Kurt Dettinger, General Counsel to WV Governor

Don Rigby and Kurt Dettinger are working to bring an ethane cracker to West Virginia; and, the County Commissioners in the Northern Panhandle are doing so as well. Caiman Energy with natural gas processing plants in Marshall County plans to send its ethane to Canada.

During the Marcellus Natural Gas Liquids & Shale Gas Infrastructure Summit in Canonsburg, Pa., Dettinger, general counsel for West Virginia acting Gov. Earl Ray Tomblin, and Rigby, executive director of the Wheeling-based Regional Economic Development Partnership, spoke of efforts to attract a $1 billion ethane cracker that would bring hundreds of jobs to the Mountain State.

“It would be up to the individual investor and their needs,” Dettinger said, when asked which site he believed would be more likely to attract a cracker, though declining to name the companies considering the project. “We will just be glad when they choose West Virginia.”  However,  Texas-based El Paso Midstream Group is seeking ethane supplies to send 90,000 barrels of ethane daily to Louisiana via an 1,100-mile pipeline.

During a presentation at the conference, Caiman Vice President Art Cantrell stated, “If built, new ethane crackers are projected at four to five years out,” as a reason to send the ethane north of the border,” to Canada for cracking. Caiman has completed a purchase of 150 acres adjacent to the Ohio River south of Moundsville – the former Olin Chemical site – where Caiman will build a processing plant for its propane, butane and pentane.

State officials and business leaders are getting more optimistic by the day about West Virginia’s chances of landing a multibillion-dollar ethane cracker plant that could create more than 500 full-time jobs. Last week, Bayer CEO Greg Babe told a chemical industry trade publication that his company has received several inquires about the use of its sites in Institute and New Martinsville for a cracker, which would process ethane from Marcellus Shale natural gas in the Appalachian Region. After hearing about Babe’s comments, state Commerce Secretary Keith Burdette predicted that a company’s decision to build a cracker plant would come “sooner rather than later” and possibly by the end of the year.

Bayer CropScience Plant Entrance, Institute, WV AP photo/Jeff Gentner

Bayer Corporation wants to have a convenient supply of product for its New Martinsville,WV and Institute, WV manufacturing plants and Acting Governor Earl Ray Tomblin has created a Marcellus to Manufacturing Task Force charged with the mission of making that happen for Bayer and potentially other chemical corporations.  The Governor has ordered the executives of several gas production companies, as well as other helpful principles such as reps from economic development agencies, labor, and state government to come to the table with Bayer Corporation and the Chemical Alliance Zone primarily for the purpose of expediting the development of an ethane cracker plant.  An ethane cracker plant is the missing link between the natural gas industry and the chemical industry.  It converts ethane, another constituent of natural gas, to ethylene.  Bayer currently purchases an estimated 200 million pounds of ethylene oxide which is shipped from the Gulf region for use as feedstock in manufacturing other chemical compounds.

Before mid-January, when Dominion Resources announced that it has reached an agreement with PPG Industries on an option for Dominion to purchase land at PPG’s Natrium, WV, site,  it seemed unlikely that a ethane cracker plant, estimated cost $1 billion, would materialize in West Virginia.  The land is being purchased by Dominion as a site for a fractionation plant to separate non-methane components, including ethane, butane and propane, from natural gas.  The Natrium site is only about 9 miles north of Bayer’s New Martinsville, W.Va. facility and is close to Dominion’s TL-404 pipeline which that firm plans to convert into a wet gas service line.   Natural gas is referred to as wet gas before the heavier hydrocarbons such as ethane are removed.  The Natrium site also is close to railroad, pipeline and barging services for transport of natural gas liquids.

As independent efforts by Bayer to entice a cracker plant to move in next door appear to have been nonproductive, it would greatly behoove Bayer to negotiate a deal to build a stakeholder partnership between the gas producers, the fractionator (Dominion), and an ethane producer/cracker plant operator.   In addition to the cost savings of cheaper feedstock (transport costs nearly eliminated) as a motivator, the company has recently had to adapt to the loss of production.  In August, 2010, Bayer was forced to agree to phase out production of aldicarb (trade name Temik) after this EPA finding: A new risk assessment conducted by EPA based on recently submitted toxicity data indicates that aldicarb no longer meets our rigorous food safety standards and may pose unacceptable dietary risks, especially to infants and young children. A closely related issue is the storage of methyl isocyanate gas (MIC), an ingredient of aldicarb, at the Institute plant.  Twice as much of the highly toxic compound was stored there as was involved in the grueseome catastrophe in Bhopal, India in 1984.  Half a million people were injured or killed after an explosion released the deadly MIC gas at a Union Carbide plant – the worlds’s worst industrial disaster.   There had been public pressure to eliminate the storage of MIC at Institute prior to an August 2008 explosion at the Institute plant which killed 2 workers and led a congressional investigation to conclude that “it could have been worse than Bhopal.”  This issue has been in recent news and a hearing is scheduled for Feb. 25th.   The point is that Bayer has idle capacity at both of its WV plants; in January it was announced that 220 workers would be laid off at Institute, 44% of their workforce there.  Bayer has motivation to be flexible in negotiations for a cracker plant deal as it seeks ways to return the plant to capacity.  Incidentally, Bayer’s new CEO, Greg Babe, has a personal connection with New Martinsville; it’s his hometown.

A cracker in West Virginia would benefit the gas production companies because then the ethane would not have to be piped elsewhere. Historically, natural gas production has been the magnet for ethane crackers.  Currently pipeline projects are being planned to move Marcellus ethane to the crackers in the Gulf region.

Among the likely candidates which may be courted for cracker plant development are Chevron, Shell, Exxon and Reliance, each of which have a more than $1 billion stake in the Marcellus Shale. Others are BP, Dow Chemical,  Formosa Plastics, LyondellBasell, Koch Industries, and Westlake Chemical.

Will the public be expected to be a partner in this venture?  Will TIF funds be awarded a project that emerges from the Task Force efforts?  Why is there public representation in a corporate businessroom?  Will, in fact, we, the citizens of West Virginia, be expected to participate in a public plan to subsidize private industry in a recovery which would lead to job creation or restoration?   Of course, Bayer may not be the only chemical corporation to benefit.  But it is certainly poised to be the immediate beneficiary of  any successful effort to bring an ethane cracker plant to the Kanawha Valley area.