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Northern Panhandle Activity Picking Up in Wake of Shell’s Cracker Plans

 

Royal Dutch Shell is building a $6 million cracker in Monaca, Pennsylvania, and nearby businesses are already seeing positive effects

As signs go, Eagle Manufacturing‘s Joe Eddy sees plenty that tell him the Upper Ohio Valley’s economic fortunes are changing.

With one ethane cracker under construction in nearby Monaca, Pennsylvania, and another on the table in nearby Dilles Bottom, Ohio, Eddy says it’s no longer a question of “if” West Virginia’s Northern Panhandle will benefit, but when.

“This opportunity is generational; it’s the best opportunity we’ve had to see growth in the valley for 50 years,” Eddy said. “This type of growth has really never been afforded in the local area. It’s still a big story; it’s the best thing West Virginia has going for it.”

PTT Global, a Thai company, is mulling the feasibility of building a cracker in Dilles Bottom, Ohio, just across the Ohio River from Moundsville. PTT recently exercised its option to purchase a 172-acre parcel in Dilles Bottom, and locals are optimistic the firm will make an announcement by the end of the year.

Preliminary work is already under way outside Monaca, where Royal Dutch Shell is building its $6 million cracker. Slated for completion around 2020, it will use low-cost ethane from gas producers in the Marcellus and Utica shale to produce 1.6 million tons of polyethelene per year. The cracker will create 600 permanent jobs and 6,000 others during the construction phase.

Polyethelene is used in the manufacture of any number of products ranging from food packaging and containers to automotive components. It’s feedstock at Eagle, used in safety cans and cabinets and materials-handling items such as parking stops, barricades, dockplates, post protectors, posts and machine guards.

Eddy said there’s “a significant amount of interest from chemical companies and plastics processors looking for property in the area.”

“The additional supply of ethylene brings in additional chemical manufacturing capacity, and with the supply of polyethelene at both cracker plants we’re going to see expansion at existing processors, like Eagle, as well as new plastics processors moving into the area,” Eddy said. “We actually have been preparing for having a local supply of polyethelene and trying to grow our capacity so we could take advantage of it when the time came.”

Pat Ford, executive director of the Business Development Corp. of the Northern Panhandle, said employment statistics, economic indicators, property inquiries and actual shovel-in-the-ground projects all point to better times ahead. After decades of decline, he said it’s good to see optimism building.

“All you have to do is drive up and down the Ohio River valley right now; there are shovels in the ground from Pittsburgh to Wheeling,” Ford said. “Five years ago, we started seeing it in the form of temporary jobs, temporary construction jobs associated with pipeline, land surveyors, appraisers, deed researchers. We saw all those people moving in and out of our area from all over the country, but they were only here for three to nine months at a time.

“Now, look at what’s happened over the past 24 months — we’re starting to see the temporary jobs tapering down and the permanent jobs growing just as rapidly as we saw construction jobs grow.”

  • The
  • Associated General Contractors
  • organization reports the Weirton-Steubenville metropolitan statistic area ranked third in the nation in construction growth from November 2015 to November 2016: The national report said the area recorded a 16 percent increase in construction jobs — going from 1,900 to 2,200 construction jobs — over that period.

“Compared to other regions of West Virginia, Eastern Ohio and Western Pennsylvania, we probably have the most rapid growth rate in our region, and also the highest increases in construction activity not just in the tri-state area, but throughout the country,” Ford said.

  • The unemployment rate was at 5 percent in Brooke and Hancock counties in May, the lowest it’s been in nearly a decade, and less than half what it was (13 percent) when Shell announced it was considering building a cracker in 2010. Meanwhile, May unemployment was 3.9 percent in Ohio County; 4.7 in Marshall; 5.5 in Wetzel and 5.1 in Tyler. In nearby Monaca, unemployment was 5.8 percent. May unemployment was 5.7 percent in Belmont County, Ohio, where PTT Global’s proposed site is
  • .

“At the nadir of the steel mill (consolidation) in January 1983, the unemployment rate in the 10-county Pittsburgh Metropolitan Area was 17.1 percent,” said Jack Manning, executive director of the Beaver County (Pa.) Chamber of Commerce. “In Beaver County, the unemployment rate was 27.1 percent. That nadir really started the population drain that Beaver County just hadn’t recovered from. If you think about it in those terms, it’s really been quite a while since we had anything even close to a $6 billion investment and the potential for prosperity like this, boosting employment and prosperity for a real regeneration of opportunities and, I think prosperity for our region.”

Though the cracker construction won’t be done for a couple of years, Manning said his community is already seeing new businesses coming in for the construction phase. Others are sizing sites up for downstream opportunities. There’s been a flurry of highways upgrades, including several new interchanges and bridges added to a nearby interstate, to accommodate the anticipated traffic load.

“Most of those folks have bought property or are looking for property and making plans to come in and be downstream,” he said. “There’s been an amazing transformation of the landscape in the area of the plant, now we’re starting to see a lot of other plants come in to help support construction … and there’s a tremendous amount of housing (going in). Three hotels are under construction, there’s apartment complexes, condos and new single family homes being built. All of those are in anticipation of workers coming in.”

Manning said the downstream plastics business “is an $800 billion enterprise in the U.S. alone. And, according to the American Chemistry Council, the U.S. chemical industry (represents) almost 25 percent of our gross domestic product — it’s a significant contributor to the balance of trade because we export significant amounts.”

“That’s why I get upset with naysayers about chemical or plastics plants coming into the area,” Manning added. “Ninety-six percent of all manufactured goods are touched by the chemical industry: If you like your iPhones, if you like your computers, your cars, your food packaging that reduces spoilage … the benefits of the industry are significant, but the impact on the economy is huge. If we can entice them into the Tri-State area and create an Appalachian hub that can compete with the Gulf Coast and Texas, we can have long-term jobs and opportunities and be able to regrow our population and sustain the economy.”

Tyler County, which recently joined the West Virginia Polymer Alliance Zone, is close enough to the Shell cracker to see some spin-off growth. It’s even closer to Dilles Bottom — about 42 miles — where PTT Global has been mulling the feasibility of a cracker.

“We’re enthusiastic about the possibility, not just for midstream, but downstream development,” said Eric Peters, executive director of the Tyler County Development Authority. “We see opportunities for processors of ethylene here, probably small- to medium-size users. We can probably put together about a 100-acre site, we can put together sites for smaller or medium-sized downstream users. We also see opportunities for existing companies to ramp up their polymer production.”

He also sees potential for expansion of existing companies, like Momentive, a specialty chemical company with a plant in Friendly. “Historically, they’ve had polymer units. We see an opportunity for expansion and new investment by them if they choose to use the feedstock that would come out of Dilles Bottom. I can’t speak for them, but I see that as a inducement for them to consider going back in more polymers production.”

Peters said the more inquiries they get, “the better chance (we) have of landing something real.” And that, he said, is just the shot in the arm the regional economy needs.

“If that interest is piqued outside the region, we know they’re going to start coming to us for sites and opportunities here and that gives us the opportunity to refer (them) to our existing companies,” Peters said. “It’s sexy to recruit new companies, but our real bread and butter is retention and expansion of our existing companies, and we want to do all we can to get in on it.”

Wheeling Mayor Glenn Elliott said his city may not be able to cash in on land-intensive industrial projects, but that doesn’t mean they’ll be left behind.

“Wheeling does not possess a surplus of flat, developable properties suitable for the offshoot industries that tend to cluster around crackers (but) we have a surplus of office space in our downtown business district suitable for the corporate activity associated with all this regional commerce,” Elliott said, adding there’s a “very palpable level of excitement in and around Wheeling about the prospect of the Belmont County cracker plant being announced later this year.”

“While it is difficult to project the overall regional economic impact of a cracker plant, there is no doubt that this facility would be a tremendous shot in the arm to our regional economy,” he added, pointing out Wheeling is ideally positioned “to become the corporate headquarters for the cracker-based economy, particularly when you consider the impressive collection of banks, law firms, accounting firms and financial firms in and around our downtown.”

Peters said it’s important to take advantage of new opportunities as they present themselves.

“What could derail it, I think, is any hesitation on our part regionally to welcome this and encourage and attract users of the products coming out of the cracker plants — of course, that means ethylene,” he said. “We saw how, over a 20, 30-year period our polymer business go south to the Gulf Coast because that’s where the feedstock was being produced, the companies rebuilt near the feedstock.

“Now, we’re going to have the feedstock here and we have to do everything we can to show them this is a good investment — the feedstock, probably less expensive feedstock, is going to be produced here, in our backyard.”

Peters said a workforce that isn’t prepared to meet the demands of the new industry also could be problematic, “not only for the cracker but for companies coming in here to use those feedstocks. We have to be ready to populate the workforce, to have a workforce with the technical skills and the ability to be trained on-site.”

And Eddy said a companion project, an Appalachian Storage Hub, is crucial, to provide underground storage for the high-value natural gas liquids and chemicals like ethane, ethylene and propane. Instead of pumping them to the Gulf Coast or shipping them oversees, the proposed hub would capture their value for the states that would most benefit — West Virginia, Ohio, Pennsylvania and Kentucky.

In May, the American Chemistry Council suggested the region could support as many as five crackers. It estimated a storage hub, coupled with pipeline development and the crackers, could spur more than $30 billion in new development, attract as many as 100,000 new jobs and generate nearly $3 billion in new federal, state and local tax revenue in the four-state region.

“Seventy percent of plastics processing capacity in North America is within 400 miles of this area, so it makes great sense, with the feedstock of ethane, to start making polyethylene for the centralized part of plastics processing capacity,” Eddy said. “You don’t want to have a conversation about cracker growth potential without discussing an Appalachaian Storage hub.”

“There’s a total value-added multipler of 20:1 by keeping it here, cracking it locally as opposed to shipping it,” Eddy said, outside the Appalachian Basin.

Ford, meanwhile, points to heightened interest in available properties, as well as recent site announcements in the two northernmost counties: Bidell Gas Compression purchased an idled 100,000-square-foot machine shop on the outskirts of Weirton to manufacture, sell, lease and service natural gas and compression equipment. Bidell will initially employ 60 people, with as many as 300 permanent jobs expected when it reaches full operations. West Virginia beat four other states — Texas, Georgia, North Carolina and New York — to land Pietro Fiorentini‘s first U.S. plant, a $9 million investment that will employ 41 in the early stages and as many as 150 when production ramps up. Fiorentini produces pressure regulators, valves and meter systems for the natural gas industry.

He said they’re also showing properties throughout Brooke and Hancock counties to investors — including the 30,000-square foot shell building funded by the state at the former TS&T pottery site in Chester. He says there’s a “high likelihood” an announcement on the Shell building site will be coming by the end of the year. The building can be expanded to about 70,000 square feet if need be.

“One cry we’ve always heard since 2009 is, ‘What are you doing to create opportunities for our young people?’ Well, we’re finally there, seven years later,” Ford said. “We’re doing it.”

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