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Shell Chemical Details Plans for PA Cracker in First Permit Application

A recent air quality permit application filed with Pennsylvania regulators by Shell Chemical Appalachia LLC for a multi-billion dollar ethane cracker gives an early glimpse of the project after years of speculation about the company's plans.

Although Shell has not committed to constructing the facility in western Pennsylvania, the 715-page document filed in Mayis the first step in a lengthy process to earn federal and state approval for a project more than two years in the making so far. According to Shell, if the cracker is constructed, it would be the first project of its kind to be built outside the Gulf Coast in 20 years.

The company's application includes an impact analysis of air, soil and vegetation, concluding that the "facility's emissions are not expected to result in adverse effects to soils, crops, or plant species of concerns, within the vicinity of the project site."

Given the size of the facility, however, it is classified as a major new source of emissions. In its application, Shell said that particulates, nitrogen oxides, volatile organic compounds (VOC) and carbon dioxide, among other things, will exceed federally acceptable standards under the Clean Air Act. For instance, carbon dioxide from the cracker will surpass the majority threshold of 100,000 tons/year, and VOCs will surpass the 50 tons/year threshold set forth under federal law.

"First of all, we had to accept this application for completeness under administrative review, which it's passed," said Pennsylvania Department of Environmental Protection (DEP) spokesman John Poister. "Now it's going through the technical review. This is a very lengthy process; it will take months to complete. We have to go through everything -- every table and every number -- that [Shell has] presented to determine whether they're usable. We have to determine if it can meet operating parameters because it's a new major source of emissions." 

Shell continues to assess the cracker's viability. It would be constructed on a 400-acre site adjacent to the Ohio River in Potter and Center townships in Beaver County, PA, about 35 miles northwest of Pittsburgh. The facility would also employ 400 people, according to Shell's application, and would replace a shuttered zinc smelting facility of similar size that once employed 600.

The DEP, Poister said, is examining that aspect of the project as well, to determine how replacing one major emissions source with another would be any different. Shell also said in its application that it would likely be required under federal rules to purchase emission reductions credits to offset certain pollutants. It added that the facility would use the best available technology to achieve minimum emissions.

Poister said it's too early in the permitting process to say what the state or federal governments might require of Shell if it builds the facility.

"This is not going to be a fast process. It will likely take four to six months to get through this. I think what [Shell] is doing -- based on their experience and what they've made clear -- is they want to go through the permitting process and have all the necessary permits in hand before they begin actual construction. There will be many more documents, and it's too early for us to say what happens with emissions because that's a part of this process."

Shell spokeswoman Kimberly Windon toldNGI the company is awaiting a response from the DEP about its air quality application as it prepares to file for other permits. In the meantime, she said, the company is attending regularly scheduled township meetings in the area of the proposed site to educate the public about the project.

“We have always maintained that securing the necessary permits is an important factor. As we’ve said, a number of steps remain before Shell will be in a position to make a final decision,” Windon said. “Among those activities is confirming the suitability of the site, obtaining customer support for our products, completing the engineering and design work, receiving the necessary permits and continuing the evaluation of project economics.

Shell first floated the idea of constructing an ethane cracker in Pennsylvania in 2011 (see Shale Daily, June 7, 2011) and signed a site option agreement in Beaver County in 2012 (see Shale Daily, March 16, 2012). It has signed three amended purchase agreements since then (see Shale Daily, Dec. 26, 2013).

Rising ethane volumes continue to pose challenges for exploration and production companies as well as midstream operators in the Appalachian Basin. The onshore boom has driven up supply and depressed prices. Three other crackers have been proposed for West Virginia (see Shale Daily, May 2; Nov. 14, 2013; Jan. 19, 2012), but speculation has run rampant about Shell's plans since it became the first to announce a project that would be built in the Northeast far removed from the enormous industrial complex along the Gulf Coast.

Although both Shell and state regulators acknowledge that the company's plans could change because no final decision has been made about the project, Shell's application said construction activities are planned to start in late 2015 and continue for two years until operations begin in 2018.

Shell cited an "appropriate" business and zoning climate, as well as the site's proximity to rail, water, roadways and wet natural gas in its decision to select the western Pennsylvania site.

The complex would convert locally sourced ethane into ethylene and polyethylene, which is a key building block for plastics. According to Shell's application, the facility would be capable of producing 1.5 million metric tons of ethylene per year and another 1.6 million metric tons of polyethylene per year. More specifically, it would convert ethylene into high- and low-density polyethylene, which is used to make trash bags, diapers, bottle caps and water pipes, among other things.

The polyethylene would be converted into pellets for sale to regional manufacturing facilities that would be loaded onto trains and trucks at the facility. The ethylene manufacturing process will consist of seven cracking furnaces, one of which would be on standby, that will heat ethane to temperatures above 1,500 degrees Fahrenheit.

The ethylene would then be fed to two polyethylene manufacturing units and another slurry technology unit. To support the plant's operations, three on-site natural gas-fired turbines would be used to generate electricity and steam, with excess electricity sold to PJM Interconnection.  Ancillary equipment at the site would include four emergency diesel generators, two cooling towers, storage tanks, pressure vessels for raw materials, logistics terminals and a wastewater treatment facility.

Although Shell stopped short of highlighting the facility's economic impact, a study released by the Pennsylvania Economy League shortly after the company said it would construct the cracker estimated that 18,000 jobs would be created during peak construction, with annual economic output related to the facility projected to be $4.8 billion.

While many industry experts have questioned the economic viability of a petrochemical facility in the Appalachian Basin (see Shale Daily, March 24), several polymer companies on Fortune Magazine's list of the world's 1,000 largest corporations are located in Northeast Ohio, including Goodyear Tire and Rubber Co., Parker Hannifin and PolyOne Corp. The Pittsburgh region is home to more than 100 plastics-related companies that employ more than 5,000 people, according to the Pittsburgh Regional Alliance, an economic development organization that supports the facility's construction.

"Companies in this industry that are among our members continue to say that one of the largest markets for these products is within a few hundred miles of Pittsburgh," said Bill Flanagan, a spokesman for the alliance. "Based on what they've told us, a market will exist. And of course, downstream investment will come over time with more manufacturing to follow."

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