Shale Gas Fuels Gulf's Chemical Industry

  • The BASF facility is part of an expansion in the petrochemical industry that promises $129 billion in new investments nationwide as a direct result of shale gas. Photo: Reid R. Frazier

  • Carver Terrace public housing project where asthma rates are high. Carver is surrounded by refineries and chemical plants that emit 3.9 million pounds of toxic chemicals a year. Photo: Reid R. Frazier

  • Jason Warrior and his 6-year-old daugher, Makayla both suffered from asthma since moving to Carver Terrace. Photo: Reid R. Frazier

This is the first story in our 4-part series, The Coming Chemical Boom, funded in part by the Fund for Investigative Journalism. Part 2 looks at how Houston struggled to clean its air.

EXPANSION BRINGS JOBS AND AIR QUALITY FEARS, WILL PENNSYLVANIA SEE THE SAME WITH A BEAVER COUNTY PLANT?

October 18, 2013

PORT ARTHUR, Texas -- Standing beneath a tangle of pipes, ductwork, and grated catwalks at BASF’s massive ethylene unit in this small refining city on the Gulf Coast, Andy Miller pointed to a large metal box a few feet above his head. Inside, a fire burning at 2,000 degrees Fahrenheit produced an industrial-scale whine.

“If you look up into this little peephole, you’ll be able to see some of the firing,” Miller said.

The orange glow is just one sign of an historic transformation occurring in the U.S. chemical industry and stretching from Western Pennsylvania to the Texas coast. The plant is a partnership between BASF, which owns 60 percent, and the French company Total, which owns 40 percent.  It was recently modified to pipe ethane—a key component found in natural gas, especially in shale formations—through its furnaces.

The plant can make more than two billion of pounds a year of ethylene, a key component of plastic that’s used in everything from diapers to antifreeze to plastic bags.

This is where the building blocks for those products begin, said Miller, a manager for BASF. “It starts here.”

Miller’s plant is one of several around the country that have expanded to take advantage of shale gas. In addition, six brand new “world-scale” crackers—where ethane is ‘cracked’ to form ethylene—are slated for construction in Texas and Louisiana.

Royal Dutch Shell has proposed building a cracker plant in Western Pennsylvania, in the heart of the ethane-rich Marcellus Shale. It would be the first ethane cracker of its size in the Appalachian region. The company has a land option for a property in Monaca, Pa., in Beaver County and has recently solicited bids for contracts from local ethane producers while it evaluates the site.

The state has promised more than $1 billion in tax breaks over 25 years to the project, which Shell said could provide up to 10,000 jobs at the height of construction.

A Key Switch

It wasn’t so long ago that Miller’s employer, BASF, couldn’t have used any natural gas here. The plant was built in the 1990s to convert naphtha—a crude oil byproduct—into ethylene. It was one of the biggest such facilities in the world, capable of making 2.45 billion pounds of ethylene, enough to make a quarter trillion of plastic bags a year.

But in the late 2000s, the “shale gale” flipped the script for the U.S. chemical industry. Once $12 per thousand cubic feet, natural gas dropped to between $3 and $4. Almost overnight, the shale gas revolution made the U.S. one of the cheapest places in the world to make plastic. The industry took note, and went on its current building boom.

Fracking, the horizontal drilling process used to extract natural gas from shale, has completely revived the prospects of the American chemical industry, experts say.

“It is a huge deal,” says Joe Chang, global editor of ICIS Chemical Business, a trade weekly. “It’s a great amount of expansion, all based on the premise that you’re going to have these low-cost natural gas feedstocks for a long time.” 

ICIS estimates that the U.S. capacity to make ethylene—the “big daddy” of petrochemicals—will expand by a whopping 38 percent in the next few years, with plants planned from Freeport, Texas, to Louisiana to Beaver County, Pa.

“It really has changed everything for the U.S. chemical sector,” Chang said.

From Bust to Boom

Until recently, petrochemical plants were closing in the U.S. Dow Chemical mothballed a plant in St. Charles, La., in 2009.

Chang said companies trying to take advantage of lower cost fuels in the late 90s simply overbuilt. By the early 2000s, “you had incredible overcapacity,” he said. Companies were flooding the market with ethylene. “It was probably the worst industry downturn in history.”

The shale gas revolution changed all that. That’s because most of the world makes ethylene out of crude oil. In the U.S., natural gas usage has climbed in recent years from 50 percent to 80 percent of the chemical industry’s raw material, according to a report from IHS.

There is so much ethane flowing out of wells from shale formations like the Marcellus in Pennsylvania and the Eagle Ford in Texas that the chemical industry can’t use it all right now, Chang said.

“It just creates a huge margin opportunity,” said Russell Crockett, an industry veteran. The margin—or difference in cost of plastic made in the United States compared with Europe or Asia—is “advantage North America,” Crockett said. “That margin opportunity today is unprecedented.”

Other chemical makers that depend on natural gas—like producers of fertilizer—also are building new plants. In the next five years, the industry expects to build or refit about a dozen plants.

An industry-funded study from research firm IHS estimates that the chemical industry will make $129 billion in new investments nationwide as a direct result of shale gas, adding more than  50,000 permanent jobs to a workforce of around 800,000.

Shell’s cracker in Beaver County could include separate units that further refine the ethylene into products that go into packaging, fibers and other chemicals. Costs have been estimated at around $2 or $3 billion, though Kimberly Windon, Shell’s spokeswoman, said the company is not disclosing the exact amount.

The project could add 10,000 jobs during construction and 17,000 indirect jobs as other chemical companies and suppliers come into the area once it’s completed, said Steve Kratz, spokesman for the state’s Department of Community and Economic Development. The Shell plant could attract companies that make rubber, sealants or PVC pipes.

“The goal would be to bring in an entire new industry cluster to that region,” Katz said.

A typical “world-scale” ethane cracker costs in the neighborhood of $5 billion to build, and creates about 10,000 jobs during construction. But since plant operations are heavily automated, they only create between 350 and 1,200 permanent jobs.

Dan Borne of the Louisiana Chemical Association, echoed Katz’s point about the multiplier effect of the plants.

“If you would take a rock and drop it in a pond, that rock would make a splash and then there would be ripples,” Borne said. “That’s what happens with these chemical plants. One job … creates five others working for contractors, suppliers, the people who make the pumps and valves needed to make those plants run.”

DeBusk Services Group, which cleans out pipes in refineries and chemical plants in Port Arthur, is an example of a business that’s benefitted from the expansion of the chemical industry.

“There’s more equipment to clean now,” said Randall Delahoussaye, safety director for the company’s Port Arthur facility. “It’s helped everybody.”

Delahoussaye said the Port Arthur region suffered after the BP oil spill cooled off drilling in the Gulf. That meant less work at refineries in the area. But the expansion of nearby petrochemical plants in nearby Beaumont and Orange, and the return of offshore drilling have kept his shop humming.

”There’s a whole lot of motels in the area, the businesses stay packed, so the area around here’s been booming pretty good,” said Delahoussaye,

The rebound in the region’s chemical sector means more work for his crew of 50 or so.

Air Quality Worries

The expansion of chemical plants in the Gulf is good for the economy. But it’s happening in a region where the industry has a mixed environmental record.

Ethylene plants can emit high concentrations of volatile organic compounds, a key ingredient in ground-level ozone, as well as hazardous air pollutants like benzene, a known carcinogen. 

After struggling with bad air for years, Port Arthur currently meets federal health-based air quality standards for pollutants like ozone. New plants must still demonstrate they are using the best pollution control devices available, and many are installing sophisticated leak detection systems to prevent emissions.

BASF, for instance, has rented helicopters equipped with infrared cameras to look for fugitive emissions, plant manager Masica said. It also has a crew of workers who continuously inspect the plant’s 105,376 valves, flanges, and other places where leaks can occur.

Still, the city’s refineries and chemical plants are responsible for around 3.9 million pounds of toxic pollutants a year, according the U.S. Environmental Protection Agency. In August, an ethylene plant run by Flint Hills Resources, a subsidiary of Koch industries, reported a leak of nearly 600 pounds of hazardous air pollutants.

Hilton Kelley, a community activist in Port Arthur’s predominantly black West Side worries the air --though better than it used to be--is still bad for people who live here.

“We have babies that have to use nebulizers, take breathing treatments—we’re talking infants,” said Kelley.

At Carver Terrace, a public housing project bordered by the country’s largest oil refinery, Kelley’s community group, Community In-Power & Development Association conducted a door-to-door survey in the neighborhood in 2009 and found one in four households here has a child with asthma. A public health study from a decade ago found residents in Carver Terrace had much higher rates of respiratory illness and heart problems than those in a nearby city.

Jason Warrior, a 28-year-old resident of Carver Terrace is among those who worried about the emissions.  Shortly after moving in, he and his six-year-old daughter Makayla began having breathing problems.  She uses an asthma pump twice a week. 

“I’m from Houston. I’ve been down here for three years.  When I came down here my asthma and stuff started acting up,” Warrior said.

These apartments are slated to be torn down. Some of them have mold inside them, which can also exacerbate breathing problems. Warrior doesn’t know for sure what’s causing his problems, but he thinks it the dark smoke he sometimes sees coming out of the plants have something to do with it.

The smoke comes during unplanned events—like a power outage—when a unit is forced to burn off chemicals and fuel for safety reasons such as an April 14, 2013 power outage that caused facilities like Motiva Enterprises LLC to flare.  

 

 

 

Sometimes Warrior said, the flares at the plants light up the streets in the middle of the night.

“Probably like 2, 3 in the morning—something like that? They start burning them off. You’ll see the whole apartments around here just light up.” 

 

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Transcript

Royal Dutch Shell has proposed building a petrochemical plant in Western Pennsylvania (Monaca, in Beaver County), in the heart of the ethane-rich Marcellus Shale.  The facility would convert natural gas into a building block for plastics and chemicals. To see what could be in store for Pennsylvania, The Allegheny Front’s Reid Frazier went to the Gulf Coast, where the natural gas boom is fueling a resurgence in petrochemicals.  The 100 billion dollar expansion has given some high hopes for the economy along the Gulf, but others are worried about the environmental costs of the industry. To begin his four part series, Reid visited a refinery town along the Gulf: Port Arthur, Texas.

FADE IN AMBI OF CRACKER.

FRAZIER: Standing beneath what looks like an enormous HVAC system, Andy Miller points to a large metal box above him. A furnace burns at 2,000 degrees Fahrenheit inside the box.

MILLER: “If you look up into this peep hole, you’ll be able to see some of the firing that goes on within a furnace.”

FRAZIER: I look up into a hole the size of a quarter. There’s an orange glow coming from inside.

MILLER: “But...as you can see, This is where we actually crack the material into the products we desire.”

FRAZIER: Miller is a unit manager for BASF at the company’s plant in Port Arthur, Texas. The plant here makes ethylene--it’s like the granddaddy of all plastic, and many chemicals as well. You know that milk jug you’ve got in your fridge? Or the antifreeze in your car? All of it started its life in a place like this.

MILLER: “This is where we start to build the building blocks to make those products.” 

FRAZIER: The plant was built 15 years ago to process crude oil into ethylene.
But it recently underwent a facelift. It added some new equipment. Plant manager Greg Masica points me to some of it.

MASICA: “What you see over here with this whole unit is a vaporizer.”

FRAZIER: The vaporizer takes ethane -- a key component of natural gas, and readies it for processing. The cracker heats the ethane up so hot that it cracks--literally, the molecular bonds holding it together--that have actually held it together for aeons-- break apart, and form into ethylene.
When the plant was built, oil was preferred as a feedstock for the plant--natural gas was too expensive.  But that changed a couple of years ago--thanks to a drilling boom brought on by fracking. Once $12 per thousand cubic feet, natural gas dropped between $3 and $4 in the last few years.

As a result, chemical plants around the Gulf are expanding, or switching to natural gas. Shell’s proposed ethane cracker in Beaver County, in Western Pennsylvania, is one of seven brand new ethane crackers planned for the United States. That plant would take ethane from the Marcellus shale and convert it to ethylene.

Industry experts all agree--fracking is good news for the American chemical industry.

CHANG: “It is a huge deal. It’s a great amount of expansion, all based on the premise that you’re going to have these low-cost natural gas feedstocks for a long time.” 

FRAZIER: Joe Chang is global editor of ICIS Chemical Business, a trade publication. Chang estimates the industry will expand in the U.S. by a whopping 38 percent in the next few years.

CHANG: “It really has changed everything for the U.S. chemical sector”.

FRAZIER: Almost overnight, America has become one of the cheapest places in the world to make plastic.  That has the petrochemical industry here giddy. It’s planned over $100 billion in investments in new capacity, and predicting a big jobs impact. But few of these jobs will actually occur at the plants themselves.

After all, a new plant only needs a few hundred workers to run it. But there are lots of other jobs that are created outside of the plant itself. 

RAISE AMBI of garage

A few miles from the BASF plant, workers at DeBusk Services Group take a break between service calls. Randall Delahoussaye (Dell-a-WHO-see) is the safety director for the shop. He said the Port Arthur region suffered after the BP oil spill cooled off drilling in the Gulf. But drilling’s coming back, and expanding petrochemical plants, like DuPont, have kept his shop, and the local economy, humming.

DELAHOUSSAYE: ”There’s a whole lot motels in the area, the businesses stay packed, so the area around here’s been booming pretty good.”

FRAZIER: His company uses industrial pressure washers clean out pipes at big chemical plants and refineries. More plants, and more units means more work for his crew of 50 or so. 

DELAHOUSSAYE: “As they put in more exchangers, more towers, it’s just more things to break. To go in and clean.”

FRAZIER: The expansion of chemical plants in the Gulf is good for the economy. But it’s happening in a region where the industry has had a mixed environmental record. Port Arthur is an oil town, and the city is ringed with a dozen industrial plants and refineries. The city used to routinely fail to meet federal air quality standards. But it’s met those standards the past 8 years, because companies have cut down their omissions. And new plants have to demonstrate they’ll use tighter pollution controls before they’re allowed to build.

But the plants in Port Arthur still release nearly 4 million pounds of hazardous chemicals into the air a year, according to the EPA. That has some who live around the plants worried the air is bad for them.

Jason Warrior is 28. He lives in Carver Terrace, a public housing project in the city’s predominantly black West side.

WARRIOR: “This is an asthma pump my daughter uses.”

FRAZIER: What’s your name sweetheart? A: Makayla.”

FRAZIER: Makayla, who is six, uses the pump twice a week. The neighborhood is near several chemical plants and the biggest refinery in the country. The EPA says the air quality here is good, but a door-to-door survey, conducted by a local community group found one in four households here has a child with asthma.

Warrior moved here three years ago to look for work in one of the plants, but hasn’t been able to find any. Both he and six year old Makayla got asthma when they moved here.

These apartments are slated to be torn down. Some have mold inside, which can also exacerbate breathing problems. Warrior doesn’t know what’s causing his problems, but he thinks the dark smoke he sometimes sees coming out of the plants have something to do with it.

The smoke comes during unplanned events--like a power outage – when a unit is forced to burn off chemicals and fuel for safety reasons. Smaller events can happen on a nearly weekly basis here, according to state records. Sometimes Warrior says, the flares at the plants light up the streets in the middle of the night.

WARRIOR: “Probably like 2, 3 in the morning--something like that? They start burning them off. You’ll see the whole apartments around here just light up.”

FRAZIER: It’s a sight that means jobs, and work for many in this community. With new plants in the works, it’s a sight that many along the Gulf--and possibly in Pennsylvania--will be seeing in the future.

In Port Arthur Texas, I’m Reid Frazier for the Allegheny Front.