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Marcellus, manufacturing synergies promising

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R. Dennis Xander is president of the Independent Oil & Gas Association of West  Virginia.

The direct benefits of Marcellus Shale development in West Virginia are obvious and indisputable. More people are finding jobs, and wages and benefits are increasing. Projections of future revenues from severance taxes are optimistic, despite tremendous reductions in commodity prices. The tax base in Marshall County has doubled in just six years. Residential gas rates for consumers have fallen 45 percent in the last three years.

 However, the amazing expansion of this industry is just the preface to a more compelling story. Most people think of natural gas as methane, primarily used for residential heating. In reality, only about 20 percent of the natural gas produced in the US is used for that purpose. Another 15 percent is used to heat businesses. The use of natural gas for electrical generation is growing, and currently consumes about 35 percent of our total production. The remaining 30 percent is used for manufacturing. A significant portion of the shale gas is ethane, the primary feedstock for the petrochemical industry. To quote Kevin DiGregorio, a Ph.D. chemist and the executive director of the Chemical Alliance Zone, "Burning ethane for heat is like grinding filet mignon to make hamburger".

 Just a few short years ago, industry officials in Appalachia were hard at work dealing with "gas quality issues" raised by downstream pipelines. The primary "issue"? Too much ethane! Gas with too much ethane is not "pipeline quality." The ethane must be removed before the remaining methane can be shipped to markets to be burned for heat and to generate electricity. Joe Eddy, chairman of the West Virginia Manufacturers Association and a petroleum engineer, makes this point in presentations across the state. But what was a problem for Appalachian gas producers may now be a huge opportunity for manufacturers, and a source of new demand for shale gas. 

The list of products made from ethane is amazing. Tires, clothing, carpet, paint, sealants, plastics, detergents, adhesives and PVC pipe, for starters. Based on sundry published reports, the supply of ethane is projected to increase 50 percent by 2016. This increased supply will afford a significant competitive advantage to domestic manufacturers. So why not do it here? This is an amazing opportunity for West Virginia to grow its economy by exploiting the vast supply of shale production, and ethane in particular.  This growth will mean more employment, higher wages and benefits and greater tax revenues in the manufacturing sector, which will allow us to finance better schools, roads and other infrastructure needed in the state.

This is not a new idea. In fact, the first ethane "cracker," the plant that transforms ethane into various usable forms for manufacturing, was built right here in Clendenin, W.Va. in 1922.  That plant contributed feedstock to a viable chemical industry in the Kanawha Valley for decades.  We can replicate that success and vertically integrate here by taking steps to encourage chemical manufacturers to locate in West Virginia to have ready access to ethane and ethane byproducts. Our state's proximity to ports and markets in the northeast is promising, especially if we finish Corridor H, giving us access to the Virginia Inland Port near Front Royal, Va. 

Industry leaders in West Virginia get this. The Just Beneath The Surface Alliance is working hard to spread the word. The Alliance boasts 34 "supporting partners" from the manufacturing and oil and gas industries and includes various economic development groups that see the synergies between the two industries. The upcoming Marcellus to Manufacturing (M2M) Ethane Development Conference scheduled for March 20-21 at the Charleston Civic Center will focus on these synergies, and is the best way to learn more about what the future holds for West Virginia.

The Mountain State has been blessed with amazing resources in the shale formations just beneath our feet. The opportunity to process and exploit those resources is the icing on the cake. But make no mistake: It all starts with drilling horizontal shale wells and a vibrant oil and gas industry.