Natural Gas Boom Energizing The Chemical Industry

A Shell-owned ethylene cracker plant on Pulau Bukom, Singapore. Several U.S. states are competing for a similar plant the company plans to build in northern Appalachia.

hide captionA Shell-owned ethylene cracker plant on Pulau Bukom, Singapore. Several U.S. states are competing for a similar plant the company plans to build in northern Appalachia.

Courtesy of Shell Chemicals

Just outside of West Virginia's capital city, Charleston, on the banks of the Kanawha River, sits the Institute Industrial Park. Chemical plants have operated here continuously since World War II, when the local factories cranked out synthetic rubber. Today there are industrial pipes, tanks and buildings stretching in just about every direction.

Soon, there could be more.

U.S. chemical companies are the latest beneficiaries of the nation's natural gas drilling boom. Long focused on cheap gas sources elsewhere in the world, companies are now looking to expand here. A surplus of natural gas has pushed down prices, making it more attractive for chemical companies that use lots of gas to reopen shuttered plants and build new ones.

Sleepy rural communities across the country are turning into industrial zones — and that worries people who live nearby. But the boom is good news for manufacturers that need cheap, plentiful supplies of natural gas.

The natural gas drilling boom near Charleston has local business boosters lobbying for a huge new chemical plant, called an ethane cracker, which could bring jobs to the state.

"It will take approximately 2,000 construction workers two years just to build the facility," says Matthew Ballard, president and chief executive officer of the Charleston Area Alliance. "Once up and running, there will be several hundred jobs at that cracking facility."

The plant would "crack" ethane — break it down at the molecular level — and turn it into ethylene. Kevin DiGregorio, executive director of the Chemical Alliance Zone in Charleston, says ethylene is used to produce all sorts of things, from the cushions we sit on to the clothes we wear.

"Everything that's not wood, or maybe brick, is made with chemicals, certainly. But probably 40 to 60 percent of it is made from ethylene," DiGregorio says. "It's very, very important to our daily lives."

States Compete For Plants, Jobs

The Marcellus Shale, from which nearby drillers are pulling natural gas, is particularly ethane-rich. Most natural gas contains anywhere from 2 to 8 percent of ethane, DiGregorio says, but "Marcellus natural gas contains as much as 14 to 16 percent" of ethane.

Bayer CropScience, the company that operates the industrial park near Charleston, is talking with companies interested in building ethane crackers in the region. No official announcement has been made, but business leaders here are keeping their fingers crossed.

The same is true elsewhere around northern Appalachia. Ohio, Pennsylvania and West Virginia are competing to lure a new ethane cracker that the oil company Shell plans to build. Firms in Canada also see opportunity in the Marcellus Shale.

"We wouldn't have to go back very far — literally just seven or eight years — and the picture for the industry here in North America was pretty uncertain," says Randy Woelfel, CEO of NOVA Chemicals in Calgary, Alberta.

He says high oil prices sent a lot of petrochemical manufacturing overseas to the Middle East and Asia. But now, low natural gas prices and the ethane-rich Marcellus Shale have changed everything.

"That means ... that we'll be back in the hiring business, rather than the consolidation and survival/cost-cutting mode that NOVA was clearly in for much of the last decade," Woelfel says.

Environmental Groups Wary

As chemical companies in the U.S. look to expand, they can expect plenty of scrutiny from environmental groups, already concerned about pollution from natural gas drilling.

"Clearly there are advantages to having economic development and manufacturing occur here in the United States," says Mark Brownstein, head of the Energy Program at the Environmental Defense Fund. "Our biggest concern is that we not sacrifice public health and the environment to get those jobs."

Brownstein says for each new plant or expansion, tough questions will be asked about whether proposed facilities are being properly located and how they will affect local air quality.

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