Questioning Financial Viability of Proposed Plant
New developments have surfaced that have major implications regarding the PTT Global Chemical/Daelim Chemical ethane cracker plant proposed for Belmont County. An eye-opening new report released by the Institute for Energy Economics and Financial Analysis (IEEFA) indicates that the petrochemical buildout in the Ohio River Valley region is not as profitable and riskier to shareholders than initially thought because of various major economic forces (see footnote 1). Now is the time to focus on bringing our communities economic prosperity, and we must be careful not to invest blindly into a dying industry who will leave us worse than when we started.
The staggering report comes just after Ohio Valley residents have learned that the companies have again delayed the financial investment decision for the Belmont County cracker, this time to the end of 2020 or beginning of 2021 (footnote 2). The report focuses on the Shell Chemical cracker plant being constructed just 70 miles upstream in Monaca, Pennsylvania and has major implications for the PTT cracker and the larger petrochemical buildout of Appalachia. Financial analysts report that profitability of the project is weakened and riskier for investors due to not just the COVID-19 pandemic, but multiple factors that existed before the pandemic:
The price of plastics in 2012-2016 was in the $1 per pound range. Today, plastics prices are in the 40 to 60 cents per pound range. This decline poses risks to investment in the Appalachian buildout.
The global buildout of ethane/ethylene crackers and plastics manufacturing has created an oversupply and contributed to lower prices. Industry analysts suggest that the oversupplied market will take several years to adjust, if at all.
There will be ongoing stiff competition in the plastics manufacturing industry.
Even before the coronavirus pandemic, the U.S. and the global economy were expected to grow at a slower rate than would be needed to absorb excess supply in a timely manner. Pre-pandemic, IHS Markit and ICIS, two leading analysts, suggested that the companies involved with capacity expansions would have to cancel projects or reduce profits.
A similar report by IEEFA released in March outlined the financial risks and shaky outlook for the PTTG cracker plant specifically (footnote 3). This report, along with the recent report on Shell should be examined closely and seriously considered by Ohio public officials as well as Ohio Valley leaders, developers, and residents.
“I want to live in a community where the air is clean, and the river is not polluted. If the ethane cracker plant is built, then many people, including myself will not be able to enjoy our beautiful community and the air we breathe and the water we drink,” says Hampton Fuller, a resident of Shadyside, Shadyside is just five miles downwind of the proposed cracker site.
“The financial experts have spoken, and Ohio’s leaders and Ohio Valley residents should listen- petrochemical expansion and plastics manufacturing will never provide the kind of jobs that steel or coal did. Regional leaders must support projects that will commit to the Ohio Valley from day one and not keep delaying their decision to proceed while accepting tax breaks and funding that could more wisely be used for other committed endeavors,” says Susan Brown, also a resident of Shadyside and former resident of Dilles Bottom.
No more tax incentives and no more JobsOhio public funds should be given to this project, which many indicators show might not even happen. Local residents, scientists, and stakeholders are instead insisting that our time, energy, resources and efforts should be channeled in a direction that will lead to guaranteed, long-term, sustainable projects that will benefit all Ohio Valley residents for generations to come.
Since so much money has been spent on land that may not ever be used, now is the time to look for new solutions that can be built on that land and other areas of the Ohio Valley that will provide long term solutions such as what was highlighted at the “Better Vision for the Valley” conference held by Concerned Ohio River Residents in 2019 (footnote 4).
Reed, of Bridgeport, represents the Concerned Ohio River Residents organization.