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Shell exec expands on plan to build cracker plant in Beaver County

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Screen Shot 2016-05-21 at 10.18.28BY DAVID CONTI | Tuesday, June 28, 2016, 6:36 p.m.

Royal Dutch Shell’s decision to build a multibillion-dollar petrochemical plant in Beaver County came down to three key considerations: location, location and tax incentives.

Pennsylvania lies above the ethane the facility will consume, is close to most customers of the polyethylene it will produce, and offered the global energy giant a package of credits worth as much as $1.6 billion over 25 years.

“I can tell you, hand to my heart, that without these fiscal incentives, we would not have taken this investment decision,” Shell Appalachia Vice President Ate Visser told industry officials who gathered Downtown on Tuesday for the Northeast U.S. & Canada Petro­chemical Construction Conference.

Visser elaborated on the reasons for picking the site along the Ohio River in Center and Potter, and explained the project’s time line, three weeks after the Anglo-Dutch company made its final decision to build the plant. It was the first public comments on the ethane cracker from a Shell official since the June 7 announcement.

“We’re sitting here in a world-class resource base at the door of the customer,” Visser said during a discussion of natural gas liquids such as ethane, a product of many of the Marcellus and Utica shale wells in this region. “This will give us long-term, sustainable, competitive advantage.”

Lawmakers in 2012 approved a package of incentives aimed at luring Shell. They authorized a tax credit for companies that use ethane — in this case to make the building blocks of plastic — that invest more than $1 billion and employ more than 2,500 workers during construction. They also extended a tax-free Keystone Opportunity Zone in Beaver County and provided other grants.

Officials said the plant will employ 6,000 construction workers, create 600 good jobs for operation and attract related manufacturers to build additional facilities.

“They have options to go anywhere in the world. Shell had a number of major investments they were considering along with this one, all over the world,” state Economic and Community Development Secretary Dennis Davin said earlier in the petrochemical conference.

When Shell this month ended nearly five years of suspense over whether it would go ahead, it said construction would begin in 18 months, with completion set for early in the next decade.

Visser noted spending cuts Shell has implemented in recent years as global oil prices crashed. He called the wait “consistent with managing our capital situation, our capital discipline, affordability in the current low-oil-price environment.”

The delay gives Shell time to finish design work and preparation of the site, which began more than a year ago and involves construction of a bridge and two river docks, relocation of State Route 18 and CSX Transportation train tracks, and movement of 7.2 million cubic yards of dirt to cap soil polluted by the zinc smelter that was there.

“It means when we start with main construction, we’ll have all our ducks in a row,” Visser said.

It also gives time for an increased ethylene supply from Gulf Coast crackers that are starting operation over the next few years to be absorbed by the market, he said.

Shale gas drillers say having Shell build here will benefit an industry hit by low prices and reduced activity over the past two years. Shell will consume about 100,000 barrels per day of ethane, which will come from 10 companies including Marcellus producers Antero Resources, Consol Energy and PennEnergy Resources.

“The best thing you can do for production is have the demand right at home, right in the basin,” said Steve Woodward, a senior vice president at Antero, the top ethane supplier for the plant. “It creates jobs. It creates a number of synergistic possibilities all around.”

David Conti is the assistant business editor at the Tribune-Review. Reach him at 412-388-5802 or [email protected].

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