YOUNGSTOWN, Ohio – A site in Belmont County along the Ohio River near Interstate 70 – apparently across the West Virginia border somewhere near Wheeling -- is commanding plenty of attention as three states compete for a ethane processing plant, a project that would bring $2 billion of investment, hundreds of direct jobs, and thousands of related jobs.
"The site that we're talking about is very good," says Jason Wilson, director of Gov. John Kasich's Office of Appalachia. "It's the preferred site in Ohio." Royal Dutch Shell is expected to announce soon whether Ohio, Pennsylvania or West Virginia will be home to the company's proposed cracker plant, an operation that breaks apart ethane molecules and converts the gas into ethylene, a base ingredient found in products such as plastics. "They've [Shell] been on the ground and looked at it," says Wilson, who is part of a shale work group that meets twice a month to assess development of Ohio's oil and gas industry.
"That's always a very good sign. From what I understand, the response is positive and they're pleased with the site." Wilson declined to divulge the site's exact location, but noted that it's in Belmont County nestled on the Ohio River. It's also close to I-70 and has access to rail, and meets all or most of the criteria required by Shell so it could construct the plant there. A strategic site, coupled with a generous state incentives package, places Ohio in a strong position to win the estimated $2 billion plant. "It bodes well for Ohio," Wilson says. "There are a lot of multiple pieces of this puzzle that are positive for the state." Access to major waterways such as the Ohio River is an important factor in the project, since much of the equipment is manufactured offsite and must be transported on large barges to the location, Wilson says. The region's network of railroads, highway infrastructure and available acreage also makes the Belmont County site an ideal place for the new plant. "It's a quality location," Wilson says.
Moreover, the location straddles the liquids-rich Utica shale in eastern Ohio and the massive Marcellus shale play that runs through western Pennsylvania and northern West Virginia. Such a plant could not only create thousands of jobs, but could also resurrect a long-dormant petrochemicals industry in the state while establishing a network of suppliers across eastern Ohio.
Construction of the plant would require thousands of tradesmen, while full-time employees would number about 200 there. The American Chemical Association estimates the cracker plant could create 17,000 jobs in other industries associated with the plant, generate $1 billion in wages, and another $169 million in tax revenue for Ohio. Tracy Drake, executive director of the Columbiana County Port Authority, reports that his organization submitted site applications about 10 months ago, when Shell first announced its intentions.
"It's been quiet," Drake says of the response. The port authority suggested a site in Wellsville and another on Yellow Creek near Jefferson County. Although Columbiana County is not likely to land the cracker plant, Drake believes it stands to reap its benefits should Shell locate in Ohio, Pennsylvania or West Virginia. "I think it's going to have a major economic impact,” he observes. Jobs in midstream and downstream industries are likely to grow in earnest once the cracker plant is in operation, Drake says. "You've got all this wet oil supply. It's either going to have to be processed locally, or transported to a place where it can be processed. You're going to need a way to get these materials to the market." That could open up opportunities across the board for companies that supply and serve the industry, he says. "We're talking about a bunch of other projects. Some of them are not necessarily small – there are a lot of big projects out there right now."
West Virginia-based Aither Chemicals announced earlier this month that it wants to construct a smaller cracker plant in the Utica/Marcellus shale region. The company is trying to raise $750 million for the venture, which would create 1,000 to 2,000 construction jobs and 200 full-time permanent positions. And, the company is contemplating the possibility of adding more such plants in the region. Still, the Shell project is a prize that Ohio wants, and wants badly. Kasich traveled to Houston in late December and met with Shell executives, pitching Ohio as the most logical location for the new plant. He has declined to identify what, if any, incentives package was offered the company. Ohio is in stiff competition with its neighbors Pennsylvania and West Virginia for the project. This month, on the heels of the state's legislature approving a 25-year abatement on property taxes aimed at luring the project, West Virginia governor Earl Ray Tomblin also met with Shell executives in Houston. Tomblin later said he's likely to ask lawmakers for additional inducements.
Meantime, Pennsylvania's General Assembly is considering a bill that would expand its Keystone Opportunity Zone, which eliminates real property taxes at designated areas for 10 years. The bill would extend the KOZ designation another five years for companies that invest at least $1 billion and hire 400 employees. Pennsylvania’s economic development officials are pushing a former LTV Steel site along the Ohio River in Aliquippa. The Columbaina County Port Authority's Drake says that while incentives are important, they're not going to be the driving force on this project.
"Incentives come into play when you're trying to narrow it down to between two sites" in different states, he explains. "I think you have to look at Ohio as a leader that other states follow," Drake says. "I don't think we're behind the curve at all."
Eric Planey, vice president of international business attraction at the Youngstown/Warren Regional Chamber, says the Mahoning Valley has practically zero chance of landing a cracker plant here. However, the region could score big by benefiting from construction business, transportation jobs and opportunities arising from a robust plastics and petrochemicals industry. "The petrochemical industry is the No. 1 customer of products from an ethane cracker," Planey says. "No matter who wins it, this region will benefit because of construction jobs, the suppliers that need to fill that product and transporting that end product and putting it back to work in the petrochemical industry." Planey says ethylene is likely to be transported two ways: by pipeline or rail. Most likely, a pipeline would be constructed that could serve markets in the east and deliver ethane to ports such as Philadelphia.
"I think there's something to be said as to looking at whether Lake Erie could also be a transportation conduit, not for just the Midwest, but for also Western Europe."
Copyright 2012 The Business Journal, Youngstown, Ohio.