MDN Weekly Update – Nov 13, 2011: Where Should Ethane be Processed?

poll resultsNot a lot of passion, it seems, on taxes or fees for drilling in PA as indicated by the low-ish number of people voting over the past seven days in the latest MDN poll. The clear majority (very large majority at 63%) believe that an impact fee similar to what Gov. Tom Corbett has proposed, where most of the revenue stays in the local community, is the preferred method of taxing drillers in the state.

A respectable 25% believe there should be no fees or taxes of any kind on drilling. And only 12% think a severance tax is a good idea.

What kind of fee/tax should PA assess on Marcellus wells?

Impact fee (most of the proceeds stay in the county) (63%, 110 Votes)
No fee or tax of any kind (25%, 43 Votes)
Severance tax (most proceeds used in state’s general budget) (12%, 22 Votes)

Total Voters: 175

Where should energy companies process their ethane?

A complicated topic for this week’s poll. If you’ve been reading MDN for any length of time, you will have come across the topic of ethane, sometimes referred to as “wet gas.” When drilling for natural gas, or methane, in some areas of the Marcellus and Utica Shales, drillers will also recover other chemical compounds, including ethane. It’s more likely to be found in the western portions of the Marcellus and Utica Shale areas, like western Pennsylvania, West Virginia and eastern Ohio. But ethane can also be found in other areas of the Marcellus and Utica as well.

Why is ethane important? Ethane can be “cracked” or processed to produce ethylene, which is the main raw material used to make plastics—plastics of all kinds. It is a huge industry, and wherever you process the ethylene into plastics, associated industries pop up to turn the plastics into useful products. What it all means is when you build a “cracker plant” to process the ethylene, it involves billions of dollars in investment and thousands of jobs. And when associated plastics industries sprout up, it creates billions more in economic impact and thousands more jobs. A huge impact which cannot be overstated.

Shell has said they are looking to build a cracker plant in the Marcellus and will make an announcement by the end of 2011 on where they plan to build it. There have been at least one, perhaps two other unnamed companies also investigating a plan to build a cracker plant in the Marcellus region.

But what if you simply build a pipeline to another location where there is already a cracker plant to process the ethane? That’s an opportunity that at least two, possibly up to four pipelines are pursuing right now. Range Resources and Chesapeake Energy have already signed on with two of those pipelines, one to Canada the other to the Gulf Coast. The energy companies say there’s more than enough Marcellus and Utica Shale gas coming online to support not only pipelines but building at least one cracker plant in the region. But state officials, like those in West Virginia, are peeved about Chesapeake and others committing to sending the ethane out of the region for processing, believing that might jeopardize building a local cracker plant.

Those who support free enterprise and capitalism (a concept increasingly under attack due to the woeful lack of education in this country) will say, as does MDN, both should have a right to do what they want. If pipelines can get the permits, lease the land and build the pipelines, get customers to use it and turn a profit—go for it. It’s (still, for now) a free country. Likewise with a cracker plant (or two or three). MDN does not question whether or not pipelines should be “legal” or “allowed” to take place. They should.

But MDN does want to know what readers would prefer to have happen. Would you prefer Chesapeake and Range and others to process their ethane locally, in the Marcellus region? Does it matter? Head on over to the right side of any page and cast your vote.

Below are the most recent “top 5” lists and the calendar of Marcellus related events for the next two weeks.

Happy reading,
Jim Willis, Editor

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