The Times West Virginian

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March 15, 2012

Pittsburgh-area site is chosen for major refinery

PITTSBURGH — Shell Oil Co. has chosen a site near Pittsburgh for a major, multi-billion-dollar petrochemical refinery that could provide a huge economic boost to the region.

Dan Carlson, Shell’s General Manager of New Business Development, said Thursday that the company signed a land option agreement with Horsehead Corp. to evaluate a site near Monaca, about 35 miles northwest of Pittsburgh.

Ohio, West Virginia and Pennsylvania had all sought the plant and offered Shell major tax incentives. Monaca is about 15 miles from both the Ohio and West Virginia borders, so workers in all three states are likely to benefit.

Shell has said that it could spend several billion dollars to build the plant, and that the complex would attract a wide range of industry and suppliers to nearby locations. But actual construction is still years away. The company said the next steps are environmental and design studies and further economic analysis, then permits.

One lifelong resident of the Pennsylvania township almost broke down on hearing the news.

“Oh my God. It makes me want to cry. That’s just the best news,” said Christie Floyd-Gabel, Potter Township’s secretary.

It’s also an unexpected turn for Horsehead’s zinc factory, which is located on the banks of the Ohio River. In September the company announced plans to shut the Monaca smelter plant by 2013 and relocate to North Carolina, along with most of its 600 workers.

“That was a major loss,” Floyd-Gabel said of Horsehead’s plans to depart, adding that’s it’s amazing that another major corporation may come in to replace Horsehead.

Ali Alavi, a Horsehead spokesman, said the company would have to vacate the factory site by April 30, 2014, under the terms of the option agreement with Shell.

Shell said the Horsehead site had the mix of resource and transportation attributes “to accommodate facilities for a world scale petrochemical complex and potential future expansions.”

The so-called ethylene cracker plant would convert natural gas liquids into other, more profitable chemicals, which then go into everything from plastics to tires to antifreeze.

Shell would be able to supply the plant partly with gas from its own wells, giving it more control over supply and costs. The company paid $4.7 billion in 2010 for drilling rights to about 650,000 acres in the region.

Shell’s choice may also represent an indication of just how strongly the industry feels about the vast gas reserves in nearby underground shale rock formations, given the multi-billion dollar commitments it has made. Carlson told The Associated Press that any plant must be economically competitive with existing plants in Louisiana and Texas, and even with international plants.

The Marcellus Shale, which lies thousands of feet underground, has attracted a rush of major oil companies, who have drilled almost 5,000 new wells in the last five years. The Marcellus covers large parts of Pennsylvania, New York, Ohio and West Virginia, and drillers have also started to tap the adjacent, deeper Utica Shale formation.

Ohio and West Virginia officials had made all-out efforts to attract the plant. Last year West Virginia Commerce Secretary Keith Burdette said, “We intend to compete with the last breath in our body to attract one or more crackers,” and both West Virginia’s and Ohio’s governor flew to Houston to meet with Shell officials.

West Virginia offered to slash property tax rates for 25 years in exchange of at least $2 billion worth of investment, Pennsylvania offered 15 years of tax breaks, while Ohio also reportedly courted Shell with major incentives.

The American Chemistry Council, in a report last year, estimated the new petrochemical complex could attract up to $16 billion in private investment and create thousands of construction jobs.

Several other companies are also reportedly considering building similar plants in the region.

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