Appalachian States Look Past Coal, Ask Trump to Aid Natural Gas

https://www.bloomberg.com/news/articles/2017-07-25/appalachian-states-look-past-coal-ask-trump-to-aid-natural-gas

By Ari Natter

Bloomberg News

Having lost tens of thousands of coal mining jobs to the rise in natural gas, several states have decided if you can’t beat them, join them.

A bipartisan group of lawmakers hopes to persuade President Donald Trump to spare a loan program he wants to kill and use it to help a $10 billion gas-storage project in the hard-hit Appalachian region of the eastern U.S. where coal had once dominated. Proponents say it would help spur new chemical, refining and other manufacturing industries — and give out-of-work miners a new career path.

“We need a more diverse portfolio,” said Brian Anderson, director of West Virginia University’s Energy Institute, and a member of the project’s coordinating committee. “If you have one industry that dominates your economy and that industry sees a decline then it really runs huge ripples through your entire economy.”

Coal and natural gas compete in the electricity markets and the proliferation of fracking in recent years led to cheaper gas that has displaced coal. Coal had once accounted for more than half of all U.S. electricity generation, but last year natural gas topped coal to become the largest source of power generation. The impact has been felt especially hard in the Appalachian region — which was once largely dependent on coal mining and steel production.

The Appalachian Storage Hub, estimated to cost as much as $10 billion, could encompass underground caverns in Pennsylvania, Ohio or West Virginia, although the final site has yet to be selected. It would have the capacity to hold as much as 100 million barrels of ethane, methane and other products produced in conjunction with natural gas. It would also include a 3,000-mile pipeline network to link up the storage sites with petrochemical plants.

Read More: Shell to Tap Pennsylvania Shale Gas for New Plastics Plant

A report by the American Chemistry Council found the project could create more than 100,000 jobs and nearly $36 billion in capital investment. The project would be similar, though smaller, to the Mont Belvieu natural gas liquids hub just outside Houston that has bolstered that area’s chemical industry.

Supporters of the project say a lack of pipelines and storage infrastructure has depressed the price of gas produced from the Marcellus shale under Pennsylvania, Ohio and West Virginia. Natural gas prices there are only two-thirds that of the main market rate set in Louisiana.

Southwestern Energy Co., a gas exploration company with operations in the Marcellus, is a top proponent of the storage hub.

Bipartisan Group

A group of lawmakers led by Democrat Joe Manchin and Republican Shelley Moore Capito sent Trump a letter last week asking that he set up a blue ribbon commission to back the construction effort.

The two West Virginia senators also introduced legislation that would allow the Appalachian storage hub to qualify for Energy Department loan guarantees. Trump has proposed killing that program, and a spending bill the House of Representatives is debating this week would do just that.

Even without federal help, there are initial signs that investment is coming to the region. A $6 billion ethane cracker plant, which would make ethylene for plastics and other products, is being considered by PTT Global ChemicalAmerica for a site along the Ohio River where a former coal-fired power plant owned by FirstEnergy Corp. once stood. Royal Dutch Shell Plc also has a new chemical complex planned for western Pennsylvania.

Shell’s project follows the first wave of North American plants being built along the Gulf of Mexico coast by companies such as Dow Chemical Co. and Chevron Phillips Chemical Co. The factories all use shale gas to gain a cost advantage over producers in Europe and Asia that rely on oil and coal feedstocks.

“We certainly had our struggles in this region,” said Steven Hedrick, the president of the Mid-Atlantic Technology, Research & Innovation Center in South Charleston, West Virginia. “This would be an opportunity for displaced miners to allow them to use the skills they’ve learned during a lifetime of engagement with coal.”

Ohio Gas Association