In the zone: Appalachian region could become a major center of petrochemicals and plastics manufacturing

Appalachia

With its abundant energy resources and proximity to manufacturing markets, the Appalachian Region is poised to become a major center of petrochemical and plastics products manufacturing in the United States, similar to the Gulf Coast, according to a recent report from the American Chemistry Council (ACC).

ACC’s report, The Potential Economic Benefits of an Appalachian Petrochemical Industry, found that the quad-state region of West Virginia, Pennsylvania, Ohio and Kentucky could become a star player in America’s chemical manufacturing renaissance.

The basic building blocks of innovation

Ethane and propane are natural gas liquids (NGLs) found in shale formations. They’re also key raw materials that U.S. chemical manufacturers rely on to create materials and solutions used in countless products that make our lives safer, healthier, more comfortable and more convenient.

That’s a big reason why America’s shale gas resources have been able to make the United States the most attractive place in the world to invest in chemical manufacturing – driving a manufacturing revival of the sort we have not seen in decades.

Thanks to abundant, affordable domestic natural gas, $185 billion in new chemical industry investment has been announced nationwide, supporting 310 projects including new factories, expansions and restarts of facilities shuttered during the recession. The investment will translate into an estimated 821,000 permanent new jobs by 2025.

Historic opportunity for Appalachian region

Much of the new chemical industry activity announced so far has been concentrated on the Gulf Coast, longtime center of the U.S. chemical industry. The Appalachian region could be next to join in.

ACC’s report projects that much-needed jobs and tax revenue could come to the quad-state region. We’re talking about 100,000 permanent jobs, including 25,700 new chemical and plastic products manufacturing jobs, 43,000 jobs in supplier industries, and 32,000 ‘payroll-induced’ jobs in communities where workers spend their wages. The new investment could also lead to $2.9 billion in new federal, state, and local tax revenue annually.

Several companies have already announced investment projects, and there is potential for a great deal more.

Appalachian Petrochemicals Benefits

New energy infrastructure is the missing link

A major Appalachian petrochemical industry won’t just happen. There needs to be a way to store and transport NGLs and chemicals. Only then will manufacturers have ready access to the resources needed to develop a community of petrochemical and derivative producers and support a supply chain of industries throughout the region.

What’s needed is the Appalachian Storage and Distribution Hub — an NGL storage facility and pipeline distribution network. In ACC’s report, we present a hypothetical scenario that includes the development of a storage hub for NGLs and chemicals, a 500-mile distribution network, petrochemical and plastics manufacturing and potentially other energy infrastructure and manufacturing.

Policymakers must do their part

Private industry can develop the Hub, but Congress and the Administration need to help get things started:

  • Uncertainty around financing is a key barrier to the development of energy infrastructure in the Appalachian region. Policymakers must affirm that the Hub is eligible for existing private-public financing programs.
  • As Congress and the Administration consider infrastructure modernization legislation, the Appalachian Hub should be a priority.
  • Ensuring a timely and efficient regulatory permitting process is essential.

Fortunately, lawmakers in the region are on the case. Legislation introduced in May, the Appalachian Ethane Storage Hub Study Act of 2017 (S. 1075), is a great step forward. It will inform efforts to maximize America’s domestic energy and manufacturing potential — showing the benefits of such a project and guiding future energy and infrastructure policy while helping to spur private investment. The bipartisan bill is sponsored by Senator Shelley Moore Capito (R-W.Va.) and co-sponsored by Senators Joe Manchin (D-W.Va.) and Rob Portman (R-Ohio). In the House, Rep. David McKinley (R-W.Va.) introduced a companion bill that is co-sponsored by Reps. Evan Jenkins (R-W.Va.), Alex Mooney (R-W.Va.), Tim Murphy (R-Pa.), and Bill Johnson (R-Ohio).

Earlier this month, Senators Capito and Manchin introduced the Capitalizing American Storage Potential (CASP) Act (S. 1337). The legislation would make a regional storage hub eligible for the U.S. Department of Energy’s successful Title XVII loan guarantee program. Also in June, Senator Capito introduced the Appalachian Energy and Manufacturing Infrastructure Revitalization Act (S. 1340). It will help streamline the federal permitting process for an Appalachian energy hub. We agree that the Hub should be designated a “critical energy infrastructure” project eligible for expedited federal permitting.

Next steps

As a nation or a region, we often know where we want to go, but not how to get there. That’s not the problem here. For decades, those who live in and study the Appalachian region have envisioned a thriving center of manufacturing activity. And they know that energy infrastructure — the Hub — will be critical to unlocking the opportunity. Let’s get moving!

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