Shale Daily / NGI All News Access

West Virginia Ethane Cracker Bill Sent to Governor

Lawmakers in the West Virginia Senate have voted unanimously in favor of a bill extending tax breaks to companies that build an ethane cracker in the state, and have sent the measure to Gov. Earl Ray Tomblin for his signature.

HB 4086 passed the Senate 33-0 with one vote absent on Wednesday, just two days after the House of Delegates overwhelmingly backed the measure, 93-1 (see Shale Daily, Jan. 25).

"The entire industry should certainly be excited that the legislature overwhelmingly passed this bill both in the House and in the Senate," Charlie Burd, executive director of the Independent Oil and Gas Association of West Virginia (IOGA) told NGI's Shale Daily on Wednesday. "It certainly establishes an opportunity for our governor to go and speak with big companies that are considering developing an ethane cracker here in West Virginia. It's quite an incentive."

Kimberly Osborne, Tomblin's press secretary, told NGI's Shale Daily that the governor's office had not yet received the enrolled bill.

"Once we receive it, the bill will go through our normal review process and the governor will take action within the timeframe as outlined in the law," Osborne said Wednesday.

Under HB 4086, capital investments specifically made in the natural gas liquids (NGL) extraction industry totaling $2 billion or more would qualify for a 5% property tax rate for the facility's first 25 years.

West Virginia is in direct competition with neighboring Ohio and Pennsylvania for an ethane cracker, a multi-billion dollar, multi-year investment that would create thousands of jobs.

Burd declined to comment on whether HB 4086 would give West Virginia an advantage over its neighbors -- citing an unfamiliarity with the economic incentives being offered by all three states -- but conceded that the bill "is landmark legislation, and I think it does create a tremendous incentive for any company looking to invest $2 billion or more to build a facility of this nature."

Corky DeMarco, executive director of the West Virginia Oil and Natural Gas Association (WVONGA), concurred with Burd's assessment, adding that HB 4086 is the result of more than two years of discussion between the state government and the industry.

"I don't know what [Ohio and Pennsylvania] have done tax-wise," DeMarco told NGI's Shale Daily on Wednesday. "They may have done similar things. But I certainly hope this pushes us up the ladder a little bit, if we were on a similar rung with those folks. I like to think that this is just another spoke in the wheel of why this opportunity needs to be put in West Virginia.

"We fully support this effort. I can't go far enough in applauding the governor and the legislature for working with the industry in trying to get this done."

According to DeMarco, in the 1950s and 1960s there were 14 ethane crackers in the United States. He said six of them were in West Virginia.

"We have a long history of the development of plastics and chemicals as a result of ethane production," DeMarco said. "Now we have ethane production capabilities again. We've still got infrastructure in the ground that was in place for our ethane uses in the past. We haven't moved any of those pipelines out. In fact, some of them are used today. We've got the infrastructure here, it's been here, and now we have a favorable tax position."

HB 4086 was submitted by Tomblin on Jan. 17, just days after his state of the state address on Jan. 11, when he vowed to do everything in his power to attract an ethane cracker to West Virginia (see Shale Daily, Jan. 17).

Two nonprofits -- Renewable Manufacturing Gateway (RMG) and Aither Chemicals LLC -- said week they would collaborate to build a $750 million facility in one of those states, where Royal Dutch Shell plc is also considering its own 60,000-80,000 b/d facility (see Shale Daily, Jan. 19; Dec. 5, 2011; Sept. 7, 2011).

Meanwhile, hundreds of West Virginians are petitioning companies to build a cracker in the Kanawha Valley (see Shale Daily, Dec. 15, 2011), while state officials have lobbied hard for the Mountain State (see Shale Daily, Aug. 26, 2011; July 18, 2011; May 6, 2011; Dec. 23, 2010).

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