Pennsylvania wins contest for major Shell investment

Not to rain on Chesapeake En- ergy Corp.’s parade in eastern Ohio, but Shell Chemical’s decision to locate a multi-billion-dollar ethane cracker plant in Pennsylvania is a blow to the Buckeye State, which was one of three finalists in the sweepstakes. The other loser was West Virginia.

C. Alan Walker, secretary of the Pennsylvania Department of Development, has said that the ethane cracker plant and related industries could eventually rival Andrew Carnegie’s investment in the steel industry. It has been estimated Shell Chemicals’ petrochemical project could ultimately mean a $5 billion windfall.

That’s why all three states went all out. Pennsylvania has reason to gloat. Ohio and West Virginia certainly would have done so had they been successful.

The announcement that an 80-year-old zinc plant near Monaca would be the site of Houston-based Shell’s facility came on the heels of Oklahoma-based Chesapeake saying it and two partners, M3 Midstream Development LLC and EV Energy Partners, L.P., will invest $900 million in a natural-gas processing plant in eastern Ohio. The project includes a gas-separating facility near Hanoverton in Columbiana County and a centralized complex in Harrison County.

Hundreds of Ohioans are to be hired during the five years the project is rolled out. Significant engineering has begun for the project and some operations are scheduled to begin in the second quarter of 2013.

By any measure, the investment by Chesapeake and its partners is significant. In this region, it matches the $700 million-plus being invested by the French company Vallourec, parent of V&M Star of Youngstown, in two plants in Youngstown/ Girard. One will produce steel pipe for the gas drilling industry; the other will be a pipe finishing facility.

The Chesapeake investment also compares favorably with the huge financial commitment by General Motors Corp. to its Lordstown car manufacturing facility. First, it invested $1 billion in its assembly plant and new paint shop for production of the highly successful Chevrolet Cobalt, and more recently $350 million for the production of the top-selling compact car in America, the Chevrolet Cruze.

Had Shell Chemical selected eastern Ohio for its $2 billion-plus ethane cracker plant, this part of the state could have had national bragging rights in the highly competitive economic development arena.

Thousands of jobs

The American Chemistry Council estimated that an Ohio plant would have generated 17,000 jobs in various industries, including those that use chemistry, as well as $1 billion in wages and $169 million in tax revenue from the project.

Ohio Gov. John Kasich told the Pittsburgh Post-Gazette that the locations the state had put forward required too much pipeline construction for the plant.

“We pitched hard and are disappointed, of course, but always understood that Shell leaned toward building where they owned the gas and liquids,” Kasich told the Post-Gazette.

But there’s still a chance of Ohio luring Shell, which is why the state’s economic development officials should figure out how to meet the company’s requirements.

John Stekla, director of ethylene studies at the IHS Chemical analysis firm in Houston, Texas, told the Pittsburgh newspaper that he would not be surprised if a second cracker facility is announced.

Earlier in the year, the Associated Press quoted a Shell official as saying the company is also considering building several specialized plants at a site related to the cracker facility to produce chemicals such as polyethylene, used in plastic bags, and ethylene glycol, used in antifreeze.