NEW MARTINSVILLE - Even in the face of gas industry leaders who are planning to pump their ethane to Canada or the Gulf Coast, Bayer Corp. officials believe a multi-billion dollar cracker will still come to West Virginia.
"We have been in discussions with several companies, including (Royal Dutch) Shell," said Bayer spokesman Bryan Iams, declining to name the other companies with which Bayer is negotiating. "But this type of investment is very large, and cannot be taken lightly."
Despite Caiman Energy's plan to pump ethane from it's natural gas processing plant near Cameron to Sarnia, Ontario, Canada for use by the Nova Chemicals company - and plans for Texas-based El Paso Midstream Group to send 90,000 barrels of local ethane daily to Louisiana via an 1,100-mile pipeline - Bayer and Mountain State leaders remain committed to enticing a company to build a cracker.
The ethane is produced when processing plants strip the natural gas liquids found in "wet" gas away from the methane natural gas. This ethane can then be "cracked" to form ethylene, the basis of plastic. Other liquids found in the wet gas include propane, butane and pentane.
The scale of the multibillion-dollar project is unlike anything seen for decades in the Northeast, said David Hounshell, a professor of technology and social change at Carnegie Mellon University.
"I think it's a radical shift," Hounshell said. "The region has really focused, since the 1980s, on looking more towards a service economy."
Shell spokeswoman Kelly op de Weegh said the company plans to decide soon where it will build a cracker plant, which Shell announced it would build somewhere in Appalachia earlier this year.
"For this project, we are concentrating on three states - Pennsylvania, West Virginia and Ohio - and we expect to have a decision on a location by the end of this year," op de Weegh said.
The council, in a recent report, estimated the new petrochemical complex could attract up to $16 billion in private investment and create more than 17,000 jobs and billions in tax revenue. Shell's investment alone could be "several billion," op de Weegh said.
During a recent conference in Canonsburg, Pa., Kurt Dettinger, general counsel to West Virginia acting Gov. Earl Ray Tomblin, told gas industry leaders that state officials are working with Bayer leaders to bring the ethane cracker to the Mountain State. However, some industry leaders said they would rather just, "dump it in a pipeline," as opposed to waiting for a local cracking facility.
A plot of land next to the Bayer plant in New Martinsville is one option for building the cracker, which would be expected to bring hundreds of chemical jobs paying in the range of $60,000 per year. Bayer also owns a site in Institute, W.Va., near Charleston, at which the company believes an ethane cracker would also work well.
"We remain committed to keeping this ethane local. The right option is to keep it here for cracking," said Iams.
Corky DeMarco, executive director of the West Virginia Oil and Natural Gas Association, said, "I think we have the potential here to get at least two (ethane) crackers. I really thought you all would get the first cracker."
Greg Babe, chief executive officer of Bayer Corp., recently told the chemical industry trade publication ICIS that his company has engaged in "ongoing discussions" since December to attract a cracker to one of the West Virginia sites.
"We still have multiple players interested in the idea and our sites," Babe told ICIS."As we develop more of the Marcellus shale and more natural gas liquids become available, it could become a problem if there is not a good outlet for it. Clearly the timing of any of the developments for downstream usage is watched very closely."
Over the past couple of months, county commissioners and other local officials throughout the Northern Panhandle have supported building an ethane cracker in their area because of the jobs it would create, the revenue it would create, and because the New Martinsville location seems centrally located within the Marcellus and Utica Shale regions.
"The transportation assets offered at the New Martinsville site are measurable," said Iams. "But it will come down to whatever the individual company needs in considering to build their cracker.
Dettinger said Mountain State officials hope to have the cracker open by the end of 2015.
West Virginia Commerce Secretary Keith Burdette said the negotiations are picking up speed.
"We intend to compete with the last breath in our body to attract one or more crackers," Burdette said. He acknowledged the states are "very aggressively competing" but said the most important thing is that the cracker or crackers get sited in this region.
Burdette, while reluctant to compare and contrast West Virginia and Pennsylvania, said the Mountain State is "a very reliable partner" with a stable, business-friendly environment that is attractive to many industries.
"Our budgets are balanced. There's not any fear of unknown tax increase or tax changes that might impact this," he said, making a veiled reference to Pennsylvania. "We're actually reducing taxes - not increasing them."
Shell, which paid $4.7 billion last year for gas rights to about 650,000 acres in the Marcellus region, says it's considering building several specialized types of refineries at a complex. If it builds a cracker, the company would thus be able to supply the plant partly with gas from its own wells, giving it more control over supply and costs.
Most crackers in the U.S. are located in Texas and Louisiana. Experts said it's striking that Shell and other companies are considering building new plants, instead of just expanding existing ones.
"This is very different than building a cracker on the Gulf Coast," said Geoffrey Styles, an energy consultant and former senior planner for Texaco. "If you're building a cracker in the Appalachians you have to be absolutely certain that the supply is there. It's a heck of an endorsement of the Marcellus resource."
Petrochemical plants are not without risks. A 1988 explosion at a Shell cracker in Norco, La. killed seven people, injured dozens, and forced 2,800 residents to evacuate. The blast was so powerful it broke windows and set off burglar alarms 20 miles away.