As West Virginia takes up the issue of Marcellus Shale regulatory reform, officials are also continuing their efforts to attract at least one thermal cracker facility to the state.

Lawmakers on two committees met in recent days to hear testimony from state and local government officials, academics, scientists, property owners and environmental groups. They received an update on the effort to have someone build at least one ethane cracker in the region and discussed what type of regulatory reform was still needed on Marcellus Shale drilling.

Kevin DiGregorio, executive director of Chemical Alliance Zone Inc., told NGI’s Shale Daily that he spoke before the Joint Commission on Economic Development (JCED) last Monday.

“It’s a complicated issue,” DiGregorio said Friday. “You need to get folks to understand the overall economics. You then need to make sure that the folks who might invest in a cracker and the folks who have the ethane can reach a good decision on their supply.”

DiGregorio said conservative estimates he has seen suggest that the Marcellus Shale could produce between 150,000 and 200,000 b/d of ethane. He said a cracker, which would cost between $1 billion and $3 billion to build, could handle between 60,000 and 80,000 b/d.

“We probably conservatively will have enough for two-and-a-half crackers,” DiGregorio said, adding that two sites owned by Bayer AG — in New Martinsville and Institute, WV — would be ideal candidates. “There are pipelines connecting those two [sites], and we feel there’s a good chance at getting a cracker at each spot. But even if we don’t, we think that because of the pipeline network, we’ll be able to attract some downstream facilities to manufacture ethylene products.”

Bayer owns about 1,480 acres in industrial parks in New Martinsville, Institute and South Charleston, WV. New Martinsville is on the Ohio River in Wetzel County, while Institute and South Charleston are in Kanawha County. All of the sites currently house Bayer chemical plants (see Shale Daily, Dec. 23, 2010).

Charleston Area Alliance CEO Matthew Ballard, who also addressed the JCED last Monday, told NGI’s Shale Daily that an ethane cracker capable of handling 60,000 b/d would be a “world-class facility” and would also take two years to build and create about 2,000 construction jobs. Upon completion the facility could create between 600 and 700 permanent jobs.

“That’s an estimate, and there are a million variables that can play into that, but it’s a pretty sensible estimate,” Ballard said.

The JCED also heard from officials with the state Commerce Department and were told that the state had hired PB Energy Storage Services (PBESS) to perform a study on West Virginia’s ethane storage capacity.

Angel Moore, who serves as deputy secretary and general counsel for the Commerce Department, told NGI’s Shale Daily that the state was still in the process of awarding the contract to Houston-based PBESS, so the cost of the study was still being determined. She added that it will take about six weeks for PBESS to complete the study.

“There are different ways of using ethane,” DiGregorio said. “One way is to pipe it to the Gulf Coast or elsewhere. That doesn’t largely make any sense because you spend about 20 cents a pound to pipe ethane down there to make polyethylene. But most of the polyethylene users are in the Northeast, so you spend another two to five cents per pound to ship it back up.

“So what really makes sense is to have one or more crackers in this region, where you’re using the ethane here and not shipping it, and making the final products here and not shipping them.”

The Marcellus Study Subcommittee (MSS) met on Tuesday and called former Morgantown Mayor William Byrne to testify. Byrne said he told the panel that a lack of state regulation was the driving force behind the city passing an ordinance on his watch to ban hydraulic fracturing within the city and an adjacent one-mile buffer zone (see Shale Daily, June 23).

“There are no siting regulations,” Byrne, who still serves on the city council, told NGI’s Shale Daily on Friday. “There’s nothing that considers the location of these wells with the current regulations, so it put us in a situation where we had to act in order to do what we thought was in the best interest of the community.”

The MSS, a bipartisan 10-member panel to seek a consensus on Marcellus Shale regulatory reform, was formed in June (see Shale Daily, June 17).

Byrne added that while he supported the Marcellus Shale regulatory reforms outlined in Gov. Earl Ray Tomblin’s executive order last Tuesday (see Shale Daily, July 14), they didn’t go far enough.

“It didn’t deal in any way with the overall issue of siting, about where these wells should go and how they should be buffered,” Byrne said. “That’s a critical issue for us. There should be rules about how close they can be to any type of sensitive area: a significant population base, a water intake, a school, a church, a home.

“We have more than 90,000 people in our metropolitan area. Putting a well close to that concentration of people would be of great concern to us, but I think siting rules can be developed that would take all of that into account.”

Morgantown’s new mayor, Jim Manilla, said he is concerned about the ordinance and the legal battle it has started with Northeast Natural Energy (NNE), which is drilling two Marcellus Shale natural gas wells outside the city (see Shale Daily, July 13). NNE could potentially seek millions in compensation from the city if its ordinance withstands the company’s legal challenges.

DiGregorio said he didn’t think shale gas regulations would affect West Virginia’s chances of landing an ethane cracker.

“I don’t know that regulatory is really the big holdup,” DiGregorio said. “But we do need to have responsible regulations in place.”