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Low NatGas Price Will Benefit Shell’s Ethane Cracker Plant

The low price of natural gas may not be good for drillers, but it’s great for manufacturing companies who power their plants with it. The fact that manufacturers are increasingly converting to natural gas to power their operations, and relocating to areas with an abundant supply of low priced gas—like Pennsylvania—is a good thing for Shell and their proposed ethane cracker plant in Beaver County, PA. Why?

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Landowners Settle with Chesapeake, O&G in Western PA Case

A lawsuit initiated by seven families in Beaver County, PA in March against Chesapeake Energy and O&G Investments of Wooster, Ohio has been settled. The landowners originally signed leases with O&G seven years ago, weren’t paid anything during those seven years, weren’t drilled on, and then O&G sold the leases to Chesapeake who tried to drill in order to hold the leases before they were set to expire. The families were rightly outraged by the treatment they received and sued to dissolve the leases (see this MDN story for background).

Yesterday, the judge in the case issued a closure order after being notified of a settlement:

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Shell Volunteers to Pay Local Taxes on PA Ethane Cracker

In order to lure Shell to build its multi-billion dollar ethane cracker plant in Beaver County, PA, the state passed a law granting Shell tax exempt status for the next 25 years. Problem is, the place where they will build the plant currently pays school and town taxes ($344,000 per year) that would disappear under the state plan. So Shell has offered to pay 110% of those taxes over the next 25 years—to avoid a PR problem and to support the local community where it will be doing business for at least the next generation.

Here’s the details:

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Shell Reaffirms PA Cracker Plant Still Planned, Not Certain

As MDN has previously cautioned, although the proposed ethane cracker plant Shell wants to build near Pittsburgh is looking good, it’s still not a foregone conclusion that Monaca, PA will be the location (see this MDN story). That message of caution was reaffirmed by Shell at an industry conference yesterday, as reported by the Youngstown Business Journal:

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PA Gov. Corbett Goes to Beaver County to Talk Cracker Plants

Pennsylvania Gov. Tom Corbett went to Monaca in Beaver County, PA yesterday to talk about a planned ethane cracker plant that Shell says it wants to build there. He was joined by a number of officials—bipartisan in makeup. Corbett’s message? “We’re not there yet.” He said that although a great deal has been done, more will need to be done before Shell pulls the trigger and builds the plant.

The press release from the governor’s office talking about his trip to Monaca:

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Shell: Final Decision on Cracker Plant Still 18-24 Mo. Away

MDN previously warned that the final decision of where Shell will build an ethane cracker plant is not a done deal. It certainly is looking good—they selected a site in Beaver County, northwest of Pittsburgh—and they are deep into planning for that site. But Shell CEO Peter Voser was quoted as saying it would be “several years” before a go/no decision on whether to build it would be made (see this MDN story).

That timeline of several years was reaffirmed by a Shell representative yesterday in comments to the Pittsburgh Business Times:

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O&G Countersues Landowners Claiming Lease Slander

In late March, seven Beaver County, PA families (18 people) filed a lawsuit in Common Pleas Court accusing O&G Investments of Wooster, Ohio of not drilling on their land—and not paying them—for the past seven years. The leases were sold to Chesapeake Energy and at the eleventh hour, just before the leases were set to expire, Chesapeake attempted to initiate drilling to retain the leases, which prompted the lawsuit (see this MDN story for background). Late last week O&G countersued the families:

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MarkWest Buys Keystone Midstream for $512M

Pipeline giant MarkWest has just gobbled up another, albeit much smaller, competitor. MarkWest announced yesterday it is purchasing Keystone Midstream for $512 million. Keystone is owned by Stonehenge Energy Resources and Rex Energy with operations primarily in Butler County, PA.

As part of the deal, MarkWest will gain contracts and a partnership with Rex Energy and Sumitomo Corporation to transport and process their rapidly expanding production in the liquids-rich portion of the Marcellus Shale in Butler and Beaver counties in Pennsylvania. MarkWest and Rex are also exploring a deal for Utica Shale production in eastern Ohio.

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Chesapeake Ignores Stop-Work Order in Beaver County, PA

Chesapeake Energy seems to be in hurry-up-and-drill mode on land in Beaver County, PA in order to secure the land before the lease expires next week. They started drilling without first receiving a permit and are ignoring a stop-work order from the local township. Chesapeake claims the local ordinance states they only have to apply for a conditional-use permit—not receive it—in order to start drilling. The township says the opposite is true.

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After 7 Years of No Drilling, PA Families Sue to End Contract

Seven Beaver County, PA families filed a lawsuit yesterday in Common Pleas Court accusing O&G Investments of Wooster, Ohio of not drilling on their land (and not paying them) for the past seven years. The lawsuit also names Chesapeake Energy, who purchased the leases from O&G last year and who now, “at the last minute,” is trying to tie up the land and continue the contract by moving in equipment to start a drill pad—even though they haven’t received any permits to drill.

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Shell’s ‘Silent’ Partner in Building Cracker Plant: The EPA

Shell will decide whether or not to build an ethane cracker plant in Beaver County, PA over the next two years (see this MDN story). If they decide to build, which seems likely, it will take between four and 10 years and $3 billion to build it. It’s a massive project. And Shell will have the federal Environmental Protection Agency looking over their shoulder the whole time, according to an EPA rep from Texas:

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Shell Announces Location of Ethane Cracker Plant

monaca-paStop Press: Shell Chemical has selected a location in Beaver County, Pennsylvania to potentially build an ethane cracker plant. Shell announced yesterday afternoon that the company has signed a land option agreement with Horsehead Corporation to “evaluate a site” near Monaca, PA, which is about 35 miles northwest of Pittsburgh, along the Ohio River (see the inset map). The site is about 15 miles from the borders of both West Virginia and Ohio, so Shell chose a location about as close to the tri-state border as it could get.

This is headliner news because the facility itself will mean at least $2 billion of investment to build, creating some 10,000 jobs both to build it and to operate it after it’s built. One of the components of “wet gas” or natural gas liquids found more often in western Pennsylvania and eastern Ohio is ethane. An ethane cracker plant chemically “cracks” the ethane into ethylene, which is a raw material used to make plastics and other materials. With an abundant supply of wet Marcellus and Utica Shale gas, the plant will have plenty of cheap ethane to crack.

Once the plant is built, other businesses that use cheap ethylene to manufacture plastics will also locate in the vicinity of the plant. The multiplier effect will be huge in the entire region—some estimates are as high as $15-$20 billion of new economic activity could come as a result of the plant.

All three states lobbied Shell heavily, offering various incentives to locate the plant in their state. A few weeks ago, MDN readers and MDN editor Jim Willis had some fun predicting where the plant may go. Jim was wrong! He predicted it would be built in West Virginia’s panhandle for a variety of reasons (see this MDN story). However, MDN readers guessed correctly. In a poll taken Feb. 12-18, 42 percent of MDN readers said the plant would be built in PA, 31 percent said OH and 27 percent said WV. Kudos to MDN’s readers!

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Drilling in the Utica Shale in PA – Ranges Says Yes, Williams Says No

The Marcellus Shale layer is about a mile down, depending on where you are. Lately, there’s been talk about tapping into the Utica Shale, which sits below the Marcellus, at about two miles down. A recent permit granted to Williams Production Appalachia to drill its exploratory well deeper on Route 487 in Sugarloaf Township, Columbia County in Pennsylvania sparked rumors that Williams was planning to tap into the Utica. But a spokesperson for Williams, Helen Humphreys, says that’s not true:

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Range Resources Looks for Gas Deposits in Beaver County, PA

The Beaver County & Allegheny Times Online news site reports Range Resources has hired Conquest Seismic Services to vibrate the ground around Hopewell and Independence Townships, located in Beaver County, Pennsylvania (near Pittsburgh).

For now, Range is looking along Route 151, according to Dave Schieck, a geophysicist for Range Resources. But don’t look for production wells for quite a few years:

“We’re looking here, and we’ll be looking in the northern part of Beaver County later on,” Schieck said of a stretch between Zelienople and the Beaver River. “It may be as much as a decade before any extraction takes place here, but I’d bet we’ll see some once the area is ready.”

Read the full article: Company vibrating ground in search of natural gas