Category Archives: Economic Improvement

Ohio Cracker Plant Has a Website

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Man, these cracker plants move sloooow.  They’re awfully expensive, which is why they move slow.  Even spending $100 million dollars and then pulling the plug if the deal isn’t good is a good deal when you’re talking billions of dollars.  Here in West Virginia we’re hoping for a cracker plant of our own, but we don’t expect it for at least five years.

One good thing we can point at is that the cracker plant in Ohio now has a web site of its own.  Web sites are cheap relative to the size of this project, but it’s another step in the right direction.  Step by step by step these things will (hopefully) get built.

Parkersburg Cracker Plant News

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Cracker Plant

The proposed cracker plant for Parkersburg, WV is showing some more signs of life.  WV Department of Commerce Secretary Keith Burdette said that Odebrecht is expected to buy more land on site (link requires sign-in to read article) during this quarter of the year, so in the next two months.  While we still can only hope to be pleasantly surprised when/if they make a final decision, buying up property is a sign that there may be good news when that happens.

Royalty owners should all be pushing their legislators to do something to encourage Odebrecht to build this plant.  Turning the raw material into a more refined product before sending it out of state will bring more jobs and more stability to West Virginia’s economy.  That’s something we should all encourage.  Call or write your legislator.

Possible Alkylate Plant, Electric Plant

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One of the things that made the Marcellus shale so exciting for producers at the beginning of the Marcellus boom was that it was rich in natural gas liquids, including ethane, pentane, propane, and butane.  The latter can be refined into alkylate, an octane booster.  It is “key for cleaner burning gasoline” (.pdf).  More on mixing gasoline here.  So, changing butane to alkylate will help alleviate some of the environmental issues with burning hydrocarbons.  It won’t end it, of course, because hydrocarbons are still being burnt, but it will help.  Just another way that natural gas is helping improve things here in the good old U. S. of A.

All that said, MarkWest and Marathon are thinking about building an alkylation plant somewhere near an existing MarkWest plant in Jewett, Ohio.  Yes!  The more the merrier.  Use that natural gas up close to home.

On a related not, there’s a proposal to build a 550-megawatt gas-fired power plant in Elizabeth Township, PA.  The unusual thing about this plant is that the location is a contaminated industrial landfill.  Putting an energy plant on this site would be an excellent use of a bad resource.  It would kill two birds with one stone, putting to use difficult-to-use property and using abundant and cheap local natural gas to create needed electricity.

We hate to see the natural gas produced here in West Virginia not being put to its highest and best use.  Turning it into a final product close to home is much better than shipping it away as a raw product.  Now if only we could get a few more of these chemical plants, cracker plants, energy plants, and refineries located inside West Virginia.

 

West Virginia’s Economy Ranked Lowest in the US

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West Virginia really needs to take better advantage of the energy resources located in the state.  Here’s an article by Business Insider that says we have the worst economy of all the 50 states and the District of Columbia.  We’re Number 51.

Considering the energy resources located here, the low cost of living and the inexpensive employee costs, we should be able to do better.

Oil is a $30 per Barrel Commodity, and That’s Good News for West Virginia

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We don’t often run across a good rule of thumb that we don’t know at this point.  Here’s one that’s new.  Outside of some occasional spikes, oil will always hover around $30 per barrel when adjusted for inflation.

There are a couple of other items of interest in this article by Anya Litvak of the Pittsburgh Post-Gazette.  The big takeaway for everybody, though, is that $30 figure for the inflation-adjusted price of oil.  When oil prices start to rise, we can know they will drop.  How it got to over $100 per barrel for a while there is beyond my ken.  It stayed there for quite a while, too.

Taking a look at the historical values for WTI crude oil prices, you can see some lengthy spikes.  Make sure to remove the options for “Log Scale” and “Show Recessions” just above the graph.  The interesting thing to note is that when prices climb above about $80 they usually stay up for about five years.  The major spikes were in 1980 and in 2008.  The major crashes were in 1985 and in 2009.  The crash just after 9/11 wasn’t as big as we would have expected.  Interestingly, the crash in 2009 was followed by a huge spike which lasted for about five years.

All of the major crashes look to me like they followed a stock market crash.  You’re welcome to correct me if I’m wrong.  The times when oil prices really did well were times when the economy was humming right along in the 1980s and when there was a lot of money being put into the economy by “easing”.  I don’t have the economic background to explain what was going on just before the 2009 crash, but I imagine someone reading this can explain that for us.

Regardless, the price of oil isn’t going to stay below $30 for long if it drops below that, and it’s not going to get back up to $100 any time soon.  I’ll be surprised if it gets above $50 per barrel any time soon, to be honest.  The frackers just have too many wells ready to produce when the price starts to rise.  I think this bodes well for the economy as a whole in the near future.  Cheap and less volatile energy prices are great for the United States economy, and probably for the world economy as well.

They heyday of ridiculously high bonus amounts for signing oil and gas leases is over.  Luckily in West Virginia the bonus amounts never got ridiculously high.  We’re still seeing bonus amounts surprisingly close to what we saw two years ago.  Royalty amounts are holding pretty steady, too.  It’s still a good time to own oil and gas mineral and royalty rights in West Virginia

New Pipeline Projects in West Virginia

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Gas Pipelines in Columbia

I was going to write up something about these new pipeline projects, but the folks over at Kallanish Energy already put together a good summary.

The Utica Access project is only five miles long and will come online at the end of 2016.  It will only move 205 million cubic feet per day and only down in Kanawha County, so it won’t impact production and royalty amounts much, if at all.

The WB Xpress will be an interesting project to watch, as it will move 1.3 billion cubic feet per day and will open in 2018.  There will be quite a few other project opening in 2018 as well.  2017 could be a very interesting year for West Virginia mineral and royalty owners whose rights aren’t leased.

Stonewall Gathering Pipeline Finished!

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Great news for West Virginia royalty and mineral owners!  The Stonewall Gathering project is complete and pumping gas out of the Marcellus Shale area.  It takes gas from Doddridge, Harrison, and Lewis counties and transports it to Braxton County where it connects with an existing Columbia Gas pipeline.  That pipeline takes the gas out of state.

It’s a big pipeline, at 36 inches in diameter, and is currently moving about 700 MMcf/day.  It’s highest capacity is expected to be 1.4 billion cubic feet of gas per day.  If it’s like other pipelines, it could probably be pushed a bit higher with some additional compressors.

The most pressing need in the Marcellus shale and Utica shale area is for take away capacity.  There is so much gas in the region that there simply aren’t enough pipelines to transport it all to market.  Consequently, pipeline companies can name their price to transport the gas, and they take a huge chunk of the value of the gas.  When all is said and done, Marcellus shale gas has been netting West Virginia producers more than a dollar less than what gas sells for at Henry Hub.

With more pipelines, the “differential” between Henry Hub and the Marcellus/Utica region will decrease.  That means more money in royalty owners’ and lessors’ pockets.  The Stonewall Gathering pipeline itself will not make a large difference.  Combined with other projects that should be completed in the next few years, though, we will start to see better royalty payments.

The Challenges of Converting Power Plants from Coal to Gas

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Here is an interesting article in the Pittsburgh Post-Gazette.  FirstEnergy closed down a coal-fired power plant in 2013, and had no plans to re-open it.  In the last few months, however, they have changed their minds.  At least, they have changed their minds about looking at the possibility of re-opening it.

The article states that market conditions have changed.  The price of electricity hasn’t gone up much, but the price of oil and gas has gone way, way down.  Who wants to bet that that one factor alone has reduced costs?

One other interesting point that was made in the article is that building a brand new gas-fired plant would (just a couple years ago) have been cheaper than converting the coal-fired plant to gas.

Five Facts About Fracking

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You won’t hear this phrase on this blog very often: the information in this article blew my mind.  Andrew Follett wrote an article published at the Daily Caller that describes five facts about fracking that haven’t gotten much traction in the news.  Most of them are extremely interesting.  The point about Russia’s economy shrinking because we no longer rely on their oil could have both good and bad long-term effects.  Click on over and read.  It’ll make you think.

Oil Prices Will Not Recover Soon

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In this article in the Wall Street Journal, you can see that the price of oil is not going to jump up any time soon.  Any industry that relies on high oil prices to get by is going to have a bad couple of years.  Luckily there aren’t very many industries that rely on high oil prices.  There are quite a few more industries which do significantly better when oil prices are low.  Also, American consumers benefit greatly when oil prices are low.  It seems that America and maybe the world in general is going to have a pretty hot economy in the next couple of years, just because energy is going to be so affordable.  While this firm may suffer some in the short term, we expect to benefit from an improved economy.  Here’s to shale development and the Saudi war on shale!