Officials: Plastic to be manufactured within 3 years

PITTSBURGH — Seven reactors will heat ethane to 1,600 degrees at Royal Dutch Shell’s future $6 billion Pennsylvania petrochemical complex, while officials said the plant will lead to plastics manufacturing within the next three years.

As the Beaver County ethane cracker continues taking shape at the former Horsehead Corp. site, about 40 miles northeast of Weirton, officials in West Virginia and Ohio hope to gain spinoff economic development from the facility when it gets going. They also believe there is plenty of ethane in the Marcellus and Utica region to support more projects, such as the planned PTT Global Chemical facility at Dilles Bottom.

Shell officials discussed ongoing construction of their ethane cracker Thursday during the Shale Insight conference in Pittsburgh. Later, lawyers with the Jackson Kelly law firm discussed the status of “post-production costs” companies withhold from mineral owners, as well as eminent domain for pipelines.

“The expectation is that in the next two to three years, you will see plastics manufacturing,” Pittsburgh Regional Alliance President David Ruppersberger said in relation to the Shell ethane cracker and associated projects.

Officials said the Shell project will feature seven reactors that will “crack” the ethane. To this point, most of the work at the site has taken place underground, according to Shell Technology Manager Todd Whittemore.

“Next year, we’ll start erecting major equipment,” he said. “Suddenly, the whole skyline of the site will change dramatically.

“We’ve not created a new site in the U.S. since the 1960s,” Whittemore added.

Once construction ramps up, about 6,000 employees will see work at the Shell site. The facility will employ about 600 full-time workers once it is operational, officials said.

“All these folks will get paychecks that are above the average for this area,” Shell business lead Michael Marr said.

Marr said long-term ethane supply commitments related to competing projects are not a concern. He said Shell believes it has enough ethane locked up for at least two decades.

“We’re definitely location-advantaged, both from a feedstock standpoint, as well as a market standpoint,” Marr said.

Ethane is one of the liquid forms of natural gas prevalent in the Marcellus and Utica region. A recent West Virginia University study found the creation of a Marcellus and Utica shale ethane storage hub could lead to 100,000 permanent jobs, along with at least $36 billion in total investment.

One of these storage caverns is south of the proposed PTT site, as Denver-based Energy Storage Ventures hopes to begin storing ethane before the end of 2019 at Clarington.

Before ethane gets to a petrochemical plant, drillers must extract it as part of the natural gas stream through fracking. If the gas stream requires processing, some drillers will try to deduct their expenses from the royalty checks they pay to mineral owners in the form of “post-production costs.”

Elizabeth Elmore of Jackson Kelly said a recent West Virginia Supreme Court ruling allows companies to do this to Mountain State mineral owners.

In one case, the expenses — $3,298.37 — were higher than the amount of royalties — $2,672.08 — due to the mineral owner, so the landowner actually owed money to the company. Originally, the high court voted 3-2 in November against allowing companies to take post-production expenses from royalty payments.

However, former Justice Brent Benjamin was one of those who voted in the majority, along with Justices Robin Jean Davis and Margaret Workman. New Justice Beth Walker replaced Benjamin as member of the court on Jan. 1, as she defeated him for election last year. The court then reversed its decision, with Walker joining Justices Allen H. Loughry and Menis Ketchum in the majority opinion.

“Definitely, I think the change in the composition of the court made a difference,” Elmore said Thursday.

However, Jackson Kelly’s Michael Leahey said the debate will continue about what a driller can take out of a royalty check.

“It’s really uncertain, currently, what post-production costs mean,” he said.

Leahey, Elmore and others said the best way to ensure one will not be responsible for these costs is to make sure it is specifically noted in the lease agreement.

“The Ohio Supreme Court has shown no interest in defining post-production costs,” Jackson Kelly’s Clay Keller added.

COMMENTS