Appalachia Storage and Trading Hub essential for the Northeast

Pipelines, infrastructure and storage are still necessary for the Northeast petrochemical hub to become a reality, experts told Petrochemical Update.

Ethane production in the Appalachian basin is projected to continue its rapid growth through 2025 to a total of 640,000 barrels per day, more than 20 times greater than just 5 years ago, according to the U.S. Department of Energy. Image: Nicholas Tonelli

The Appalachia Storage and Trading Hub is a crucial next step in transforming the Appalachian Basin and maximizing the potential of the raw materials present in the northeast shales, according to analysts and the United States Department of Energy.

Appalachia Storage and Trading Hub

“The Appalachia Storage and Trading Hub isn’t merely an idea or only a concept. And it’s not just a way to grow one specific region of our great nation. It’s a catalyst for follow-on chemical investment, economic development, jobs, manufacturing and energy dominance,” Appalachia Development Group, LLC (ADG) Chief Executive Steve Hedrick said. Hedrick is also the Chief Executive of Mid-Atlantic Technology, Research & Innovation Center (MATRIC).

ADG is the strategic, driving force behind the Appalachia Storage and Trading Hub, and Hedrick has been the leader nationally on the infrastructure improvements required for the Hub for nearly nine years.

“It’s a clear and achievable path forward for our industry and our country. And, it has progressed far beyond an idea. It is a reality, and we are making substantial progress,” Hedrick said.

Since 2010, 333 shale-related projects cumulatively valued at $202 billion have been announced in the

Of those, there have already been several projects ($19 billion) announced, although not all have broken ground yet, in Appalachia along the Ohio River valley.

“A positive chemical industry outlook depends upon access to abundant and affordable energy, a strong U.S. manufacturing base, a balanced regulatory environment, the state of the U.S. and global economy, access to global supply chains, and access to export markets,” Kevin Swift, Chief Economist for the American Chemistry Council (ACC) said.


Engineering and Procurement

The proposed multibillion-dollar regional storage complex for natural gas liquids sourced from the Marcellus, Utica and Rogersville shale plays moved one step closer to reality in August 2018 when Parsons Corporation was named the EPC partner for the buildout of the Appalachia Storage and Trading Hub.

Parsons will initially focus on the pre-front-end engineering design stages, including project management and execution planning. Subsequent phases would include constructing the $3.4 billion project and its long-term operation.

“With Parsons’ support, we have narrowed down the potential site locations. We are actively engaged in negotiations for land interest, so that we may then extract core samples from the earth to confirm the geologic formations at these sites are what our current data says they are,” Hedrick said noting that sites of interest are in Pennsylvania, Ohio and West Virginia.

The first subsurface storage facility for the Appalachia Storage and Trading Hub would handle some 10 million barrels of NGLs and liquid chemicals and include the requisite of underground pipelines to move the chemicals to industries along a 454-mile corridor in the four states.

The Appalachia Storage and Trading Hub would have similarities to the Mont Belvieu Hub in Texas that supports the Gulf Coast chemical industry.

ADG said they are aggressively pursuing offtake agreements to consume raw materials, and supply arrangements from companies in the oil and gas E&P community, as well as capital agreements.

The Financials

“We are aggressively pursuing private capital formation, which once secured/solidified will only expedite our progress. Our portfolio is growing quickly,” Hedrick said.

“We have several boutique firms who are interested in moving forward with us for Series A investment, and larger and sophisticated investment houses who are exploring interest in series B and C investments,” Hedrick added.

ADG also has a laser focus on the Part II application for a $1.9 billion Loan Guarantee through the Department of Energy’s Loan Program Office.

The American Chemistry Council (ACC) has estimated that the ethane storage hub would act as a catalyst for more than $36 billion in follow-on petrochemicals investments and the creation of more than 100,000 long-term jobs.

“The Appalachia Storage and Trading Hub is far beyond conceptual,” Hedrick said. “And we know beyond a shadow of a doubt that we can do this in a safe, environmentally sound and innovative way that enables our country to capitalize on this opportunity.”

U.S. Department of Energy

The U.S. Department of Energy (DOE) published a Report to Congress in December 2018: Ethane Storage and Distribution Hub in the United States.

The report highlights the potential in Appalachia for the development of a new ethane hub based on the tremendous low-cost resource from the Marcellus and Utica shales, and the accompanying security and reliability benefits derived from geographic diversity in the nation’s petrochemicals manufacturing base.

“There is an incredible opportunity to establish an ethane storage and distribution hub in the Appalachian region and build a robust petrochemical industry in Appalachia,” said U.S. Secretary of Energy Rick Perry at the annual National Petroleum Council Meeting in Washington D.C.

“As our report shows, there is sufficient global need, and enough regional resources, to help the U.S. gain a significant share of the global petrochemical market. The Trump Administration would also support an Appalachia hub to strengthen our energy and manufacturing security by increasing our geographic production diversity.”

This Report to Congress examines the potential for a hub by comparing it to existing ones that already service the Gulf Coast and Permian Basin, which account for most of the U.S. growth in NGLs outside of Appalachia.

In addition, market analysis from the report emphasizes that the development of an Appalachian hub may offer a competitive advantage for the U.S. to gain global petrochemical market share while not conflicting with Gulf Coast expansion. The report explains that a new Appalachian hub would enhance the geographic diversity of the vital US petrochemical industrial sector, supporting U.S. economic security.

“This (government) report further independently validates the strategic importance of the Appalachia Storage and Trading Hub and the positive impacts it will have on our country and our allies around the world,” Hedrick said.

“Ensuring the opportunity for geographic diversification of the nation’s chemical manufacturing assets, while leveraging the regional resources in Appalachia in the safest, most efficient manner possible, provides a truly unique opportunity that demands public-private collaboration to see it forward,” Hedrick added.

There is much to be done, and much is being done to advance on all fronts, Hedrick said.
“Of critical importance is the establishment of this infrastructure, and for it to be constructed on a similar timeline with the development of the chemical industry,” Hedrick said.

“We must also ensure excellence in work force preparation and the development of support structures for the construction trades,” Hedrick said. “Lastly, the Title XVII authority granted to the Department of Energy and its Loan Program Office must be maintained, and even expanded to enhance our country’s advancement in this area.”

By Heather Doyle