Appalachian Storage Hub is W.Va.'s Chance to Lead

The proposed $10 billion Appalachian Storage Hub is a game-changer for West Virginia. It is a multi-state, infrastructure investment that will all but assure the natural gas liquids from the Marcellus, Utica and Rogersville shale formations will be utilized within the region, causing a resurgence of the petrochemical industry.

Without this investment much of the value of the ethane-, propane- and butane-rich gas will be lost as the gas is sent to the Gulf Coast and Canada, or shipped across the Atlantic Ocean. While $10 billion sounds like an unattainable financial hurdle, when one considers there have been upwards of $35 billion committed to natural gas-related investment in the region to date, the cost is put into perspective. Hundreds of billions of dollars have been and continue to be invested in the Gulf Coast. That region has become the epicenter of the petrochemical industry in the United States. The opportunity presented to West Virginia, Pennsylvania, Ohio and Kentucky is to create a second concentration of high-value petrochemical manufacturing facilities that can provide the raw materials that are the building blocks for manufactured goods throughout the Northeast.

The Appalachian Storage Hub is envisioned as a series of four or five storage facilities as might be found in underground salt domes and connecting pipelines that serve multiple partners who share in the costs of development and operations. The Hub would connect the proposed ethane cracker being developed by Shell Chemical Appalachia LLC in Monaca, Pennsylvania, run down the Ohio to Marathon Petroleum Corp.’s Catlettsburg facility and over to the chemical plants in the Kanawha Valley. The storage hub would help encourage other ethane crackers being considered in Dilles Bottom, Ohio, and in Wood and Kanawha counties in West Virginia. Over time, there could be four or five crackers of varying sizes constructed in the region. Tie these major facilities into multiple manufacturing facilities and the critical mass needed for a petrochemical industry renaissance comes into play.

The second major component is a series of pipelines transporting methane, ethane, ethylene, propane, propylene and chlorine between the plants and the table is set for a major expansion in manufacturing. The Appalachian Storage Hub helps assure the crackers have the supply of ethane available in case of unforeseen circumstances and the same would be true for the manufacturing plants. A guaranteed supply of raw materials and feed stock is vital for a resilient supply chain and this is what the storage hub is all about. This is not a new concept. The Mont Belvieu public private storage hub on the Gulf Coast is a huge facility. Globally, storage hubs are found in Al Jubali, Saudi Arabia and Rotterdam, Netherlands.

This is West Virginia’s chance to join the big leagues. As with most things, time is important; this is West Virginia’s time to take a leadership role. Joined together, the six-pack of pipelines moving the raw materials among facilities will total approximately 3,000 miles of pipelines. Add to it the development of several large underground storage caverns capable of holding upwards of 100 million barrels of product, and one can see the size and scale of the infrastructure investment. One can also sense the opportunity. This is a regional opportunity and one in which West Virginia has strong multi-state support. Not only are Pennsylvania and Ohio powerhouses in shale gas development, but the governors of West Virginia and Kentucky also are extremely successful business executives with strong ties to the White House.

Industry is keenly aware of the opportunities. With the Gulf Coast always on the alert for hurricanes, any one of which could take out or seriously damage a significant part of the concentrated petrochemical infrastructure, the time is right to strategically diversify the natural gas and petrochemical infrastructure. But most important for West Virginia is the opportunity to take a giant step toward economic diversification and to capture the full value of its shale gas resources. This opportunity needs to be acted upon, for it is one of the primary paths to West Virginia’s prosperity for years to come. Indeed, it is truly a game-changer.

Brooks McCabe has been active in commercial real estate for 35 years. He is a former state senator and current West Virginia Public Service Commissioner. He also is a special project consultant to The State Journal on business and economic development issues. His comments herein are his alone.

This article was authored by Brooks McCabe and appeared in the State Journal. Click here to read it on the publication's website.