Shell to buy Horsehead plant in Beaver County

The division of Dutch chemical and energy giant Royal Dutch Shell is exercising its option on Beaver County property as it moves ahead with evaluating the site for a possible Appalachian ethane cracker plant — a multibillion dollar facility that would turn the natural gas liquid into ethylene, a feedstock for petrochemical production.

“This is a good decision but it does not mean that we have [made] the investment decision to proceed with the project,” said Ate Visser, the vice president with Shell Chemical who has been the lead on the Marcellus cracker project since May.

Several things need to line up before Shell’s top brass can make a final investment decision.

The company is in the midst of engineering and design. Major permits, such as a state air permit, must be in hand. Only then will the Appalachian cracker project be stacked against other such plants in the Gulf and against other investment opportunities in Shell’s portfolio to inform a final decision on whether the project makes economic sense.

And many of the permits Shell is seeking require it to be the owner of the property, officials said, explaining the timing of the land purchase.

Mr. Visser declined to give a price for the property and said there is no closing date set for the deal.

Site of the plant.
(Click image for larger version)

Shell is pursuing regulatory approval from the U.S. Army Corps of Engineers to build a dock for barge access to the proposed facility.

The Pennsylvania Department of Environmental Protection is reviewing a major air permit for emissions from the potential cracker plant. Public hearings are likely to be scheduled for early 2015, said agency spokesman John Poister.

The entire evaluation process has been dragging on since the spring of 2012, when Shell signed an agreement with Horsehead for the option to buy the 340-acre property. The company has since extended that option three times, paying a total of $3.9 million for the extensions.

It bought a warehouse across the street from the Horsehead site for $1.87 million.

More than a year and a half ago, Shell began approaching property owners along Route 18 — both businesses and residents — with agreements to give the company the option to buy their land.

Those agreements will now be exercised, Mr. Visser said. He declined to disclose how many properties will be sold to the chemical company. The company was scheduled to begin notifying landowners Thursday evening.

A year ago, Mark Petrik, owner of Midway Bar & Grill, which sits about a quarter-mile from the Horsehead plant, told the Post-Gazette that he signed such a deal and expected to run his restaurant through December of this year.

In January, Horsehead began demolition on the former smelter site, with Shell footing the bill. That's scheduled to be completed early next year.

If built, the cracker would gobble up about 105,000 barrels of ethane per day. The Appalachian region is rich with ethane, but other proposed cracker plants and pipelines that aim to transport ethane to Gulf Coast crackers or export it create competition for supply.

Shell has said it contracted with at least 10 area producers for ethane. “We feel we have a very good position,” Mr. Visser said.

“[We] believe there is ample supply of ethane in Appalachia to meet the prospective cracker projects and announced export facilities,” he said.

The land purchase announcement comes three days after Gov. Tom Corbett, who championed the cracker project and pushed through more than a billion dollars in incentives for the cracker, lost his bid for re-election to Democratic challenger Tom Wolf.

Speculation foretold that Shell would make its decision in advance of the election, but the company has always indicated its process would not submit to a political timeline.

"We are very grateful for the strong support that we have received from the state and local officials," Mr. Visser said.

Anya Litvak: or 412-263-1455.

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