West Virginia Legislators, industry leaders digesting $83B shale deal

Environmental impact, property rights among concerns

An employee works on a “sand can” truck, which is used to transport sand to Marcellus and Utica shale natural gas fracking sites, at the Transload Solutions site in Benwood. (Photo by Casey Junkins)

An employee works on a “sand can” truck, which is used to transport sand to Marcellus and Utica shale natural gas fracking sites, at the Transload Solutions site in Benwood. (Photo by Casey Junkins)

WHEELING — From how petrochemical plants will impact the environment to whether drillers should get access to minerals even if they cannot obtain a lease for them, the $83.7 billion Chinese shale natural gas development deal gives members of the West Virginia Legislature plenty to consider.

Also, longtime industry leaders said using Mountain State natural gas for electricity generation and ethane cracking will increase demand for the product, which will ultimately create more jobs and revenue.

“We won’t have to hope for a really cold winter anymore,” said Tim Greene, a former West Virginia Office of Oil and Gas inspector who now owns Land and Mineral Management of Appalachia. “Once you get those power plants going, and then even some manufacturing, that is going to drive demand. Drilling is sure to pick up.”

West Virginia Senate Majority Whip Ryan Weld, R-Brooke, said the announcement is a positive that should mean more development for the northern part of the state, while Delegate Erikka Storch, R-Ohio, who also serves as president of the Wheeling Area Chamber of Commerce, agreed.

“They surely wouldn’t be making such a huge investment if they didn’t think they could make money,” Storch said.

“And this is so much bigger than anything we’ve ever seen.”

Indeed, the $83.7 billion figure exceeds the total value of all goods and services produced within West Virginia during a typical year. The state’s annual gross domestic product is estimated at about $75 billion.

Weld said the memorandum of understanding, which West Virginia Secretary of Commerce Woody Thrasher signed with China Energy officials early Thursday, is “a little short of a full contract.” Still, he is optimistic.

“That’s a massive dollar figure. I am hopeful that it comes to fruition,” Weld said.

The Deal

While in the presence of President Donald Trump and China’s President Xi Jinping in Beijing, Thrasher signed the MOU with China Energy, which calls for the company to invest $83.7 billion in West Virginia during a 20-year span. The investment could lead to ethane crackers, storage areas, pipelines, processing plants, electricity plants, and other such facilities.

Thrasher later said some of the first projects that are part of the agreement are natural gas-fired power plants in Brooke and Harrison counties, the two of which should cost about $1.3 billion. According to its website, Brooke County Power would generate enough electricity for up to 700,000 homes.

“I think this will be great for the mineral owners and the drillers because there will be a consistent market for the gas,” Greene said. “Because of the higher demand, you get higher prices — which means you get more drilling.”

“Right now, gas and oil prices are fairly low. They will eventually go back up,” Weld said.

Weld said the key to the deal is that it involves “downstream” projects. In the oil and natural gas industry, this term refers to end-users, such as ethane crackers or power plants. “Upstream” is industry jargon for drilling and fracking, while “midstream” refers to pipelines, processing plants and compressor stations.

“This gives us the opportunity to capitalize on our resources with downstream projects,” Weld said. “For years, we’ve mined coal here and exported it. Now, instead of just sending the raw material out of West Virginia, we can add value to it. This creates more jobs and revenue for our state.”

Environmental Matters

Operational ethane crackers and natural gas-fired power plants likely will pump pollutants such as nitrogen oxides, carbon monoxide, sulfur oxides, volatile organic compounds, ammonia, carbon dioxide equivalents, xylene and benzene into the environment.

Moreover, air pollution could increase due to emissions from drilling, fracking and processing operations, all of which would likely increase with ethane crackers and power plants to fuel. Fracking can also lead to water pollution, while the Upper Ohio Valley has seen pipeline blasts, well fires and other problems associated with the industry during the past several years.

“I would hope that they understand that our rules will have to be followed. They need to realize there will be more hoops to jump through,” Greene said.

R. Dennis Xander, past president of the Independent Oil and Gas Association of West Virginia, has spent 43 years drilling wells in or near the Mountain State.

“The Chinese people, who are used to doing whatever they want, may get frustrated with state and federal regulators,” Xander said of the West Virginia Department of Environmental Protection and U.S. Environmental Protection Agency.

Location and Joint Development

Storch and Weld said most of the drilling, fracking, processing and pipeline development throughout the state has taken place in these counties: Monongalia, Harrison, Doddridge, Marion, Ritchie, Pleasants, Tyler, Wetzel, Marshall, Ohio and Brooke.

“We obviously hope to get as many of these projects in our part of the state as we can,” Storch said. “We know the folks in Charleston are going to try to steer things their way, but it only makes sense for them to be up here because this is where the drilling is.”

In that light, West Virginia Oil and Natural Gas Executive Director Anne Blankenship said she hopes federal and state leaders will create laws to allow Mountain State drillers to thrive.

“West Virginia must support legislation and rules that make development as possible as it is in surrounding states, while avoiding any possibility of hampering natural gas power production, if we are to see the true value of this investment,” she said. For several years, industry leaders tried to pass legislation allowing them to drill on land for which they do not have a lease. The measures have been known as “forced pooling,” “lease integration,” and “joint development.”

Each time, no matter the name or the language of the bills, the legislation failed.

“We are going to try to reach an agreement on joint development,” Weld said. “I understand some don’t like it. But as long as we are treating everyone fairly, we need to get something done to give our drillers a level playing field with those working in Ohio and Pennsylvania.”

Storch said she plans to learn more about the $83.7 billion deal this week during a caucus with fellow legislators. She understands there will be plenty to address moving forward, including issues of taxation and transportation.

“We’re going to have to hit the ground running when we get back into regular session next year,” Storch said. “There will be plenty to consider.”

COMMENTS