DOE Report: Appalachia ‘Energy Hub’ Would Spur Manufacturing, Job Creation

Turning the Appalachian region into America’s next ‘energy hub’ would drive job-creation across the economy and greatly expand regional manufacturing, a federal government report issued this week concluded.

The region’s natural gas liquids (NGL) abundance provides manufacturers with a key competitive advantage, according to the Department of Energy’s Ethane Storage and Distribution Hub in the United States report. In fact, liquids production in Appalachia is projected to be 20 times greater in 2025 than 2013, demonstrating the long-term strength of the shale resource.

Building an ethane storage and distribution hub would better leverage Pennsylvania’s energy resources to drive manufacturing job growth.

“We should fully harness ethane and other byproducts of gas production to greatly expand value-added manufacturing in Appalachia,” U.S. Energy Secretary Rick Perry wrote in the Post-Gazette. “This would drive job creation and economic growth in an area that sorely needs it.”

Specifically, the Department of Energy’s report highlighted the region’s production, proximity to market and diversified geography in backing the development of an Appalachia energy hub.  

Increased Production

“Ethane production in Appalachia is projected to continue its rapid growth in the coming years, reaching 640,000 barrels per day in 2025 – more than 20 times greater than regional ethane production in 2013. Between 2010 and 2016, natural gas processing capacity increased ten fold, and fractionation capacity in the Appalachian region increased from 41,000 b/d in 2010 to nearly 850,000 b/d in 2016 and may grow as high as 1.1 million b/d in 2019.”

Proximity to Market

“Appalachia’s abundant resources coupled with extensive downstream industrial activity may offer a competitive advantage that could enable it to displace marginal producers and help the U.S. gain global market share in the petrochemical industry.…
Nearly one-third of U.S. activity in the petrochemical ecosystem occurs within 300 miles of Pittsburgh, with over $300 billion of net revenue, 900,000 workers, and 7,500 establishments.

Diversified Geography

“Today, over 95% of U.S. ethylene production capacity is located in Texas or Louisiana.Expanding the petrochemical asset base beyond the Gulf Coast would enhance geographic diversity of this industrial sector and support reliability in the petrochemical industry.…
Development of an Appalachian cluster is not necessarily in conflict with Gulf Coast expansion, since Appalachian capacity may serve regional demand for NGLs derivatives, freeing up Gulf Coast production for other markets, including exports overseas.”

As 2018 comes to an end, Pennsylvania natural gas production is expected to top a record 6 trillion cubic feet, a 12% annual increase, according to a Pennsylvania Independent Fiscal Office (IFO) quarterly analysis.

Other recent reports, like the Forge the Future assessment, indicated that the potential growth of the Pa. shale industry and connected downstream uses could generate upwards of $60 billion in gross domestic product, more than 100,000 jobs and several billion in tax revenues. The DOE’s newly released report, offering a national outlook, projects the total economic growth from expanded petrochemical capacity to generate nearly $227 billion between 2018 and 2040.

While Pennsylvania is strongly positioned to continue to grow good-paying energy, small business and manufacturing jobs across the Commonwealth, as MSC’s Dave Spigelmyer remarked, state and local policies matter.

“We appreciate the Trump Administration’s support for creating middle-class jobs and enhancing America’s global energy leadership,” Spigelmyer stated. “That said, policies – especially at the local and state level – have an enormous impact on job-creating investment decisions. Our industry is fully committed to working collaboratively with policymakers at every level of government and other key stakeholders to advance commonsense solutions that focus on growing Pennsylvania energy, infrastructure and manufacturing jobs.”

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