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Shell plant hot topic at energy conference

PITTSBURGH — Shell Oil Co.’s proposed cracker plant in Beaver County — and the wet gas it would utilize — was a hot topic of discussion Monday at the Pennsylvania Energy and Manufacturing Summit.

Energy executives, elected officials and labor groups turned out for the second annual conference, sounding off on everything from the proposed cracker plant to job creation to an unlikely link between the natural gas and steel industries.

“Wet gas is like pepperoni pizza to the energy industry,” said Peter Molinaro, vice president and senior adviser of government affairs at Dow Chemical Co. “It really whets our appetite.”

Shell’s proposed, so-called cracker plant would convert natural gas liquids — or wet gas, the type found in the Marcellus shale — into more profitable chemicals such as ethylene, used to make plastics and other products.

While Shell was recently granted its second six-month extension regarding the Potter Township site, currently the home of Horsehead Corp.’s zinc smelting plant, a Keystone Opportunity Expansion Zone for the site was just approved in recent weeks.

The KOEZ, granted to any company that makes a capital investment of at least $1 billion and creates 400 permanent full-time jobs, would exempt Shell from property taxes, while net profits, earned income, business privilege and mercantile taxes would be abated. The KOEZ also has been extended to a duration of 22 years. A PILOT agreement also was approved for Shell, which means that in lieu of taxes, Shell would pay 110 percent of what Horsehead would owe to the taxing bodies in real estate taxes.

But an abundance of wet gas in the region doesn’t necessarily lock in the proposed so-called cracker plant, officials said at the conference.

“In my personal opinion, there’s so much petrochemical infrastructure in the Gulf Coast, it will be a challenge to bring one to this area,” Molinaro said. “It’s possible, but I just think for a lot of us, we put an awful lot of investment in the Gulf.”

It will be tough to pull out of that investment, he said.

“When the economy went down, when gas hit $14, we shipped the gas to other places,” he said. “Now we’re just getting back to utilizing those assets (in the Gulf). There is a scenario which we think is on the plus side for the cracker in this area — you know you have to ship these products long distances … and some of these products are risky to ship.”

But if there was a local plant they could ship to, he said, “we might do a swap. That could be a point in favor of a cracker plant in this region.”

Others touted the country’s ethane production as a whole.

“If you would have (told) me five years ago if the United States was competitive on the global basis when it comes to the production of ethane, I probably wouldn’t have agreed with that statement,” said Robert Powelson, chairman of the Public Utility Commission. “But that is really what is driving this market, that we have a competitive advantage as a country.”

OLD MEETS NEW

The unlikely link between old and new industries in the state — natural gas and steel — also was explored.

“Steel production is very energy-intensive,” said Brett Smith, senior director of government relations for the American Iron and Steel Institute. “The recent increased affordability and reliability of natural gas has increased our competitiveness.”

Last year, the steel and iron industry consumed 304 billion cubic feet of natural gas, Smith said. He also said that natural gas exploration, production and transmission all create a need for steel.

“Steel pipe and tubes are critical to all of those,” he said.

And Jason Norris, vice president of commercial tubular products in Dura-Bond Industries, knows about this link firsthand.

“We use natural gas in our process, we have to heat the pipe up prior to application, (and) it was a no-brainer to use a natural gas-fired oven,” Norris said of the company’s new, 55,000-square-foot mill in Duquesne.

“It’s been a two-sided equation,” he said. According to Norris, higher gas prices make it cheaper to produce the product — various types of piping used to transport natural gas from wellheads to transmission lines — but lower natural gas prices mean there’s more demand for pipelines.

Regardless, he has nothing but good things to say about the shale boom.

“Shale gas has definitely impacted our business (in a positive way,)” Norris said, of his family-owned business started in 1960, which now has four locations in the state.

REGULATION IS KEY

Regulating the industry was another point of discussion, especially in light of the U.S. Environmental Protection Agency’s proposed emission limits for coal-fired power plants.

“We have to get these policies right to keep supply and demand in check,” Molinaro said. Molinaro also said he thinks policy, not demand, will be the industry’s challenge.

Others shared that sentiment.

“The current (regulations) have been on the books since the Clean Air Act of 1990,” Powelson said. “What it’s doing to Pennsylvania is we’re losing a lot of our coal-power generation.”

The steel industry had something to say about regulations and public policy as well.

“Wonderful opportunities don’t happen by themselves, and they don’t happen in a vacuum,” said Ike Gittlen, PA Steel Alliance Labor co-chair and USW International representative. “Shale gas and the change in the industry really does present a very startling opportunity, both economically and in a lot of other ways. The question is, will that potential will be realized by good public policy?” ___

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