12.10.18

U.S. Department of Energy Reports Touts Need for Appalachian Ethane Storage Hub

CHARLESTON — A new report released by the U.S. Department of Energy cites the potential of West Virginia and other Appalachian states for the location of centralized storage hub for natural gas production. 

The report takes a look at West Virginia, Ohio and Pennsylvania as potential locations for a storage hub for ethane — a byproduct of natural gas. Ethane, when broken down through a process called “cracking,” creates ethylene and is used in the manufacturing of plastics, chemicals, insulation and fertilizer. 

The tri-state region is home to the Marcellus and Utica shale plays, where a combination of hydraulic fracturing and horizontal drilling has created an energy boom. Those shale formations contain a large amount of “wet gas,” or a gas stream that includes natural gas liquids, such as ethane, propane and butane. 

“There is an incredible opportunity to establish an ethane storage and distribution hub in the Appalachian region and build a robust petrochemical industry in Appalachia,” said Rick Perry, secretary of the Department of Energy, when he announced the report at the annual National Petroleum Council Meeting in Washington, D.C. “As our report shows, there is sufficient global need, and enough regional resources, to help the U.S. gain a significant share of the global petrochemical market.” 

According to the energy department, the U.S. is a top producer of oil and natural gas, with gas production expected to grow to 640,000 barrels per day by 2025 — 20 times greater than five years ago. Most of the growth is expected in the Appalachian region. 

“Appalachia’s abundant resources coupled with extensive downstream industrial activity may offer a competitive advantage that could enable it to displace marginal producers and help the U.S. gain global market share in the petrochemical industry,” the report said. 

The Energy Information Administration’s most recent numbers show that natural gas production in West Virginia, Ohio and Pennsylvania jumped from 2 percent in 2008 to 27 percent in 2017. 

“This report affirms what we have been talking about for years,” said U.S. Rep. David McKinley, R-W.Va. “Natural gas production in the region has grown by leaps and bounds over the past decade. The next logical step is to take full advantage of this resource and develop a petrochemical industry in the region.” 

West Virginia features prominently in the report, which shows the growth of gas processing plants and natural gas liquid fractionator plants between 2010 and 2019, with most of the production capacity growing in the Northern Panhandle and North Central West Virginia. The report also makes mention of crackers — facilities that break down ethane into multiple byproducts — including the proposed Odebrecht/Braskem cracker which was slated to be built near Parkersburg. 

Royal Dutch Shell is in the process of building a $6 billion cracker plant at Monaca, Pennsylvania, and other international companies are considering construction of another cracker at Dilles Bottom in Belmont County. PTT Global Chemical and Daelim Industrial Co. have purchased property at the proposed site and are seeking approval for air and water pollution permits, but the companies have not yet announced an official decision on whether they will build the plant. Based in Thailand and South Korea, respectively, PTT and Daelim have said they may invest as much as $10 billion in the project. 

The federal report cites a study conducted by West Virginia University in 2017 looking at geological locations for a possible underground storage hub. These possible locations include the Salina F4 salt caverns along the Ohio River in Hancock, Brooke and Tyler counties; the Upper Devonian Sandstones between Harrison and Lewis counties; and even locations in the Kanawha Valley. 

A similar storage facility is proposed for Monroe County in Ohio. Mountaineer NGL Storage officials announced in 2017 plans to spend $150 million — and potentially as much as $500 million — on an NGL storage facility along the Ohio River near Clarington. By 2019, company Managing Director David Hooker said he hopes to store up to 420 million gallons of ethane, propane and butane in caverns along the river, with the goal of allowing the potential PTT cracker to access the product via pipelines that would only need to stretch about 10 miles. At the time, he said the Mountaineer NGL Storage project could be the first part of the Appalachian storage hub that American Chemistry Council officials said could eventually lead to $36 billion worth of investment and about 100,000 permanent jobs. 

The energy department report compares a potential petrochemical hub to current hubs in Texas along the Gulf coast and in the Permian Basin. It presents a plan to grab more market share globally for petrochemical manufacturing without hindering further expansion in the Texas plays. 

“With the vast majority of America’s petrochemical industry located on the Gulf Coast and vulnerable to disruptions by hurricanes, it is in the national interest to diversify and build a secondary hub in West Virginia, Ohio, Pennsylvania and Kentucky,” said McKinley, who has introduced two pieces of legislation regarding ethane storage hubs. 

The first — the Appalachian Ethane Storage Hub Study Act — directed the energy department to conduct feasibility studies on creating an underground storage hub in Appalachia. Besides Tuesday’s report, energy released two other reports looking at feasibility and demand in 2017 and 2018. The second — the Capitalizing on American Storage Potential Act — would allow storage projects to qualify for loan programs through the energy department. 

Other members of West Virginia’s congressional delegation have been active in introducing legislation to make a storage hub in Appalachia a possibility. U.S. Sen. Joe Manchin, D-W.Va., introduced similar legislation to McKinley’s to make petrochemical companies eligible for loan guarantees as an incentive to build a hub. 

“I am pleased that the Department of Energy’s report recognizes the benefits of the development of an ethane storage hub in Appalachia,” Manchin said. “Given the high concentrations of natural gas in our region, I look forward to working with the Department of Energy to examine the potential national security benefits of a hub that can support all natural gas liquids.” 

In 2017, the Appalachia Development Group — a consortium of multiple energy and natural gas companies — was invited to submit an application for this loan program. 

Another piece of legislation introduced by U.S. Sen. Shelley Moore Capito, R-W.Va., would expedite the permitting process for potential companies considering building a hub. 

"I’ve said time and time again that a regional ethane storage hub would do a lot to benefit West Virginia — like driving economic growth and enabling us to make the most of our natural resources,” Capito said. “We’ve been working to help advance this project for a long time, and this study is another affirmation that it’s one worth pursuing. I’m excited about the benefits this could bring to the Mountain State, and I will continue working with Secretary Perry, the Department of Energy, and others to see this project through.” 

Perry, who McKinley hosted for a visit to West Virginia in 2017 to discuss opportunities for a storage hub in the state, said President Donald Trump is interested in seeing such a facility in the region in the near future. 

“The Trump Administration would also support an Appalachia hub to strengthen our energy and manufacturing security by increasing our geographic production diversity,” Perry said.


By:  Steven Allen Adams
Source: Wheeling Intelligencer