Underground storage hub for natural gas liquids clears major hurdle

SOUTH CHARLESTON — Appalachia Development Group has cleared a major hurdle in its efforts to secure a $1.9 billion federal loan guarantee, scoring a highly prized invitation to proceed with Part II of the application process for funding for a proposed underground natural-gas-liquids storage hub.

The company was invited to submit its Part II application for the U.S. Department of Energy Title XVII Loan Guarantee Program.

The submission was “the first of several steps in the process to secure a conditional commitment and final loan agreement, the company said.

“I would consider this to be a milestone and a pathway,” said Steve Hedrick, CEO of ADG and president and CEO of Mid-Atlantic Technology, Research & Innovation Center. “A select few efforts make it through Part I of the loan guarantee program and get an invitation to Part II.”

The $1.9 billion loan guarantee would support development of infrastructure for the Appalachia Storage and Trading Hub, which Hedrick said is key to maximizing the value potential of the gas reserves underlying the Mountain State, as well as neighboring Pennsylvania, Ohio and Kentucky.

An underground storage hub would mean high-value natural gas liquids like ethane, propane and butane could be safely stored in a secure site or sites within the four-state region instead of pumping them to the Gulf Coast.

Hedrick said the initial cost would be “north of $3 billion,” just for the first phase.

“(You’re talking) multiple storage locations with significant infrastructure and piping, storing and delivering natural gas liquids from intermediates to manufacturing locations — it’s not a small list,” he said.

Surviving Part I of the application process was no easy feat, Hedrick said. Getting through Part II will be even more so.

“It’s an even deeper dive into it,” Hendrick said.

John Deskins, Bureau of Business and Economic Research at the WVU College of Business & Economics, said the announcement is encouraging because it shows a dedication to move the trade hub forward.

“I think the most significant, biggest question in developing our natural gas resources is: How much of that downstream development lands in West Virginia?” he said. “We’re looking at dozens of industries.”

Deskins said it’s vital to find ways to add value to gas products extracted from West Virginia before it’s shipped elsewhere. While exporting raw material brings some value with it, Deskins said it pales in comparison to that of more refined products.

“It’s absolutely crucial to see value added,” he said. “That could really turn around a lot of vicious cycles we’ve seen such as unemployment and loss of population in this state.”

U.S. Sen. Joe Manchin, D-WV, said he was “very excited” that ADG had made it to Part II, calling the hub a “vital project that will help us capitalize on our state and region’s abundant natural resources, growing infrastructure and innovative spirit.”

Developing the hub would “create jobs and develop our economy by attracting significant manufacturing and related investment to West Virginia and our neighboring states,” Manchin said, adding it would also help secure America’s energy future “by providing a reliable affordable supply of natural gas liquids.”

In November, state Commerce Secretary Woody Thrasher had announced an $83.7 billion memorandum of understanding signed with China Energy to develop West Virginia’s petrochemical industry. Such an industry would be dependent on the byproducts of natural gas production, including ethane. Manchin had told a Senate subcommittee in October “development and construction of a ‘hub’ to store these high value products in underground geologic formations could ultimately lead to a petrochemical manufacturing hub and a revitalization of the area’s manufacturing center.”

U.S. Rep. Evan Jenkins, R-WV, alluded to the China Energy opportunities, saying the hub would help us capitalize on our natural gas resources in West Virginia.

“This is an exciting opportunity for West Virginia, particularly on the heels of the announcement that China plans to invest $83 billion in West Virginia,” Jenkins said.

U.S. Sen. Shelley Moore Capito, R-WV, said the invitation to proceed “is a clear indication of the strength of (ADG’s) application, and it demonstrates the department’s interest in the transformative job creation and economic growth potential of developing an Appalachian market for natural gas liquids.”

U.S. Representative David McKinley, R-WV, also called it exciting news for the entire region,” saying it’s “gratifying” to see the project get DOE’s blessing.

“The storage hub has the potential to create thousands of jobs, attract billions in investment, invigorate Appalachia’s economy, and establish our area as a force in the petrochemical industry,” McKinley said.

West Virginia Gov. Jim Justice was also quick to praise the DOE decision, saying “thousands of potential jobs and numerous downstream businesses could result from development of this project.”


This article was authored by Rusty Marks, Linda Harris and Conor Griffith for WV News. Click here to read it on the publication's website.