natural gas for some of the country's transportation needs. And in November the Senate introduced its version of the legislation, which would expand tax credits for gas infrastructure and NGVs.

"I don't know what the prognosis is" for federal bills in 2012, McCurdy told reporters. He noted that AGA supports the legislation, saying that from an energy security standpoint, it "makes sense."

"No. 1 [issue] on our agenda will always be pipeline safety," Borgard said, adding that "we've got [an] aging infrastructure." He said he hopes Congress will approve legislation by the end of the year, and send it to the president. House Speaker John Boehner (R-OH) wants to adjourn by Dec. 15.

The House of Representatives could vote out pipeline safety legislation "as early as next week," an official with the Interstate Natural Gas Association of America (INGAA) told NGI Friday.

The two House committees -- House Transportation and Infrastructure and House Energy and Commerce -- have reached an "agreement in principle" on combining their separate pipe safety bills (HR 2845, HR 2937). But before going to House floor, the House committee leaders plan to take their deal to the Senate Commerce Committee to see if any changes are necessary. The full Senate passed its pipeline safety bill (S. 275) in October.

"It's not certain," but "it's still possible to get a bill approved" before Congress adjourns for the year later this month, said INGAA's Martin Edwards, vice president of legislative affairs.

The AGA has asked Congress to provide at least $3.5 billion in funding for the Low Income Home Energy Assistance Program (LIHEAP). "We believe that a government expenditure out of a multi-trillion dollar budget of $3.5 billion to provide grants to the states to help with this [heating and air conditioning bills] is not an unreasonable request," McCurdy said. LIHEAP was allocated $5.1 billion in fiscal year (FY) 2011. The gas industry has contributed $2 billion -- on top of the requested $3.5 billion -- for the program in FY 2012, he noted.

The distributor group said it also wants Congress to simplify the tax code in 2012. "That means we'd like to see a reduction in the corporate [tax] rate," McCurdy said. Moreover, he called on lawmakers to not use the tax code to create energy policy. "You cannot have responsible energy policy through the tax code."

ISSN © 2577-9877 | ISSN © 2158-8023
Comments powered by Disqus