Articles, Newsletters and Advisories
West Virginia has a long history of watching most of its natural resources being harvested and sent to out-of-state users who add value to those resources. The same is happening with West Virginia’s natural gas, and we need to do something about it.
Whether it has been coal converted into electricity or timber fashioned into furniture, the value added to West Virginia’s natural resources has too often taken place outside of the state’s borders. Now, as noted in the 2017 Sustainable Energy in America Factbook, the United States has experienced a 79 percent increase in shale gas extraction since 2011, and a 12 percent jump in total gas production in the last five years. Much of this increase centers on the Marcellus and Utica shale plays, of which West Virginia is an important part.
Numerous groups rightly tout the potential for shale gas to provide a better future for both West Virginia and the region. As such, West Virginia must continue efforts to modernize its laws and regulations so natural gas can be economically and efficiently produced. Likewise, we must support the development and construction of intrastate and interstate pipelines that will only increase the demand for West Virginia’s natural gas and contribute to the country’s energy security.
But while production and transmission of natural gas are solid economic drivers for the state, each cubic foot of gas and each gallon of natural gas liquids that leaves West Virginia represents a lost opportunity to add value to that resource right here.
The only way to truly realize the full value of West Virginia’s natural gas is to adopt policies that attract and establish the activities that use — and add value to — that gas. For example, according to the Factbook, natural gas is now the largest source of power in the country, contributing 34 percent to the electricity mix in 2016. A number of natural-gas-fired power plants are being developed in Harrison, Marshall and Brooke counties, each of which will generate electricity that will be sold on the PJM wholesale power grid. The facility in Harrison County will be the first downstream user of natural gas in the county. More such opportunities for downstream use of natural gas within the state must be found.
At the top of the list should be efforts to facilitate the development and construction of an ethane cracker facility and — more importantly — the spinoff activity that necessarily surrounds such a facility. For instance, the cracker Shell Chemical announced in July 2016 would be built in Beaver County, Pennsylvania, will create an estimated 6,000 construction jobs and 600 permanent jobs. More importantly, the spinoff activity — the manufacturers expected to establish facilities to take advantage of the cracker’s products, the local businesses that support the plant directly and restaurants, hotels and shopping centers that benefit indirectly — is estimated to be several times the amount of Shell’s initial investment.
While West Virginia’s legislators have (rightly) been focused on trying to realign West Virginia’s budget, they cannot ignore the long-term need for economic development. The sobering fact is, regardless of how much taxes are (or are not) raised, or how much the state’s budget is (or is not) slashed, without good jobs created by the private sector, tax revenue — in whatever form taxes may take — will continue to fall. The road to economic health for West Virginia, therefore, ultimately must go through the creation of good jobs in the private sector.
What better place to create jobs than in the industries that add value to our natural resources? As Pennsylvania Gov. Tom Wolfe noted when Shell Chemical made its announcement, “The feedstock is here. The workforce is here. Let’s go.” The same is true of West Virginia.
While West Virginia has offered tax incentives in an attempt to lure a cracker facility, government and community leaders need to redouble their efforts, even while tackling difficult budget issues. In addition to tax incentives (the efficacy of which is debated by economists, but which companies insist upon), we must involve all stakeholders in these efforts, including leaders of communities where these facilities may be located, community and technical colleges that can train and supply the skilled labor necessary and utilities and other companies that will provide critical services for new businesses.
Only by adding value will West Virginia truly benefit from the promise held by the abundance of shale gas that lies under our state.
Mychal Schulz is an attorney in at Babst, Calland, Clements & Zomnir, P.C. in Charleston focusing on energy, employment, and commercial litigation. He is a member of the West Virginia Business & Industry Council and sits on the Board of Directors of Leadership West Virginia.