Corbett: Shell tax breaks a way to expand manufacturing in state
Gov. Tom Corbett came Downtown to talk to the natural gas industry about sparking a new industrial revolution in the state.
The pipeline builders who spoke after him came to throw cold water on his vision.
The Williams Cos. Inc. may build a pipeline to supply gas to Gulf Coast chemical companies, an executive said. That would be at least the fourth major pipeline project taking ethane and propane gas for use out of state or abroad.
It doesn't make sense to spend billions to build petrochemical and plastics plants that could use it here, starting a new industry nearly from scratch, another pipeline executive said.
“It's just tough to make those numbers work,” said Paul Weissgarber, senior vice president for Ohio River Valley operations at pipeline company Crosstex Energy Services LP. “Our view is we ought to be investing in the infrastructure to take the product to the Gulf Coast, perhaps to some other places east.”
Weissgarber and Corbett joined about 20 speakers in the first day of a two-day conference about pipelines and processing plants for Appalachia's gas-rich Marcellus and Utica shales. The conference organizer, Hart Energy, expected more than 1,600 people to attend at the David L. Lawrence Convention Center, Downtown.
Pennsylvania and the Appalachian region are at a critical juncture for the build-out of their burgeoning oil and gas industry. A coalition of manufacturers and local political, academic and industry leaders are pushing to find new ways to use the glut of shale gas locally. They claim the cheap supply can help grow scores of businesses that could use it as fuel or raw material.
Corbett has been their top cheerleader. He's offered more than $1 billion in tax breaks to the chemical arm of Royal Dutch Shell plc to encourage it to build an ethane processing plant — called a cracker — in Beaver County. He was willing to invest so much because it's those types of plants and the manufacturers they feed that will help ensure the state's gas boom gives a sustained benefit to Pennsylvania instead of a quick flame out, he said.
“If you don't do something with (the gas), it wasn't worth having it in the first place,” Corbett said during his 20-minute speech. “We have a bounty of resources, but we have to build on them. We can't count on gas and oil to take care of us forever. We need to constantly be drilling not just for the minerals but for new ideas.”
Producers and petrochemical companies are trying to figure out whether to build plants here or pipelines out of the region, said Paul Hart, editor of Hart's magazine Midstream Business. The upfront costs of building in Pennsylvania are in the billions, much more expensive than simply building pipelines out of the region, he said.
Pennsylvania would need about 50 to 100 years to build up to compete with the Gulf Coast, where Williams already has a cracker, said Darrell Bull, general manager for Williams' Ohio Valley Midstream in Moon. On the gulf, dozens of plants stand basically right next to each other, allowing companies there to make more manageable investments with a guarantee of nearby customers, Bull said.
“There's not enough demand within 500 or 1,000 miles (of Appalcahia). So we thought, let's find a way to get this to the center of the universe,” Bull said during questions after his presentation. “If we do not have a clear line of site to market, people will lose interest in drilling here.”
A new Williams pipeline would join pipelines from Enterprise Products Partners LP, MarkWest Energy Partners LP and Sunoco Logistics Partners LP, all designed to help take local ethane and propane to the Gulf Coast, Canada or Europe. Even if all four get built, there should be enough local ethane left to feed about 10 plants the size of what Shell has proposed, Bull said. Shell officials have said they spent months gauging the region's ethane supply and think there is probably enough for their cracker.
Corbett's strategy drew about 30 protesters outside of the convention center before his morning speech. They are upset that he's offered of tax breaks at the same time he's made deep budget cuts to education and social programs, according to fliers they passed out. Some protesters shouted while others lay under a red carpet, intended to represent the citizens Corbett is stepping over on his way to meet with corporate leaders.
“It's time to get back ... in action, to tell the governor that we won't stand for his political gambling with our tax dollars,” said a flier from Pittsburgh UNITED, a group led primarily by union leaders and environmental groups. “It's time for him to do what's right and represent the interest of Pennsylvania, not mega oil companies making money hand over fist.”
Timothy Puko is a staff writer for Trib Total Media. He can be reached at 412-320-7991 or email@example.com.