ORVI Insider #27: The End of Appalachian Petrochemical Development?

 

The  latest news, research, and analysis from the Ohio River Valley Institute.

November 16, 2021

The Appalachian petrochemical buildout is on shaky ground. 

After years of industry-funded speculation about an Appalachian petrochemical hub and the thousands of jobs it would create, a new report from the Ohio River Valley Institute finds that new petrochemical development in the region is unlikely to move forward. 

A convergence of market forces, including sustained low plastics and polyethylene demand and shifting international trade dynamics, cast a dark shadow over future capacity additions. Prospective investors, fearful of sinking money into stranded assets, have fled new projects in the region.

The report finds that, even if such projects go forward, they are not likely to produce the economic benefits once predicted by industry supporters and hoped for by local communities. For these reasons, the region’s business leaders and policymakers would be wise to shift their focus from virgin plastics production to other strategies for economic development. 

Click here to view and download the full report. And keep reading for the latest news on energy finance and economic development from the Ohio River Valley Institute:

New Research

Poor Economics for Virgin Plastics: Petrochemicals Will Not Provide Sustainable Business Opportunities in Appalachia

 

 

New petrochemical development in Appalachia is unlikely to move forward as decisive shifts in the virgin plastics and ethane markets threaten the cost margins of new capacity additions. A new report from the Ohio River Valley Institute outlines the converging market forces likely to impede petrochemical expansions in Appalachia, suggesting that alternative economic development strategies are needed to generate job growth and shared economic prosperity in the region.

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Sloganeering Politicians and CEOs and the Myth of Energy Independence

 

 

Senior Researcher Sean O’Leary recalls the dire political appeals to ‘energy independence’ in the 1970s. While politicians framed it as an “existential necessity,” U.S. oil and gas companies actually cashed in on global oil price fluctuations incited by the Organization of Petroleum Exporting Countries (OPEC). O’Leary explains that true energy independence, the kind that would insulate the U.S. from global production cuts, would require decoupling domestic oil prices from global prices, which would lower the ceiling of American fossil fuel company profits.

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ORVI In the News

The New Steel? Hope and Fear as a New Plastics Factory Rises in Appalachia (NBC News) 

Facing unstable prices and uncertain demand for oil and gas, fossil fuel companies are looking to plastics to eke profit  The industry was “trying to determine, ‘OK, if we can’t make money with oil and gas extraction in the way that we could 20 years ago and the refinery business has become increasingly competitive and increasingly unprofitable, what is our future?'” said a senior researcher at the Ohio River Valley Institute, a progressive regional think tank, Kathy Hipple, a finance professor at Bard College’s MBA in Sustainability program. “Plastics or petrochemicals were seen as a lifeline.”

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Report Casts Doubts on Petrochemical Growth in Appalachia (Youngstown Business-Journal) 

Plagued by shifting international markets and increasingly uncertain demand in the long term, the financial future for virgin plastics looks “poor,” according to new research from the Ohio River Valley Institute. Report co-author Kathy Hipple explains, “the oil and gas industry, particularly natural-gas producers in Appalachia that have struggled for a decade, have ample reasons to support a petrochemical build out. But that should not dictate what is best for the region and its citizens.”

A flurry of market headwinds have dissuaded prospective investors from sinking assets into new petrochemical projects, particularly in Appalachia, for fear of ending up with stranded assets. The region is better off pursuing alternative development opportunities, the report concludes.

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West Virginia-Led Challenge to EPA Authority to Regulate Power Plant Emissions Threatens Climate Policy, Administrative Agendas (Charleston Gazette-Mail) 

West Virginia Attorney General Patrick Morrisey and a group of elected representatives from 18 states have filed a petition urging the U.S. Supreme Court to limit the authority of the national Environmental Protection Agency, Mike Tony reports. Morrisey characterized the move as essential to saving jobs and controlling electricity prices in coal-heavy West Virginia.

In reality, though, efforts such as Morrisey’s to prolong coal-fired power generation in West Virginia are “taking money out of the pockets of [residents], raising the cost of doing business, and discouraging companies that demand clean, affordable electricity from locating in the state,” explains Senior Researcher Sean O’Leary, who likened policymakers’ attempts to salvage and bail out uncompetitive coal-fired power plants to a major tax imposed on electricity customers. 

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Group Asks To Project Marshall County’s Economic Future (WTRF) 

Senior Researcher Sean O’Leary met with the Marshall County Commission and other local elected officials earlier this month to discuss opportunities for regional economic development that could generate lasting, shared prosperity. The Centralia Model for Economic Development, outlined in a recent ORVI report, highlights strategies for investment in clean energy, education, and energy efficiency that have produced an astonishing economic turnaround in a coal community in Washington State. Communities in the Ohio River Valley could be the next to benefit from a diversified, forward-thinking portfolio.

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Unlocking the Transition: Politicians Tout Renewable Energy Jobs for Ex-Fossil Fuel Workers, But It’s Not So Simple (Utility Dive) 

Sean O’Leary explains that jobs in the clean energy sector don’t always appeal—or aren’t always available—to workers who are losing jobs as coal mines and power plants close. A broader approach to the energy transition, including targeted investments in energy efficiency and education in addition to renewables like solar and wind, could create avenues to employment for fossil fuel workers, keep money in the local community, and boost flagging economies at the same time. 

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What We’re Reading

Ohio Utilities FirstEnergy and AEP Still Spending Big on Lobbying (Energy News Network)

Manchin’s Favorite Clean Energy Plan Could Be Obsolete Before It Starts (Bloomberg Green)

Fall 2021 Solar Industry Update (National Renewable Energy Laboratory)



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