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Despite Low Oil Prices, Shell Moves Forward With Pa. Petrochemical Plant

RENEE MONTAGNE, HOST:

The oil and gas giant Shell recently announced it will spend billions of dollars building a large petrochemical plant about 30 miles west of Pittsburgh. The plant will make the building blocks of plastic out of the natural gas that comes from fracking. It's the first of its kind outside the Gulf Coast. Because the oil and gas industry is struggling, Shell is using a new source of raw material to try to redraw the map of the American chemical industry. Reid Frazier of Allegheny Front reports.

REID FRAZIER: On the banks of the Ohio River, Shell is betting big on a chemical plant. Right now what you see is just a big, dusty construction site that stretches for several football fields deep and several football fields wide. But in a few years, you'll see towers and smoke stacks and pipes running all through this complex for hundreds of acres. Shell won't say how much it's spending on the project, but experts say it'll run into the billions.

The plant is called an ethane cracker. It makes a common plastic out of ethane, a type of natural gas. Kendall Puig follows the natural gas market for the financial publisher Platts Analytics. She said she was caught off guard by Shell's June announcement that it was going ahead with the project even as oil prices and profits for oil majors like Shell are down.

KENDALL PUIG: With the fall in oil prices and the uncertainty around commodities, I was pretty surprised that they chose this moment in particular to announce it.

FRAZIER: But Shell is getting a billion-dollar tax credit from Pennsylvania. Plus, it'll be taking advantage of the region's abundant and cheap supply of ethane. A lot of it just gets burned as fuel instead of getting used to make chemicals. So basically, that ethane has been wasted here.

DAVE SPIGELMYER: Certainly, it creates a demand for the product when there is not a demand for the product today.

FRAZIER: Dave Spigelmyer is president of the Marcellus Shale Coalition, an industry trade group. Spigelmyer's group represents dozens of companies that drill for natural gas in the state, including Shell. Shell itself declined to comment for this story. But Spigelmyer says there aren't enough pipelines to get this gas out of Western Pennsylvania to chemical plants in the Gulf Coast. So instead of building a pipeline to move the gas, Shell is moving the refinery closer to the supply.

SPIGELMYER: Well, I think it breaks a mold. I mean, the Gulf Coast states have historically been kind of the petrochemical center of the United States, and I think it's fair to say that there is a new chapter being written right now.

FRAZIER: Environmental groups worry about the plant's impact on air quality. Pittsburgh still fails to meet federal air standards, so these groups are pushing for the company to closely monitor emissions at the plant. But many in the region say the cracker's economic stimulus is too great to pass up. Construction is expected to take five years and at its peak will employ 6,000 workers. The plant will create 600 permanent jobs.

UNIDENTIFIED MAN: Swing your hips. Try swinging your hips until you plant a leg. There you go. There you go. No slipping.

FRAZIER: At a training session from a local ironworkers union in Pittsburgh, apprentices practice climbing a steel beam. If they work on the cracker, they'll have to know how to shimmy up and down I-beams like this one. After his climb, Preston Beton, a fourth-generation ironworker, said he's excited about the prospect of working on the cracker.

PRESTON BETON: Anything where you're guaranteed work for any extended amount of time, you want to get on with something like that - better than jumping around from place to place.

FRAZIER: And he could have work for years to come since Shell says it will need a thousand ironworkers to build the cracker. For NPR News, I'm Reid Frazier in Pittsburgh. Transcript provided by NPR, Copyright NPR.