Shell Cracker

Jim Willis on NGL Pipelines
Editor & Publisher, Marcellus Drilling News (MDN)

[Editor’s Note: The Shell Cracker will contribute $3.7 Billion of value to the Pennsylvania economy every single year says a Robert Morris University study of economic impacts.]

A new study prepared for Shell Chemical Appalachia earlier this year is just coming to light now. The study, researched by professors at Robert Morris University (RMU), calculates the impact on the Pennsylvania economy from the soon-to-be-completed Shell ethane cracker plant in Beaver County, PA. The numbers are staggering. Each and every year that cracker operates RMU projects the cracker will create $3.7 billion throughout the PA economy. Amazing! And it’s ALL private money–no government transfers from one taxpayer to another. Joe Biden should be jumping up and down and extolling this from the rooftops! Instead, he’s attacking fossil fuels.

President Trump viewing Shell Cracker construction

The Shell cracker uses ethane (a fossil fuel) as its raw material–the feedstock–to create ethylene plastic pellets. Ethane is an NGL (natural gas liquid) that comes out of the ground along with methane and other NGLs like propane and butane. Shell selected the location of the Beaver County cracker plant based on proximity to Marcellus Shale wells and the prolific amount of ethane generated from them.

The cracker plant is one of the biggest and best examples of how the Marcellus is contributing to the economy of PA (and Ohio and West Virginia).

While we don’t have a full copy of the study (we couldn’t locate one), RMU breaks down some of the numbers in the study. First up is an overview from the Pittsburgh Business Times:

A study by Robert Morris University prepared for Shell Chemical Appalachia earlier this year projects the company’s Beaver County petrochemical plant will provide $3.7 billion to the state’s economy every year.

It’s the second time RMU professors have provided a forecast of the Shell plant’s economic benefit. The first time estimated the construction benefits and that was in 2014, even before Shell’s parent company Royal Dutch Shell (NYSE: RDS.A) had made the final investment decision. The plant is expected to become operational in 2022.

The plant itself, when operational, will have about 600 employees, far fewer than the thousands that have been involved at various points of the construction. The study estimates $132 million in direct labor income from those 600 jobs, along with an increase of 11,197 jobs and $1 billion in total labor income when you consider the direct, indirect and induced effects of the cracker operational.

The plant will create $3.7 billion in economic value a year, the RMU study estimated, over the 40-year life of the facility. Tax revenue will be about $21 million a year in state income taxes and $7 million in local income taxes.

Not surprisingly, the study said the plant will have a big impact on Beaver County. The study said between 40% and 75% of the employees who will work at the plant will live in Beaver County. That contributes to between $260 million and $846 million in economic activity in Beaver County. It is forecast to be $3.3 billion a year for the 10-county region in Pennsylvania surrounding the Pittsburgh region.

Shell received about $1.7 billion in state tax credits to build the plant. The study didn’t take into account those tax credits, but Marcel Minutolo, a professor of strategic management and one of the authors of the study, said the return on investment was big.

“That is money that Pennsylvania wouldn’t have had otherwise, that policymakers can use for social programs or other benefits to the public good,” Minutolo said.

The RMU website posted this press release with some of the detailed numbers in the study:

The Shell petrochemical facility in Beaver County will generate nearly $3.7 billion annually in statewide economic activity, according to a study by professors at Robert Morris University.

Royal Dutch Shell began construction in 2014 on a petrochemical complex that will convert ethane into ethylene and ultimately polyethylene for use in manufacturing. The site occupies 800 acres in Potter and Center Townships, and is expected to be completed and operational by 2022. During the peak of construction, approximately 8,000 workers have been employed on the project, and the facility will have 600 workers once it is operational.

The RMU economic impact analysis was performed by Steve Clinton, professor of marketing; Marcel Minutolo, professor of strategic management; and Brian O’Roark, university professor of economics. The study is a follow up to the university’s 2014 analysis of the economic benefits likely to accrue from the facility’s construction.

In this most recent report, the authors used a popular economic impact software application called IMPLAN to forecast the total economic activity generated by operations of the facility over 40 years, as measured in 2020 dollars. (Forty years is a typical lifespan for a petrochemical facility of this type.)

The authors estimated the economic activity likely to be generated in Beaver County; in a 10-county region in southwestern Pennsylvania; and in Pennsylvania as a whole. Among their findings:

* In Beaver County alone, the complex produce $260 million to $846 million in annual economic activity – the net value of wages, benefits, and related spending — depending on the number of county residents who are employed at the plant. Local wage tax receipts would tally between $550,297 and $902,254 each year.

* The annual economic impact in the 10-county region would be approximately $3.3 billion. In addition to Beaver, those counties are Allegheny, Armstrong, Butler, Fayette, Greene, Indiana, Lawrence, Washington, and Westmoreland.

* In addition to the $3.7 billion in economic activity generated each year statewide, the commonwealth of Pennsylvania would collect an additional $23 million each year in state income tax. Over 40 years, the ethane cracker would produce $81.7 billion in economic activity statewide, with the commonwealth taking in an additional $515.4 million in income tax receipts.

The economic impact analysis did not take into account the cost of the state corporate tax credits that Shell is receiving, which totals approximately $1.7 billion. The RMU study demonstrates that the state’s return on that investment is substantial, according to Minutolo.

“That is money that Pennsylvania wouldn’t have had otherwise that policymakers can use for social programs or other benefits to the public good,” said Minutolo.

Shell commissioned RMU to perform the economic impact analysis but did not participate in the research. Minutolo noted that the analysis was performed entirely with publicly available information and could be replicated by others.

“We thank Robert Morris University for their thorough work in demonstrating Shell’s value to Beaver County, the greater Pittsburgh region, and the state of Pennsylvania,” said Shell Senior Vice President Hilary Mercer. “We are proud of the positive impact we are having on the local, regional and state economies, and we look forward to remaining a valued neighbor and employer of choice in the region for decades to come.”

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