By Kevin DiGregorio
Surely you know all about Polly and how that bird wanted a cracker—a saltine cracker, in fact. Perhaps you also know that everybody else—well, it certainly seems like everybody else—also wants a cracker.
Instead of a saltine, everybody else is after an ethane cracker—or two or three—and the $1 to $3 billion investment each will bring, along with several thousand construction jobs, several hundred permanent jobs and other chemical-related, add-on investments and jobs. It’s a big deal for economic development in West Virginia. That’s why the Chemical Alliance Zone (CAZ), along with the Charleston Area Alliance, the Regional Economic Development Partnership, West Virginia Oil and Natural Gas Association, West Virginia Manufacturers Association, West Virginia Development Office, Bayer Corporation and others are working diligently to attract a cracker or two to the state. Of course, as the Polly comparison suggests, we are not alone. Other states, especially Ohio and Pennsylvania, want a cracker as well.
All three states sit squarely over what could be some of the largest natural gas reserves in the world, especially the Marcellus and Utica shales. Moreover, sizeable parts of those formations contain large amounts of ethane, and ethane is one of the basic building blocks for the chemical industry, thus the reason everybody wants a cracker.
A cracker is a chemical facility that “cracks” or converts ethane to ethylene. The ethane molecule is literally split into two, or cracked, allowing it to then reform into ethylene, the largest-volume petrochemical produced in the world. Once made, ethylene is converted to a host of chemicals that end up in everyday products such as clothing, detergents, cleaners, antifreeze, brake fluids, paints, adhesives, flooring and siding. One of the largest-volume chemicals made from ethylene is polyethylene, the most widely used plastic in the world. It ends up in garbage bags, plastic films, packaging, containers, bottles and other plastic products.
In fact, probably 40 to 60 percent of all the world’s chemicals come from ethylene. That means it takes many manufacturing facilities to produce those chemicals, not just a cracker. After ethylene is made in a cracker, other facilities convert that ethylene into polyethylene and a host of other chemicals. Those chemicals are then eventually formulated in other production facilities into end products like bottles and trash bags. Of course, that provides an opportunity for even more investments and jobs.
No wonder everybody wants a cracker.
In reality, this will likely be a regional play. As many as five or more states could gain jobs and investments from the positioning of one or more crackers in the region. West Virginia, Pennsylvania and Ohio, for example, could form a coalition of some sort to develop and garner the economic benefits of shale ethane in the region.
In that vein, the Chemical Alliance Zone is interested in gaining a cracker anywhere in the State of West Virginia with no preference in location. The only locations in West Virginia that have been publicly announced as potential sites for a cracker—Bayer’s sites in New Martinsville and Institute—are both prime contenders for a cracker and other downstream facilities. If we are really successful, we will attract a cracker at each site. If not, both locations may very likely be winners anyway, as downstream investments and facilities may flow to those sites and possibly other facilities in West Virginia whether the cracker is situated in the same industrial park or not.
In fact, new pipelines from the Northern Panhandle to the Kanawha Valley would allow the flow of both ethane for crackers and ethylene for downstream chemical facilities. Pipelines already exist to transport chemicals from Institute to other facilities owned by Dow and DuPont in the Kanawha Valley. This pipeline system would extend the economic impact in West Virginia, at least, from more of a local to a regional play, creating a large, regional hub of chemical activity.
Of course, the economic impacts stretch nationally, not just regionally or locally. The American Chemistry Council recently released a study that analyzed the impact of a 25 percent increase in national ethane supply on the U.S. chemical industry. The study found that such an increase—realistic in their view—would generate 17,000 new, high-paying jobs in the chemical industry; 395,000 indirect jobs outside the chemical industry; $16.2 billion in capital investment by the chemical industry and $4.4 billion in additional annual tax revenue.
As great as that is for the nation, those investments and jobs will indeed happen locally and regionally. The fierce competition is on for a cracker, and the more we think regionally and less locally, at least within West Virginia, the more likely we will all come out winners.
And then, when Polly gets a cracker, all the birds will eat.
