West Virginia believes it can support a chemical industry even if plans to ship Appalachian ethane to Canada and the Gulf Coast come to fruition, an official told a Pittsburgh-area audience Wednesday.

Looking to boost manufacturing, West Virginia Gov. Earl Ray Tomblin created the Marcellus to Manufacturing Task Force in February and charged it with studying the feasibility of converting ethane to ethylene in the state (see Shale Daily, Feb. 16). Having just delivered an interim report to Tomblin, the task force believes West Virginia is “strongly in the game,” Kurt Dettinger, general counsel to Tomblin and member of the task force, said at the Marcellus NGL & Shale Gas Infrastructure Summit.

The possibility of building an ethane cracker in West Virginia is predicated on increasing ethane supplies from wet shale gas and the current lack of an ethane market in the region, but any local project would have to compete against proposals to ship ethane to existing markets (see Shale Daily, May 6; March 28).

West Virginia traces its chemical industry to World War I, and the regional industry grew through the 1960s but subsequently declined alongside the national industry from the 1970s through the 1990s. However, the state is still home to “significant” chemical operations today, Dettinger said, and the task force has identified nearly 100 local companies that could benefit from nearby ethylene.

Dettinger said potential investors have four primary concerns: Is there enough local supply? Is there enough local infrastructure? Is there enough local storage? Is there a good site for investment?

So far, Dettinger said, the outlook on each is promising.

Based on the capacity expectations of natural gas liquids (NGL) processing plants in southwestern Pennsylvania, West Virginia and sections of the Huron Shale in eastern Kentucky, the task force expects the wet gas region to produce about 270,000 b/d of ethane by the end of 2015. If both the Sunoco Mariner West and the Marcellus Ethane Pipeline System (MEPS) are brought online, that would send 140,000 b/d to outside markets, leaving 130,000 b/d in the region (see Shale Daily, March 24; Oct. 26, 2010).

“So we do have sufficient volumes remaining if those projects come online at the capacities that they’re talking about. We’ll have multiple cracker opportunities in West Virginia and in the region,” Dettinger said.

That view is also held by El Paso Midstream Group Inc., one of the companies behind MEPS. “Clearly there is enough ethane out there…Is there enough for two projects? Three projects? In addition to a local cracker? Probably all of the above,” said Russell Mahan, vice president of El Paso Midstream Group.

As processing facilities come online or announce expansions, the region is getting more liquids infrastructure, but the task force believes West Virginia still needs 271 miles of pipe to connect all of the fractionators to the two proposed sites for an ethane cracker (see Shale Daily, July 18; Dec. 23, 2010).

Based on that potential investment, the task force is estimating shipping rates between 2 and 3 cents/gallon to move ethane throughout the state, compared to between 12 cents/gal and 20 cents/gal to ship it to Canada or the Gulf Coast through proposed pipelines. “We think that that’s a cost-advantaged transportation structure that should be well suited for not only producers but also petrochemical companies,” Dettinger said.

The task force hired a consultant to consider the storage possibilities in the state. The firm is set to deliver a report in early September, but Dettinger said initial results suggest that West Virginia could use salt caverns, hard rock caverns and depleted gas fields for storage; one of the potential salt caverns is on the site of an existing chemical plant, and the Big Lime formation appears to be suitable for hard rock caverns.

Finally, the task force is considering two existing petrochemical sites in the state, one owned by Bayer Corp. and PPG Industries Inc. in New Martinsville, WV, and another owned by Bayer in Institute, WV.

The picture is not entirely rosy, though. A big issue is whether West Virginia can act quickly enough to keep from being bypassed by a pipeline.