Kanawha officials pin hopes on second cracker

CHARLESTON, W.Va. -- West Virginia officials today were trying to make the best of an announcement that Shell chemical had picked a site in Pennsylvania for construction of a multi-billion-dollar natural gas "cracker" plant.

Shell said it had signed a land option agreement to evaluate a site near Monaca, Pa., about 20 miles northeast of Weirton, for the project.

Gov. Earl Ray Tomblin and other state officials have been pitching West Virginia to Shell, lobbying the company and passing a $300 million tax break, hoping to lure the facility to one of several sites in the state's Northern Panhandle.

Ohio and Pennsylvania have also been trying to land the project, which would take advantage of the boom in natural gas drilling in the Marcellus Shale, and turn drilling byproducts into valuable chemicals, creating potentially thousands of jobs.

"Naturally, we are disappointed by this decision," Tomblin said after Shell's announcement. "We worked extremely hard to develop a competitive proposal. Ultimately, the decision was related to site-specific factors beyond our control."

During a press conference, Tomblin said that Shell's decision came down to West Virginia being unable to provide a site that met its needs for 500 acres of vacant flat land.

Shell's preferred West Virginia site, believed to be in the Northern Panhandle, featured 250 acres of flat land, but the adjacent acreage needed to expand to 500 acres is, according to Commerce Secretary Keith Burdette, "very much occupied."

Citing two unnamed sources with direct knowledge of the negotiations with Shell, The Associated Press reported that the company chose Pennsylvania because its preferred West Virginia location encroached on Mountaineer Casino, Racetrack and Resort south of Chester.

Tomblin and Burdette said that economic impacts of the Shell plant in Pennsylvania would spill over into West Virginia.

"Under any circumstances, it's going to be a good thing," Burdette said before Shell's announcement. "Some of us are going to be applauding, and some of us are not."

Burdette said that all of the sites being examined by Shell were within 50 miles of each other, with some sites being just across the river from West Virginia and none of them more than 10 miles from the state border.

Any of the sites would provide jobs and economic benefits for West Virginia, Burdette said.

"I know there's an awful lot of pride in trying to be the one who gets the deal, but it really does have a huge regional impact," Burdette said.

Burdette also said West Virginia is not "one and done," noting the state is also working with other companies and potential cracker projects.

In a press release, Shell said it had signed a land option agreement to "evaluate" the Pennsylvania site, located in Potter and Center Townships in Beaver County.

"This positive development marks another phase as Shell continues to assess the commercial feasibility of a petrochemical complex in the Appalachian region," Shell said. "The next steps for this project include additional environmental analysis of the preferred Pennsylvania site, further engineering design studies, assessment of the local ethane supply, and continued evaluation of the economic viability of the project."

The preferred site announcement comes just a few days after Shell CEO Peter Voser said at an industry conference that his company was "quite a few years away from a potential final investment decision" on building a cracker plant.

The cracker would process ethane from Marcellus natural gas to produce ethylene, one of the primary building blocks for petrochemicals, and important raw materials for countless everyday items.

In June 2011, Shell announced it was looking for a site to build a cracker plant somewhere in Appalachia, setting off a bidding war between West Virginia, Ohio and Pennsylvania for the facility.

Pennsylvania approved legislation that would give the project a 15-year tax abatement, while Ohio reportedly offered Shell incentives totaling $1.43 billion. Earlier this year, West Virginia lawmakers rushed approval of a 25-year property tax break - worth an estimated $300 million - so that Tomblin could tout the legislation during a visit to Houston to lobby the company.

In its announcement, Shell said company officials looked at "various factors" to select their preferred site, including "good access to liquids-rich natural gas resources, water, road and rail transportation infrastructure, power grids, economics, and sufficient acreage" for the facility and potential future expansions.

Burdette said West Virginia officials believe the Shell project would cost between $2 and $3 billion and employ 500 to 1,000 people, depending on the exact size and configuration. Industry studies have projected construction of a new cracker in West Virginia would produce a series of "downstream" facilities, creating 2,500 direct jobs, 6,300 indirect positions, and 3,500 other "induced jobs" generated by the overall increase in economic activity surrounding the plant.

Another company, South Charleston-based Aither Chemicals LLC has announced it is looking for a site to build a smaller cracker that would use different technology than Shell. Aither says its plant would cost $750 million and produce 200 permanent direct jobs.

A third company, believed to be Brazil-based Braskem, has also said it is studying plans for a new U.S. cracker facility. Other firms have also mentioned such proposals, but appear to be targeting the Gulf Coast rather than Appalachia.

And former state Supreme Court justice Richard Neely has said that he's working on plans for a cracker plant to be build near Montgomery.

Staff writer Phil Kabler contributed to this report. Reach Ken Ward Jr. at kw...@wvgazette.com or 304-348-1702.