Appalachian Storage Hub: Realizing Our Potential

By Samantha Cart

The West Virginia hills were once home to an abundance of mills, factories, chemical manufacturing plants and mines that employed thousands of hardworking Mountaineers. Today, the state’s economy is struggling to deal with the loss of businesses and population, the decline of the coal industry and the fight to maintain millennials, but West Virginia’s leaders aren’t giving up. As innovators continue to look for ways to revitalize the Mountain State, obtaining regional petrochemical cracking plants—or crackers—and creating an adequate resource to put West Virginia’s oil and natural gas industry back on the map are promising priorities.

One potential project that could bring jobs and renewal to West Virginia is the creation of the Appalachian Storage Hub, a proposed underground storage facility that would be used to store and transport natural gas liquids (NGLs) extracted from the Marcellus, Utica and Rogersville shales across Kentucky, Ohio, Pennsylvania and West Virginia. Construction of this hub would not only lead to revenue and job creation in the natural gas industry but would also further enable manufacturing companies to come to the Mountain State, as the petrochemicals produced by shale are necessary materials in most manufacturing supply chains.

West Virginia’s Potential

According to Steve Hedrick, president and CEO of South Charleston’s Mid-Atlantic Technology, Research and Innovation Center, also known as MATRIC, the raw materials available in the region’s Marcellus Shale alone are estimated to be worth more than $2 trillion, and an estimated 20 percent of this shale is composed largely of ethane, propane and butane NGLs that can be utilized by the petrochemical industry in the manufacturing of consumer goods.

“The brightest minds in geology—collaborating from universities in West Virginian, Ohio and Pennsylvania—are currently investigating where the top three to five locations for a storage hub might be from a technical perspective,” says Hedrick. “The ideal location is yet to be determined, but we anticipate it will be in the quad-state region.”

While the storage hub is still in a conceptual stage, it already has bipartisan support in West Virginia. The premise has intrigued U.S. senators Shelley Moore Capito and Joe Manchin and Congressman David McKinley for its projected ability to grow downstream manufacturing and utilize the state’s NGLs. On a federal level, legislation by the Department of Energy and the Department of Commerce that is associated with the establishment of such a hub and its related infrastructure has been passed by the U.S. House of Representatives.

Since last fall, this bipartisan effort has stretched beyond state lines, and no matter which location is chosen, West Virginia will still reap the benefits. In October, West Virginia Governor Earl Ray Tomblin, Lieutenant Governor of Ohio Mary Taylor and Pennsylvania Governor Tom Wolf signed an unprecedented agreement at the Tri-State Shale Summit, promising collaboration between the states in securing crackers for the region and, by extension, support of the storage hub. Instead of competing, the neighboring states will encourage the growth and opportunities of the Appalachian Basin, which will benefit the economies and residents of each.

“It was exciting to see the governors of these three great states commit to collaboration in a stronger way than they ever have before,” says Hedrick. “For a larger company entering our region for the first time, it sends a powerful statement that all three of the governments will work together to see to their success. Further, it enables collaboration without fear of too much competition, as the Appalachian Storage Hub would enable a win for Pennsylvania, Ohio and West Virginia—and Kentucky too.”

Inside the Hub

The envisioned infrastructure, fed from built-for-purpose underground storage, would act like an interstate highway, with on-ramps and off-ramps feeding manufacturing hubs along its length and drawing from the available ethane storage fields. The piping would sit aboveground and follow the Ohio and Kanawha river valleys. If chosen, West Virginia’s mountainous terrain would serve as an advantage, protecting this costly development from weather and natural disasters.

Regional leaders are looking at a similar structure in Mont Belvieu, Texas, for inspiration. With a strategic location along the Gulf Coast, the underground storage site includes 35 storage caverns that can store and deliver 110 million barrels of NGLs.

“The Mont Belvieu storage site has led to the expansion of the petrochemical industry in the greater Houston Ship Channel area and farther,” says Hedrick. “From refineries to ethane crackers to downstream derivative units to the infrastructure to support it all, there has been a dramatic spread of heavy industry that has driven economic development spanning more than a generation.”

In much the same way, the Appalachian Storage Hub would safely house liquid ethane as a built-for-purpose facility to distribute critical raw materials to consumers across Appalachia’s broader region. According to Hedrick, the infrastructure associated with a fully functioning and successful build-out would tie the hub’s inlet and outlet piping to a six-pack of pipe, which would potentially contain methane, ethane, ethylene, propane, propylene and chlorine.

“We would anticipate it utilizing the corridors naturally created in the Ohio and Kanawha rivers, spanning from Monaca, Pennsylvania, to Charleston, West Virginia, to Catlettsburg, Kentucky,” he says. “This would facilitate the safe, environmentally sound and efficient delivery of raw materials and intermediates to the region’s most viable manufacturing locations.”

Brian Anderson, a chemical engineering professor at West Virginia University (WVU) and director of the WVU Energy Institute, believes the building of the Appalachian Storage Hub would be in line with the economic mission of West Virginia’s land grant institutions.

“Our portfolio of research efforts includes the responsible development of the energy resources of the state of West Virginia, including ways to add value to these resources before they are shipped out of the state and region,” says Anderson. “Research efforts across campus for shale gas utilization under the umbrella of the WVU Energy Institute are targeted toward the downstream industries the Appalachian Storage Hub could enable.”

Calculating the Benefits

The completion of a storage site would enable the utilization of the state’s natural resources, lead to increased industrial investment in West Virginia and create the capacity for multiple ethane crackers to operate in the region, a hot topic for West Virginia and the surrounding states’ leaders.

“West Virginia in many ways was the birthplace of the chemical industry due to the development of the oil and gas industry in the state early last century, and it can be again,” says Anderson. “Any ethane crackers that would be built in the region would be key customers of the Appalachian Storage Hub. The hub and the associated pipeline network would supply the crackers with ethane and provide a conduit for the offtake of the crackers’ produced ethylene. The hub would help ensure a stable supply of ethane to the crackers and provide a trading point for the upstream gas producers to sell their NGLs to the crackers and other petrochemical and polymer production facilities.”

The construction of the hub and a cracker would require thousands of skilled, highly motivated and qualified workers. “It would be a multi-year approach, requiring a variety of STEM-related skills ranging from geologists to pipefitters to mechanical engineers,” says Hedrick.

Initially, the potential for employment would exist because of construction, but as the region moves forward, the growth of the petrochemical industry looks promising for permanent jobs to operate and maintain the facilities that will follow, as well as the renewed growth of the oil and natural gas sectors as production continues to rise.

Overcoming Obstacles

While the construction of this storage site would bring jobs, revenue and people to the Mountain State, it is not without challenges—specifically, the lack of pre-existing infrastructure and funding.

A significant engineering, procurement and construction firm has not yet delivered a specific estimate, but Hedrick says construction of the storage hub would likely cost around $10 billion, which would require a public-private partnership with the financial backing of the private sector and federal and state governments.

Funding for the hub itself is not the only monetary concern. According to Hedrick, the single largest barrier to success in building out the manufacturing base is inadequate infrastructure. This coupled with competition from other NGL trading hubs in the country could pose as a major setback.

“One argument against the hub is the fact that there already exists a natural gas liquids trading hub in the United States in Mont Belvieu,” says Anderson. “There are plans to build pipelines from Mont Belvieu to Canada and eastern Pennsylvania. In these locations, there is already existing infrastructure that can process NGLs for conversion or export. However, we believe there is a sufficient supply of NGLs in the Appalachian Basin to supply an industry here in the region as well as Texas and the export market.”

While there are still a lot of decisions to be made regarding a storage hub in Appalachia, West Virginia innovators like Hedrick and Anderson are among those championing this beneficial project.

“This is of strategic importance to the region,” says Hedrick. “We are driven to see this be a historic success story for West Virginia, Ohio, Pennsylvania and Kentucky.”