Shell, Horsehead agree to final extension of cracker site agreement
By Timothy Puko
Published: Thursday, Dec. 26, 2013, 10:00 a.m.
Global oil giant Shell will invest more money at the site of a possible multibillion-dollar petrochemical plant in Beaver County as it nears a deadline to decide whether to build — a positive sign in the eyes of some industry experts.
The chemical arm of Royal Dutch Shell PLC agreed to pay for some demolition at the site it is targeting and received more time from the property owner, Horsehead Holding Corp., to decide whether to buy the property, officials said on Thursday.
“That shows a little more seriousness and investment,” said Cyril Tellis, a chemical industry consultant based in Charleston, W.Va. “Having said that, that might be a sunk cost they'd be willing to write off. It is a positive sign, but there's no certainty it could go forward.”
This will be the last time the company seeks an extension, Shell spokeswoman Kimberly Windon said. Company executives will decide by the next deadline, she said, but would not give a date.
Business and civic leaders across the region have high hopes for the project, a plant that would turn plentiful shale gas into chemical products such as plastics. The state offered more than $1 billion in tax incentives based on advice from business leaders and economists that it could be the biggest economic project in a generation, birthing a petrochemical sector for the region's economy.
“This is what a lot of people have been waiting for,” Beaver County Commissioner Joe Spanik said on Thursday, lauding news of Shell's new investment. “Even without making a decision yet, as you can see, Shell's moving forward along with Horsehead to get this operation going.”
Shell, which has employees in Western Pennsylvania working on the effort, has offered few details about its progress during more than two years of deliberations, saying repeatedly that the decision is a years-long process. Shell and Horsehead declined to say what Shell is paying in the deal or how long they have extended the deadline.
Demolition should start in the first quarter of 2014 at peripheral portions of the site, which spans Potter and Center, according to Horsehead. There are several empty office buildings that can come down around the 60-acre core, which has a smelter and other active work sites, spokesman Ali Alavi said.
Razing them would give Shell a head start if it buys the property and clears all 300 acres, he added. None of the office buildings will require environmental cleanup beyond routine asbestos abatement, he said.
“It's better (news) than (Shell) walking away, certainly,” Alavi said.
Shell Chemical LP sought and received two six-month extensions in the past year. The delays caused some to worry about the project, but there have been positive signs.
The company announced in August that it secured supply commitments from CNX Gas Co. LLC, a subsidiary of Cecil-based Consol Energy Inc.; Hilcorp Energy Co.; Noble Energy Inc.; and Seneca Resources Corp. On Dec. 5, executives at the parent company, Royal Dutch Shell, announced they scrapped a project in Louisiana that would have competed with the Beaver County plant.
They decided it was too expensive to build the $12.5 billion Louisiana plant to turn natural gas into liquid fuels, such as diesel.
Shell has two other projects, both for natural gas export terminals, that will compete with the Beaver County project for final approval.
“We are being highly selective,” Windon said after that decision. “It's not certain all of the projects will go ahead or at the same time.”
The Beaver County project would cost several billion dollars, although Shell has never detailed exactly what it might spend. It's called a cracker and would make ethylene from the ethane gas commonly found in local shale formations, including the Marcellus and Utica.
Many companies want to pipe that gas to the Gulf Coast and Canada, but if Shell builds a site here, it can turn ethylene into raw plastic or other petrochemical products that it can sell nearby in the densely populated Northeast.
State officials have estimated that could make 6,000 to 8,000 permanent jobs, largely by forming a draw for other plastics manufacturers to build in the region.
Pennsylvania offered Shell a tax-free zone to work in and credits for buying and selling materials in the state.
“Today's announcement is another positive indication for Shell's proposed plant in Beaver County, and I am committed to working in a bipartisan way to keep this multibillion-dollar project moving forward,” Gov. Tom Corbett said in a statement about the agreement. “Today, we are competing with the Gulf Coast, a long established energy hub, for major energy capital projects.”
Horsehead is leaving for a smelter it is building in North Carolina. While it is closing the bulk of its operations in Beaver County, it could keep some open if Shell decides not to buy, company executives said in August. Horsehead could make zinc powder at the site, refire idle ovens to make zinc oxide or produce iron materials for local steelmakers, officials said.
The company notified workers in a formal letter that operations would cease in Beaver on Dec. 31, but that would be just the start of a gradual closing process, Alavi said on Thursday. He didn't have figures available, but said most of the 540 workers at the smelter in November probably are still there today.
Executives warned workers that they will not be able to transfer to the new plant in North Carolina.
Timothy Puko is a staff writer for Trib Total Media. He can be reached at 412-320-7991 or firstname.lastname@example.org.
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