Appalachian Storage Hub: Big plan, big price tag

The proposed Appalachian Storage Hub is a big idea with a big price tag.

Support for the $10 billion infrastructure expansion project is slowly growing in western Pennsylvania, Ohio, West Virginia and Kentucky.

What is envisioned is a system of underground caverns, salt caves and areas where natural gas has been extracted where 100 million barrels of natural gas liquids (NGLs) and liquid chemicals would be stored, plus 3,000 miles of pipelines to move the chemicals to industries along a 454-mile corridor in the four states.

A chemical six-pack

The system would handle a chemical six-pack — ethane, methane, ethylene, propane, propylene and chlorine — in a safe and environmentally sound way, proponents say.

Such a system could take advantage of the raw materials for petrochemical and plastics companies found in the Marcellus, Utica and Rogersville shales of the Appalachian Basin.

The raw materials available in the Marcellus Shale alone have been estimated to be worth more than $2 trillion, of which 15% is NGLs, including ethane, experts say.

The project would benefit planned ethane cracker plants in the Appalachian Basin because they need nearby ethane storage. Plus, existing petrochemical and polymer companies in the four states would also benefit.

Benefits of hub

The system would provide a stable supply of ethane to cracker plants and would also provide a conduit for the offtake of the crackers’ produced ethylene.

The hub would also provide a trading point for gas producers to sell their NGLs to the crackers and to other petrochemical and polymer production facilities.

The hub would likely attract new companies to the region with cheap raw materials and reduced transportation costs and create new jobs, supporters say.

Those six chemicals would be moved 386 miles along the Ohio River from Monaca, Pennsylvania, northwest of Pittsburgh to Catlettsburg, Kentucky, by rail and a new system of pipelines. There would also be a 68-mile offshoot up the Kanawha River to Charleston, West Virginia, and nearby chemical plants.

Monaca is where Royal Dutch Shell wants to build a multi-billion-dollar ethane cracker plant; Catlettsburg is where Marathon Petroleum has a refinery.

Six liquids, six pipelines

Each of the six liquids would have its own pipeline with the six lines laid side by side. It will likely take four years, at the earliest, to develop such a system, supporters say.

What is being planned is a system similar to underground storage available on the Gulf Coast near Mont Belvieu in East Texas. A total of 35 storage caverns there can store and deliver 110 million barrels of NGLs. The liquids can then be piped to spots along the Gulf Coast.

Numerous partners working on hub

The Appalachian Storage Hub, first proposed seven years ago, is still in the conceptual stage. Researchers from West Virginia University and Ohio State University and staffers from the states of West Virginia and Ohio have been analyzing possible sites for Appalachian underground storage. That report listing the top potential sites is expected to be released by April 1.

The four states are working on the project, along with a public-private partnership that includes the U.S. Department of Energy, the U.S. Department of Commerce and private companies.

The Pittsburgh-based Claude Worthington Benedum Foundation provided a $100,000 matching grant to get the project moving.

The individuals spearheading the project include Dr. Brian Anderson, director of WVU’s Energy Institute; Steve Hedrick, president and CEO of the West Virginia-based Mid-Atlantic Technology, Research and Innovation Center (MATRIC), and Kevin DiGregorio, director of the West Virginia-based Chemical Alliance Zone

Anderson, in a speech last spring, said that without the Appalachian Storage Hub, the four states risk having shale resources drained away to the Gulf Coast.

There is plenty of ethane available, supporters say. Ethane is now being shipped to the Gulf Coast. It is also moving via pipeline to Philadelphia and shipped overseas, or piped to Sarnia, Ontatio. Ethane is also remaining in U.S. natural gas flows and being burned.

The proposed hub is very real. Added DiGregorio in an interview with Kallanish Energy: “It’s not quite a pie-in-the-sky project, but it’s not going to happen tomorrow, DiGregorio told Kallanish Energy. “It’s somewhere in between. But it’s important for the region’s long-term, long-range economic development.”

The Appalachian Storage Hub is, supporters say, the logical next step following the 2016 announcement by Shell that it intends to build its Pennsylvania cracker.

Thai-based PTT Global Chemical is considering a site in Belmont County, Ohio, for its $5.7 billion ethane cracker. A final investment decision is expected soon. A third cracker has been proposed by two Brazilian companies near Parkersburg, West Virginia.

The storage hub would ideally be able to store ethane for cracker use when supplies might be disrupted, supporters say. One cracker might use 80,000 barrels a day of ethane, or about 560,000 barrels per week.

Such ethane storage is likely to result in additional crackers being developed in the Appalachian Basin, perhaps a half dozen in the next 20 years, supporters say.

Getting the needed funds to build the Appalachian Storage Hub will likely pit the Appalachian Basin region against the Gulf Coast, some say.

Such a storage hub “won’t be easy or cheap,” said Hedrick, whose office is in South Charleston. “It’s something that can be done. It’s exceptionally real, phenomenally real.”

Smaller projects proposed

There are similar but much smaller proposals for liquids storage in the Appalachian Basin. For example, privately held Mountaineer NGL Storage, a Colorado-based company, has plans for an initial 2 million barrels of liquids storage in the Saline salt formations near Clarington, Ohio. It would load/unload about 40,000 BPD.

Construction on the first four, half-million-barrel caverns is scheduled to begin in April or May, with operations beginning about a year later, said David Hooker, managing director, in an interview.