This story was originally published on October 18, 2013.
Standing beneath a tangle of pipes, duct work and grated catwalks at BASF’s massive ethylene plant in Port Arthur, Texas, Andy Miller points to a large metal box a few feet above his head. Inside, a fire burning at 2,000 degrees Fahrenheit produces an industrial-scale whine.
“If you look up into this little peephole, you’ll be able to see some of the firing,” Miller says.
The orange glow is just one sign of a historic transformation occurring in the U.S. chemical industry that’s now playing out in places stretching from western Pennsylvania to the Gulf 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.
Annually, the plant can make more than 2 billion pounds of ethylene—a key component of plastic that’s used in everything from diapers to antifreeze. Miller says the super hot furnaces at BASF’s facility are where the building blocks for those products begin.
LISTEN: “How Shale Gas Feeds the Gulf’s Petrochemical Industry”
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 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 says 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 facilities of its kind in the world—capable of making more than 2 billion pounds of ethylene. That’s enough to make a quarter trillion plastic bags a year.
But in the late 2000s, the development of so-called “shale gas” changed the game 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.
According to industry experts, fracking—the horizontal drilling process used to extract natural gas from shale formations—has completely revived the prospects of the American chemical industry.
“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 feed stocks for a long time.”
ICIS estimates that the U.S. capacity to produce ethylene—the “big daddy” of petrochemicals—will expand by a whopping 38 percent in the next few years, with plants planned in Texas, Louisiana and western Pennsylvania.
“It really has changed everything for the U.S. chemical sector,” Chang says.
From Bust to Boom
Until recently, petrochemical plants were closing in the U.S. ICIS’s Joe Chang says companies trying to take advantage of lower-cost fuels in the late 1990s simply overbuilt. By the early 2000s, he says “you had incredible overcapacity.” 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. But in the U.S., the chemical industry’s use of natural gas as a raw material has climbed from 50 percent to 80 percent in recent years, according to a report from research firm IHS. In fact, 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 says.
“It just creates a huge margin opportunity,” says Russell Crockett, an industry veteran. The margin—or difference in cost of plastic made in the United States compared to Europe or Asia—gives North American producers a huge advantage. “That margin opportunity today is unprecedented.”
Other chemical makers that depend on natural gas—such as fertilizer producers—are also building new plants. In the next five years, the industry expects to build or retrofit about a dozen plants.
An industry-funded study from 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. Construction costs have been estimated at around $2 or $3 billion, though Kimberly Windon, Shell’s spokeswoman, says the company is not disclosing the exact amount.
Steve Kratz, spokesman for the state’s Department of Community and Economic Development, says the project could add 10,000 jobs during construction and 17,000 indirect jobs as other chemical companies and suppliers come into the area. For example, 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,” Kratz says.
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 Kratz’s point about the multiplier effect of the plants.
“That’s what happens with these chemical plants,” Borne says. “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 has benefited from the expansion of the chemical industry.
“There’s more equipment to clean now,” says Randall Delahoussaye, safety director for the company’s Port Arthur facility. “It’s helped everybody.”
Delahoussaye says 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 petrochemical plants in nearby Beaumont and Orange—along with the return of offshore drilling—have kept his shop humming.
“There’s a whole lot of motels in the area,” says Delahoussaye. “The businesses stay packed, so the area around here’s been booming pretty good.”
The rebound in the region’s chemical sector means more work for his crew of around 50.
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 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. It also has a crew of workers who continuously inspect the plant’s more than 100,000 valves, flanges and other places where leaks can occur.
Still, the city’s refineries and chemical plants are responsible for around 4 million pounds of toxic pollutants a year, according to 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 from 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,” Kelley says. “We’re talking infants.”
WATCH: A ‘Flaring’ Event in Port Arthur, Texas
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 and found one in four households there has a child with asthma. A public health study from a decade ago also 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 worry 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,” Warrior says. “When I came down here, my asthma and stuff started acting up.”
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 the dark smoke he sometimes sees coming out of the plants has 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 says, the flares at the plants light up the streets in the middle of the night.
“Probably like two or three in the morning—something like that,” he says. “They start burning them off. You’ll see the whole apartments around here just light up.”
This story is part of our series “The Coming Chemical Boom,” which is funded in part by the Fund for Investigative Journalism.