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Pittsburgh Tribune-Review: “Pennsylvania, Two Neighbors Vie to Procure Cracker”

“There’s a whirlwind of competition swirling among Pennsylvania, Ohio and West Virginia for the chance to start a new generation of industry and manufacturing,” Timothy Puko wrote in the Pittsburgh Tribune-Review on Sunday, referring to an opportunity to build a $3.2 billion petrochemical plant in one of the three states.

The Shell “cracker” plant, used to convert ethane from shale gas into a primary building block for plastic products, would create thousands of jobs in the selected state and generate hundreds of millions of dollars in workers wages and state tax revenues.

Jack Pounds, president of the Ohio Chemistry Technology Council, said the average chemical industry salary in Ohio already pays $60,000. It’s the kind of high paying salary every state wants to offer. In Pennsylvania, jobs created by the cracker would pay $70,000 on average, and in West Virginia, a cracker would create 12,271 good jobs, according to ACC estimates.

We think each state is deserving of this huge investment and the benefits that would come with it. If you are a resident of Pennsylvania, Ohio or West Virginia, tell us your story. How do you think a new cracker would impact your state?

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Pennsylvania, Two Neighbors Vie to Procure ‘Cracker’

Pittsburgh Tribune-Review

There’s a whirlwind of competition swirling among Pennsylvania, Ohio and West Virginia for the chance to start a new generation of industry and manufacturing.

Governors jetting off to Houston. State legislation on the fast track. Big tax breaks to be offered for 15 years in one state and 25 years in another.

“I’d say it was pretty fever pitch,” said Brenda Nichols Harper, vice president and general counsel of the West Virginia Chamber of Commerce.

It’s all for something called a “cracker.”

Royal Dutch Shell plc is just weeks from announcing which of the three states it will choose for its petrochemical plant, a cracker that will take ethane from shale gas and turn it into a primary building block for plastic products. The project could cost from $1 billion to $4 billion to build and offer hundreds of workers average annual salaries of $60,000 or more.

But that’s not the prime reason the governors are courting Shell officials in private, and lawmakers are approving and considering multimillion-dollar tax breaks for some businesses.

Budget-squeezed government leaders in all three states are drawn by the chance to revitalize their chemical industries, having taken hits from years of industrial decline and the recent recession. They’re banking that tax breaks for Shell would help bring growth, investment, thousands of jobs and perhaps millions of tax dollars.

“What (the ethane cracker) attracts is what’s really interesting to all three states,” said Terry Fleming, executive director of the Ohio Petroleum Council. The plants’ “customers are the chemical industry, who use those products to make just about everything we use in life. And it makes sense that (other manufacturers) will move near the cracker plant to save on shipping costs and all of that.”

A glut of ethane

A glut of ethane from the Marcellus and other shale formations is creating the investment opportunities. The country has hundreds of these plants, mostly clustered along the Gulf Coast, said Glenn Giacobbe, a Houston-based analyst who studied the investments for IHS, an energy research and consulting firm. With bountiful supplies nearby, crackers and plastics makers can locate near the biggest sales markets in the Northeast and Midwest and stay competitive via lower shipping costs, experts said.

Two startups announced plans similar to Shell’s, and officials in West Virginia and Pennsylvania think the region eventually could be home to several plants. Companies that make glass, sandwich bags, car parts or anything made of plastic would benefit, experts said.

Beaver County is one of the few places in Western Pennsylvania that has the requisite available industrial space, with river and freight rail access that Shell demands, state and local officials have said. The state spent $2.5 million to help build a dock at the former LTV Steel site, owned by Bet-Tech International Inc., a Charles J. Betters company. Betters said he signed several confidentiality agreements about future projects for the site, declining comment.

The entire Beaver County Corporation for Economic Development is under one such agreement, said vice president Bob Rice. Beaver County’s commissioners and its Redevelopment Authority director, Frank Mancini Jr., signed confidentiality agreements with Royal Dutch Shell’s U.S. subsidiary, Shell Oil Co., Commissioner Joe Spanik said.

‘Trickle-down effect’

In Pennsylvania alone, a $3.2 billion investment to build a cracker would lead to 11,000 construction jobs and 17,000 permanent jobs in the chemical industry, according to a study from the industry group American Chemistry Council. Every job in the chemical industry supports six jobs from contractors and service industries, Nichols Harper said.

Jack Pounds, president of the Ohio Chemistry Technology Council, said the average salary in the chemical industry there is $60,000. The American Chemistry Council projects jobs created by the cracker would pay, on average, $70,000 annually in Pennsylvania.

“It’s a huge trickle-down effect,” Giacobbe said. “To get from these crackers to (the hardware store), there’s five or six steps they have to go through, and transportation at all the different steps. And most of the time, the people along the supply chains are all different companies.”

Most of the negotiations happen in private. Greenwire, an online environmental and energy publication, reported without details that Ohio offered Shell more than $1 billion in incentives, though that number is not publicly confirmed, Fleming said. But Ohio Gov. John Kasich met with local Shell officials in his office and flew to meet executives in Houston, Fleming added, though Kasich administration officials would not comment on economic development issues.

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