Coal once powered both the nation and the West Virginia economy. With coal flaming out, the country is now turning to natural gas — and once again to the Mountain State. If the dream is to be realized, though, industry advocates say that more infrastructure is needed: storage hubs and pipelines.
West Virginia has lost thousands of coal jobs — a state that employed about 70,000 miners in the 1970s but which now now employs 13,000. But the good news is that the state sits atop the Marcellus Shale basin, which holds 141 trillion cubic feet of recoverable natural gas — enough to last well into the next century. That could potentially dwarf the wealth and the jobs once created by coal. But can it be done in an environmentally safe way while also keeping the riches at home?
Natural gas is not just used to create electricity but it is also used to manufacture products. “Dry” gas is used to generate power and “wet” gas is separated from it and is comprised of such chemicals as butane, ethane, methane and propane, all of which can serve as the foundation for finished goods. Indeed, just about every consumer product is comprised from “natural gas liquids.”
“We are losing population at an alarming rate,” says Woody Thrasher, the state’s former commerce secretary and the owner of Thrasher Engineering, who spoke at an Energy Infrastructure Summit held in Charleston, W.V. on Thursday. “We mine ‘met’ coal but make no steel. We cut trees but make no furniture. Let’s make West Virginia a better place to locate. There is an abundance of land that is not occupied and in close proximity to where those (oil and gas) resources are. We need to create opportunity zones.”
That’s why China Energy has signed a memorandum of understanding to invest $84 billion into the state, all to get easier access to the natural gas liquids for its manufacturing industries. Instead of having the raw material extracted only to have the associated businesses domiciled elsewhere, West Virginia needs to create incentives to ensure they locate there.
The WV Chamber of Commerce says that 20% to 25% of West Virginia’s jobs have an indirect tie to its energy sector — using the so-called multiplier effect, accounting for suppliers and vendors. Specifically, oil and natural gas businesses account for about 22,500 positions and in 2017, provided wages totaling $1.5 billion. In 2018, that is expected to be $1.8 billion.
“We need to tell our story,” adds Bob Orndorff, a lobbyist for Dominion Energy, at the conference. “We get up every morning trying to figure out how we protect our precious environment. But we are portrayed as greedy.”
Natural gas executives say that they need energy storage and new pipelines to get their fuel to where it would be consumed. The U.S. Department of Energy is backing an ethane storage and distribution hub that would potentially be located in West Virginia, all to harness petrochemicals to serve the nation’s manufacturing base.
About 640,000 barrels per day of ethane is produced in the Appalachian region, the department says, which is considering a $1.9 billion loan for the project. Moreover, the Energy Information Administration says that production in Ohio, Pennsylvania, and West Virginia has increased and that their combined share of total U.S. natural gas production jumped from 2% in 2008 to 27% in 2017.
In a state with nearly 800,000 total jobs, the hub would create 100,000 additional positions, says Steve Hedrick, chief executive officer of the Mid Atlantic Technology, Research and Innovation Center, at the summit. Most such storage facilities are located in the Gulf Coast, which is along “hurricane alley” and which if hit by a storm, could disrupt supply. A facility located in the mid-Atlantic region, however, could avoid that fate, he adds. The first step is to negotiate with landowners about subsurface storage on their property.
The Atlantic Coast Pipeline typifies the struggles between energy companies and environmentalists: The nation needs pipelines but the citizens also demand a benign environmental footprint. It is a $5.1 billion project — owned by Dominion Energy, Duke Energy and Southern Co. — that would feed the energy appetites of the mid-Atlantic states. Environmental groups say, however, that the project is running roughshod over pristine properties.
The pipeline’s advocates are citing an economic study by Chmura Economics & Analytics. It says that the project would generate $479 million for West Virginia, $1.4 billion for Virginia and $680 million for North Carolina.
“Folks need to understand that 99.99 percent of product that goes into a pipeline reaches its destination successfully,” says Tim Bittle, a lobbyist for Marathon Petroleum who spoke at the event.
Without a doubt, environmental interests are asking the hard questions of oil and natural gas executives. Take the proposed Appalachian Ethane Storage Hub, which could attract as many as a half-dozen cracker plants to split the wet gas from the dry gas: The Ohio Valley Environmental Coalition says that it could contaminate the tap water of 3-to-5 million people who depend on the Ohio River. It also says that the project would lead to increased petrochemical industrialization of the Ohio River Valley and create untold health risks.
Opposition groups also take aim at the Atlantic Coast Pipeline. In December, the U.S. Fourth Circuit Court of Appeals agreed with their environmental concerns. Those justices found that the builders were dodging rules, which has forced developers to delay construction until they are able to assure that the wildlife and water is protected.
Others take issue with the rosy economic promises made by the oil and natural gas industries. According to West Virginia University’s College of Business and Economics, natural gas production in the state is at record levels yet, natural gas employment there has lingered behind — and is near 2009 levels, or at the dawn of the shale gas boom.
“If West Virginia’s natural gas boom has proven nothing else, it has demonstrated that there is virtually no correlation between increased natural gas production and jobs and prosperity,” says Sean O’Leary, an energy analyst previously based in West Virginia, in an interview. He said that in 2010, the American Petroleum Institute had promised 40,000 new jobs by 2020, while also saying that jobs tied to the “multiplier effect” are wildly exaggerated.
“What we’ve witnessed so far with West Virginia’s natural gas industry is immense amounts of wealth being extracted with little being left behind for West Virginians,” he adds. “And there is no reason to expect that to change.”
The bigger picture is that West Virginia is awash in natural gas and its economic growth is now dependent on it. The state, in fact has gone from a budget deficit to a surplus of $243 million, of which the severance tax on minerals accounts for $40 million.
The West Virginia Oil and Natural Gas Association, meanwhile, says that natural gas pipeline construction jobs grew by 434% from 2017 to 2018. It adds that total employment in the state’s oil and natural gas industry was 17,617 in 2017 and is 22,514 in 2018, a 27% increase. That includes drilling, operations and pipelines as well as environmental consulting positions.
“Almost every good thing that has happened here is the result of oil and natural gas,” says Charlie Burd, head of the WV Independent Oil & Gas Association, at the summit. “We would be the world’s fourth leading producer,” referring to West Virginia, Ohio and Pennsylvania, meaning that the region could become “energy dominant.”
That could change the face of the region and specifically West Virginia — for the better or the worse.
Billions are flowing into the United States because of the shale gas boom. And the Marcellus Shale basin is a rich vein, allowing West Virginia to reinvent itself and to establish new pathways to prosperity. But if the coal and timber industries are illustrative, the state must encourage the businesses that use its resources to locate there and to respect its land.
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