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Shell Chooses Pennsylvania for Marcellus Cracker

Although the announcement does not mean the company is committed to its plans for a "world-scale" facility just yet, it ends months of speculation about where Shell would locate the facility and the competition among the three states in the running (see Shale Daily, Dec. 5, 2011; Sept. 7, 2011; June 7, 2011).

After considering locations in Pennsylvania, West Virginia and Ohio, Shell announced Thursday that it had signed an option to purchase land in Beaver County, outside of Monaca, PA, a small borough about 30 miles northwest of Pittsburgh, according to Dan Carlson, Shell general manager of new business development. The land is currently owned by zinc producer Horsehead Corp.

"We are very pleased to have signed this site option agreement," Carlson said. "This is an important step for the project and we look forward to working with the communities in Pennsylvania and gas producers across Appalachia as we continue our efforts to develop a petrochemical complex."

Shell Chemical LP has chosen a rural area outside of Pittsburgh, very close to the Ohio and West Virginia borders, as the potential location for a major petrochemical complex that could include an ethane cracker in the heart of the Marcellus Shale.

In choosing the location, Shell said it considered "good access to liquids-rich natural gas resources, water, road and rail transportation infrastructure, power grids, economics and sufficient acreage to accommodate facilities for a world-scale petrochemical complex and potential future expansions."

The proposed location not only hugs the Ohio River that connects western Pennsylvania to the Mississippi River, but is near the Conway Railyards and the Pittsburgh International Airport.

Shell holds about 850,000 acres of "highly contiguous acreage" in the Marcellus.

While Shell previously said the complex would include an ethane cracker capable of handling 60,000-80,000 b/d, the company is also considering polyethylene and mono-ethylene glycol units "to help meet increasing demands in the North American market," particularly the Northeast.

The cracker would turn ethane into ethylene, used to make a products from bottles to tires.

All three states lobbied hard to get the plant, and in the end residents of all three states could benefit, seeing that the plant is only about 10 miles from both the West Virginia and Ohio borders.

Pennsylvania Gov. Tom Corbett signed a bill in February offering 15 years of tax breaks to companies that invest at least $1 billion and create at least 400 permanent full-time jobs within seven years (see Shale Daily, Feb. 6). The administration spent "months" courting Shell behind the scenes.

Corbett responded to the news with cautious optimism. "We are still early in the process, but my administration is determined to see this project through to completion. The benefits to the state's southwest and to all of Pennsylvania are immense," he said. "The Shell plant would, if constructed, have the potential to be the single largest industrial investment in the region in at least a generation."

While hailing the news as an "important first step," Corbett noted that Shell must now conduct "additional environmental analysis of the preferred site, further engineering studies, assessment of the local ethane supply and continued evaluation of the project's economic viability."

Pennsylvania House Majority Leader Mike Turzai, a Republican from the region, said the tax breaks -- offered through the Keystone Opportunity Zones (KOZ) law -- were "critical" to the decision. "The Shell announcement is tangible evidence that Pennsylvania is once again ready to compete for jobs as the economy continues to recover," he said. "But we have more work to do to create a competitive tax and regulatory climate that keeps us at the forefront of business expansions and relocations.

State Rep. Jim Christiana, a Republican from Beaver, also credited Act 13, the omnibus legislation that set fiscal and regulatory terms for shale (see Shale Daily, Feb. 15), saying that without the two pieces of legislation "this historic opportunity for Pennsylvania would not have been possible."

The Marcellus Shale Coalition said the news was "further indication" that Pennsylvania policymakers were developing the play responsibly. "Today's announcement by Shell is a win-win for the region's workforce and economy and further demonstrates the tremendous resource contained in both the Marcellus and Utica shale," President Kathryn Klaber said. "While located in Pennsylvania, the supply chain and potential economic impact of this project will span the multi-state region while serving as an anchor in the resurgence of the domestic manufacturing sector."

In January, West Virginia Gov. Earl Ray Tomblin signed a bill offering tax breaks to companies that build an ethane cracker there (see Shale Daily, Jan. 30). Those incentives proved not to be enough.

"Naturally, we are disappointed by this decision," Tomblin said. "We worked extremely hard to develop a competitive proposal. Ultimately, the decision was related to site-specific factors beyond our control. The decision by Shell to locate the site near Monaca, just 10 miles across the border, is not only good for Pennsylvania but also for West Virginia. The economic activity from this plant will not be confined to Pennsylvania. West Virginia will benefit from this decision.

"Our efforts to recruit a petrochemical company have never been limited to the Shell project. We will continue to make all efforts to rebuild the petrochemical and related industries in West Virginia."

Beaver County is not only in the heart of the wet-gas window of the Marcellus in southwestern Pennsylvania, but is also prospective for the wet-gas window of the Utica Shale beneath it. Range Resources Corp. describes Beaver and neighboring Washington counties as "super-rich," a region where the natural gas stream is 1,350 BTU or higher (see Shale Daily, Feb. 23). Chesapeake Energy Corp. drilled a Utica Shale well in Beaver last year that peaked at 6.4 MMcf/d (see Shale Daily, Sept. 29, 2011). And Rex Energy Corp., one of the most active companies in the county, drilled at Utica well that produced 9.2 MMcf/d over a 24-hour period (see Shale Daily, Nov. 3, 2011).

The plant would be the first of its kind in the United States in more than a decade and is "yet another sign that a renaissance in underway in American chemistry," according to the American Chemistry Council. Previous analysis from the group estimated that a $3.2 billion complex in Pennsylvania could create more than 17,000 jobs and generate $4.8 billion in additional chemical industry output.

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