Shell chooses Pennsylvania for possible ethane cracker location

| Thursday, March 15, 2012

Shell Oil Co. has selected a site near Monaca where it could build a multibillion-dollar chemical plant, the Houston-based company said today.

A Shell subsidiary, Shell Chemical LP, signed a land-option agreement with Horsehead Corp. to evaluate the 300-acre site in Potter and Center townships, Beaver County, the company said.

The announcement concludes a months-long, three-state competition for private investment officials believe will create thousands of jobs and attract other major businesses.

"We are very pleased to have signed this site option agreement," said Dan Carlson, general manager of new business development for Shell Chemicals. "This is an important step for the project, and we look forward to working with the communities in Pennsylvania, and gas producers across Appalachia, as we continue our efforts to develop a petrochemical complex."

Shell said it continues to assess the feasibility of building a chemical plant, which would take ethane from natural gas and turn it into the raw materials used to make plastics. The company's CEO said recently that Shell could be years away from making a final decision on whether or not to build the plant.

While neither Shell nor Horsehead officials would discuss the contents of the option agreement, Shell did say that Horsehead would have to vacate the property by April 30, 2014 if Shell chooses to buy the property.

Gov. Tom Corbett, who is holding a press conference Downtown this afternoon, hailed the project.

"For many months, I have been actively engaged and working with Shell officials, as have members of my cabinet, to get Pennsylvania to this point in the process," Corbett said.

"Shell now recognizes what we as Pennsylvanians already knew; Pennsylvania is ideal for this project," he said. "Not only do we sit atop the richest known reserves of natural gas in the world, but we have a world class work force, an expansive transportation network including rail, roads and waterways, excellent education institutions and a thriving quality of life here in the Pittsburgh region."

Marcellus Shale Coalition president Kathryn Klaber called the announcement a "win-win" for the region's work force and economy.

"While located in Pennsylvania, the supply chain and potential economic impact of this project will span the multi-state region while serving as an anchor in the resurgence of the domestic manufacturing sector," Klaber said.

"As a Beaver County native, it's particularly gratifying to see that the economic revitalization of the river communities may be just around the corner," she said.

The race for the ethane cracker plant started last summer. Shell Oil on June 6 announced plans to build in Pennsylvania, Ohio or West Virginia, sparking a competition to court the company.

Shell Oil is the U.S. subsidiary of Netherlands-based Royal Dutch Shell plc, a nearly $500 billion-a-year enterprise based in The Hague, Netherlands. It was ranked No. 5 last year on Forbes magazine's Global 2000 list. It operates on every continent except Antarctica, has 93,000 employees and its brand is on 43,000 petroleum stations around the world.

A $3.2 billion investment to build a plant would lead to more than 10,000 permanent jobs in the chemical industry for the host state, according to the American Chemistry Council, an industry group. Estimates expect Shell's plant to cost as much as $4 billion.

Shell did not say today how much it expects to spend on plant.

"We recognize that today's announcement is just beginning the process of turning a plan into reality," said Tony Amadio, chair of the Beaver County Board of Commissioners.

"We look forward to working together with our federal and state officials and municipal and school district leaders to bring this investment home to Beaver County in the months to come."

Horsehead, based in Crafton, is a zinc manufacturer. Last year the company announced it would build a new metals plant in North Carolina and close its zinc smelter in Potter.

"We are moving our zinc production operations to our new plant, which is under construction in North Carolina and expected to startup during the third quarter of 2013," CEO Jim Hensler said.

"We believe this option provides the best value proposition for Horsehead among the several alternatives we are considering for this site."

Grant Cochran, 48, a mechanical repairman who has worked at the Horsehead zinc plant for 19 years, said workers had been hearing rumors for weeks. He said it would be hard to judge the reaction because workers still don't know exactly what the future holds.

"At least jobs will stay close by," if Shell does build a plant, said Cochran, whose backyard faces the zinc plant.

Politicians from around the region praised the potential plant for the new jobs it would bring to the region.

"This is a victory for the region because for the first time in a very long time, we put our regional differences aside. It's going to change the face of the region," said U.S. Rep. Jason Altmire, D-McCandless.

"This industry • not just this plant, but with natural gas • this is going to be the future employment base for generations. This is going to be like the steel industry used to be," Altmire said.

"This project is a huge jobs boost for Beaver County and Western Pennsylvania," said U.S. Rep. Mark Critz, D-Johnstown. Critz is running against Altmire in the April primary to represent a redrawn district that includes the plant's possible location, which Altmire represents now.

"I have been working for months with Shell and other leaders in the natural gas industry to bring jobs to Western Pennsylvania, and as co-chair of the Marcellus Shale Caucus in Congress, I have been fighting to ensure that Western Pennsylvania reaps the benefits of this great natural resource," Critz said.

"It is clear that this announcement by Shell is just the tip of the iceberg in terms of jobs that can be created here in western Pennsylvania."

Democratic U.S. Sen. Bob Casey said the project will make the state a leader in the natural gas industry.

"Bringing Shell to Beaver County will mean a significant amount of jobs and significant economic growth for all ofSouthwest Pennsylvania," he said in a statement.

Pennsylvania lawmakers approved expanded tax-free zones, good for 15 years, that could be used for the plant. It also streamlined local land-use rules, stripping municipalities of their power over oil and gas site locations in order to give the oil and gas industry the consistent, statewide rules it demanded.

That reform bill, passed in February, also contained almost $12 million state economic officials could use over three years to lure a cracker and convert refineries in Southeastern Pennsylvania. Corbett has also met with Shell officials in Pittsburgh, according to a Shell official.

The Marcellus and Utica shales in Western Pennsylvania and parts of Ohio and West Virginia produce large quantities of ethane and other thicker or liquid gases. They're more valuable than typical methane because they can be turned into plastics. Cracker plants take methane and other natural gas liquids, reduce them with heat, and transform them into the building blocks of plastics.

The site near Monaca is ideally located along the Ohio River and to the west of I-376.• It is also close to the Conway Railyards and about 15 miles from the Pittsburgh International Airport.

Shell said it looked at various factors, including good access to liquids-rich natural gas, water, road and rail transportation infrastructure, power grids, economics, and sufficient acreage to "accommodate facilities for a world scale petrochemical complex and potential future expansions."

Staff writer Bill Vidonic contributed to this report.

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