Economic Development

Shell Cracker Plant Seen as Game-Changer for Region

YOUNGSTOWN, Ohio – Royal Dutch Shell’s final investment decision to construct a $4 billion ethane cracker plant near Monaca, Pa., is likely to send economic reverberations throughout the entire region – and officials say they’re prepared for what they believe is coming.

“All of us are on Cloud Nine,” exclaimed Linda Nitch, executive director of the Lawrence County Economic Development Corp. “This changes the whole ball game.”

Lawrence County, just across the Ohio line in western Pennsylvania, borders Beaver County to the north where Shell has begun infrastructure and preparation work for the project in Potter Township. The site is on the Ohio River where Horsehead Industries’ zinc production plant once operated – about 15 miles south of the Lawrence County line and connected directly by Interstate 376.

“We’ve already identified the potential sites along the 18/376 corridor,” Nitch says. “We have a board meeting Wednesday and we’ll be discussing the petrochemicals plant, plastics, and how we’ll target those industries, recognizing that they’ll be looking for locations near there.”

Nitch and other development officials throughout the region have been waiting nearly five years since Shell first announced it intended to build an ethane cracker plant in the Appalachian basin – lured there because of the vast deposits of natural gas liquids in the Utica and Marcellus shale plays. After vetting several sites, the company opted for 365 acres on the river near Monaca.

Over the last year, workers at the site have prepared the land to accommodate the Shell plant, whose fate was unknown until the energy giant announced Tuesday morning that the project would move forward.

Major construction should begin in 18 months, Shell said. Commercial production of the plant should start in the early 2020s.

Shell said the construction phase alone should provide temporary work for more than 6,000 tradesmen, and once up and running, the chemicals plant would employ 600 full time.

Nitch says the long-term benefits to the region should come once the plant is operational. She cited the desire of plastics manufacturers and chemical companies to locate their factories near these large processing operations.

Ethane is a liquid gas found in abundance in eastern Ohio’s Utica shale and western Pennsylvania’s Marcellus shale. This gas is used as feedstock for “cracker” plants – large petrochemical complexes that “crack” ethane molecules and converts them to ethylene, a base ingredient in plastics and other materials.

Manufacturers, for example, use ethylene and polyethylene for their own production and benefit from reduced transportation costs by locating their operations near the source.

The Shell plant is likely to have the same impact other crackers have had elsewhere in the world, Nitch said, and there’s plenty of land in Lawrence County for manufacturers or suppliers to consider.

“The Old Stonecrest Golf Course – all 240 acres — is up for sale,” she noted, which is perfectly situated near the Beaver County line. Other large tracts of land are the Werner farm about five or six miles north of the golf course, which has 150 acres suited for development, and another 500 acres in North Beaver Township off state Route 551 open for development.

“This will spark a whole new line of business and industry,” said Jack Manning, president of the Beaver County Chamber of Commerce. “Plastics production hasn’t been as prominent in Beaver County as steel was, but when you have raw material like this, you’ll have injection molders, plastic pipe manufacturers and others looking at this region.”

Suppliers and manufacturers could slash transportation costs considerably by relocating closer to their source materials, Manning said. “I think we’ll see a few more announcements,” he said, between now and the start of major construction. “Geography trumps anything at this point.”

Shell’s announcement should also affect those existing businesses that have placed on hold any plans for expansion, Manning adds. “Those will happen now,” he said.

This transition should be more evident in three to five years, Manning said. “We’re not only thankful but relieved that it was announced,” he added.

The economic impact is likely to spill over into Ohio and West Virginia, Manning noted. “Between Cleveland and Pittsburgh, there’s going to be more housing, hospitality, and more opportunities in tech-based and science-based businesses and the jobs that come along with that.”

And, the project is likely to draw hundreds of tradesmen from the Mahoning Valley – just 40 miles northwest of the site — to help with the Shell project, said Don Crane, president of the Western Reserve Building & Construction Trades Council.

“It’ll be a huge venue for job creation in the Mahoning Valley,” Crane said. Precisely how many local tradesmen would be employed during the construction phase is unclear now, he noted, but said, “Geography tells us that it would be a larger percentage.”

About 100 local crafts are at the site now, Crane said, where operating engineers have cleared most of the land and some in the electrical trades are busy there.

“All of the trades – with the exception of elevator construction – will be used on this project,” Crane said.

An ethane cracker in Pennsylvania also bodes well for the region’s oil and gas industry, which has struggled over the last 18 months because of low commodity prices.

“Currently, a lot of the ethane produced is being rejected and left in the gas stream,” said Shawn Bennett, executive vice president of the Ohio Oil and Gas Association. “With this outlet, you’re creating a new market.”

Bennett observes that the entire tri-state area should benefit from the Pennsylvania cracker, especially if PTT Chemical decides to move ahead on construction of another cracker plant in Belmont County, Ohio.

“Since it’s right on the Ohio River, both Ohio and Pennsylvania will benefit greatly,” he said. “They’re developing a petrochemical complex in this region with downstream manufacturers that will locate here. These are well-paying, long-term jobs.”

The announcement underscores the confidence major petrochemical companies such as Shell have in the Appalachian basin, Bennett said.

“There was some concern that companies wouldn’t recognize the Appalachian Basin as a place where the petrochemical industry would prosper, and this helps others to move forward,” he said. “This is the announcement we’ve been holding our breath on for over the last five years.”

MORE:
Breaking News: Shell Says It Will Build Cracker PlantHe Smiles Knowing Shell’s Already Spent $500 Million

VIDEO:
May 31, 2016: Cracker Site Looks Like It’s Happening

Pictured: Rendering of the cracker plant rendering Royal Dutch Shell is building in Beaver County, Pa.

Published by The Business Journal, Youngstown, Ohio.