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Executive order could benefit Appalachia

by Erika Green

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President Trump’s April 10 Executive Orders are the directives which, as the President said “ends the war on American energy.”

One order primarily takes the shackles off energy infrastructure (pipelines) construction, while the second mandates the Environmental Protection Agency to review/modify an “outdated” section of the Clean Water Act that requires applicants requesting federal permits for energy infrastructure projects that might affect federally protected waters, to get state certification where any potential contamination could happen.

But there’s another part of the Trump directives that’s received little coverage, but which could have a huge impact certainly in Applachia, if not the entire country.

Economic growth in Appalachia

The Order mandates that within six months of April 10, the Secretary of Energy, in consultation with the heads of other agencies, will submit a report to Trump “describing opportunities, through the federal government or otherwise, to promote economic growth of the Appalachian region, including growth of petrochemical and other industries.”

First of all, six months to deliver a report involving the federal bureaucracy, is, in itself, a miracle.

“Doe (the U.S. Department of Energy) has definitely been given its marching orders,” Tom Gellrich, founder of consulting firm TopLine Analytics, told Kallanish Energy.

Crackers and storage

An acknowledged expert in the shale gas revolution from the downstream perspective, Gellrich said he’s been contacted by Doe types to pick his brain about the facilities which could benefit from the Trump Order: ethane crackers and natural gas liquids storage facilities chief among them.

Royal Dutch Shell’s ethane cracker complex under construction some 35 miles northwest of Pittsburgh is well under way, with the massive project now slated to be completed late in 2020, sources tell Kallanish Energy.

Also, the PTTGC ethane cracker complex in southeast Ohio, while not formally a go, continues inching toward that point. Gellrich points out the Ohio project is being offered by a Thailand-based conglomerate (PTT Global Chemical) and South Korea’s Daelim Industrial.

Refining contracts

“They’re refining some contracts, some other things, and Thailand does not handle contracts like the U.S. does,” Gellrich told Kallanish Energy. And Daelim is doing its due diligence in the project. Still, with all the contracts negotiated/signed and the supplier situation, it really points to the project moving forward.

With one and a highly probable second cracker in Appalachia, the talk for years has been natural gas liquids – including ethane – storage.

There now are three liquids storage projects proposed for the Pennsylvania-Ohio-West Virginia region. Following a late November 2018 report issued by Doe, which concluded liquids storage in the Northeast made sense from numerous perspectives, the Trump Executive Order compounds the potential positive impact of storage.

Sen. Manchin solidly behind the hub

Certainly U.S. Sen. Joe Manchin, Republican-West Virginia, thinks so. “After today’s executive order, I am more confident than ever that the Administration is serious about being a partner in helping us develop the Appalachian Storage Hub,” Manchin wrote when the Trump orders were issued.

The Appalachian Storage and Trading Hub is a proposed $3.4 billion regional storage complex for natural gas liquids sourced from the Marcellus, Utica and Rogersville Shale plays.

The first subsurface storage facility for the Hub would handle roughly 10 million barrels of NGLs and liquid chemicals and include underground pipelines to move the chemicals to industries along a 454-mile corridor in Pennsylvania, Ohio, West Virginia and Kentucky.

Early last December, the Doe released a study “Ethane Storage and Distribution Hub in the United States.” In the 91-page report, Doe concluded establishing an ethane storage and distribution hub near production from the Marcellus and Utica Shale plays could provide benefits to the broader petrochemical and plastics industries along the lines of supply diversity.

Reducing facility concentration

“The present day geographic concentration along the Gulf Coast of petrochemical infrastructure and supply may pose a strategic risk, where severe weather events limit the availability of key feedstocks,” according to the report (Remember Hurricane Harvey a few years ago?).

“Petrochemical expansion beyond the Gulf Coast would increase geographic diversity. This geographic diversity could provide manufacturers with flexibility and redundancy with regard to where they purchase their feedstock and how it is transported to them. Moreover, this flexibility and redundancy, as well as the overall increase in U.S. feedstock production, could mitigate the potential for any price spikes in petrochemical feedstocks that could be caused by a severe weather or other disruptive event in any one region of the U.S.,” the Doe study states.

“At ADG, we are pleased to see the continued government focus on the Appalachia Storage and Trading Hub, an enabler of U.S. economic development, national security, and energy dominance. We continue to work closely with the Department of Energy’s Loan Program Office on the Part II application for a $1.9 billion loan guarantee, while we simultaneously are aggressively pursuing private capital formation,“ Steve Hedrick, CEO, Appalachia Development Group, the point company for the hub project, told Kallanish Energy.

MPLX recently announced it’s evaluating underground NGL storage caverns at its Hopedale, Harrison County Ohio, complex.

Colorado company proposing Mountaineer

“The MPLX project will be built on a MarkWest (Energy Partners, acquired by MPLX sponsor, Marathon Petroleum) existing site, which already has in place necessary storage, piping and other equipment,” Gellrich told Kallanish Energy.

The third proposed liquids storage facility moving towards construction is proposed by Colorado-based Energy Storage Ventures. ESV is developing the Mountaineer NGL Storage project.

When completed, the project will store 2 million barrels of ethane, butane and propane in four underground salt caverns on a 200-acre site, about a mile north of Clarington, Ohio, along the Ohio River.

No one is quire sure what the feds will deliver to President Trump in less than 180 days. Loans, grants, tax abatements – the list of possibilities is huge – but for now it’s wait and see.

“We’re in uncharted waters with this situation,” Gellrich told Kallanish Energy.

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