by Bob Zaruta, President/CEO, NWIRC

You may have heard that a cracker plant will be built in western Pennsylvania, but are you aware of what this means to our region and could mean for your business? Last June, Shell Chemical Appalachia LCC selected a site in Monaca, PA  (Beaver County) to build a multi-billion dollar ethane cracker plant, the first to be built in more than 20 years in the U.S. that is not situated in the Gulf Coast area. It will include the cracker, polyethylene plants, water treatment facilities, and a gas-fired co-generation power plant. Project construction is underway and is expected to be completed by 2021.

In short, a cracker converts ethane into ethylene and then into different grades of polyethylene. The manufacturing chain continues with different grades of polyethylene as the raw material to create commonly used everyday products such as houseware goods, toys, diapers, trash bags, bottles, tires, solvents, paints and, related products to name a few. But, why here in Pennsylvania? The simple answer is ‘supply chain’. The natural gas deposits required to make ethane exist in the  Marcellus and Utica Shales and 70 percent of the polyethylene market is within 700 miles of the site. Shorter and more reliable supply chains mean increased opportunities and growth. Regional companies downstream of the ethylene supply chain are likely to benefit. Plastics and rubber products manufacturers, which is historically a major industry sector in Northwest PA, and chemical manufacturers are likely to realize the best opportunities followed by oil and gas extraction, wholesalers, and transportation and warehouse.

To paint a picture of what this could mean for our area, here is some background on a similar plant in Louisiana*. In 2014, Sasol began construction on an ethane cracker plant at their site in Westlake, LA (Calcasieu Parish region) and expect the plant to be operating in 2018. They have coined the initiative “Louisiana First” by committing to use the state’s businesses first for their procurement and contracting needs, as well as hiring local. As of June 2016 (per an infographic on their website), they have awarded contracts to 83 suppliers spending a total of $350M+. Of that, $75M is with the Calcasieu Parish suppliers, the region where the cracker plant is located. These stats demonstrate that over 75% of the spending is within the state, but outside of the area where the plant is situated. From this, we might conclude that there is plenty of opportunity for companies in in northwest PA.

While the Investment Phase (building of the facility) is expected to create 11,000 jobs, $727M in worker wages, and $42M in state tax revenue, the most significant long term gains will be in the Operation Phase (ongoing production). The plant is projected to create 17, 000 permanent jobs in the chemical industry and supply chain, more than $1.2B in wages for PA workers, and $140M in state and $240M in federal tax revenues. For small and mid-sized manufacturers, the exciting numbers are the industry revenue projections. While the Investment Phase is projected to generate $1.7B of industry revenue, the Operation Phase is projected at $8B. What opportunities exist for your company?

How do you best positon your company and what technologies, capabilities and improvements will be needed to gain a competitive advantage? How can your company’s existing and potential new offerings solve a customer problem? To win new business, these are some of the key questions to consider. The NWIRC can be a resource to help answer these questions. We can help you evaluate, plan, and pursue opportunities related to the new plant. The Investment Phase is still forth coming and the Operation Phase is a few years away, so you may be thinking “we have some time”. Perhaps, but as the old adage goes, “the early bird gets the worm”.

A forum will be held at Cross Creek Resort in Titusville on March 8th to discuss opportunities. Featured presenters are leaders from Louisiana to share experiences. I encourage you to attend and get more informed. Contact the Keystone Community Education Council at (814) 677-4427 or for more details. We hope to see you there!