Jan 7, 2018 5 min read

A natural gas storage project under construction in eastern Ohio that’s seen as a critical component to support the emerging U.S. petrochemical and plastic resin manufacturing in the Appalachian region was recently noted in a new publication from the U.S. Department of Energy.

Mountaineer NGL Storage LLC is a Denver-based privately held energy company this is developed, owned and operated by Mountaineer NGL Storage Project, based in Clarington, Ohio. The project, which has room for expansion in West Virginia, was developed and financed by the Merchant Banking division of Goldman, Sachs & Co. in direct response to the need for natural gas liquids or NGL storage in the Appalachian Basin.

The project is a regional effort and will directly connect to critical ethane-focused midstream and downstream infrastructure in West Virginia, Pennsylvania and Ohio.

The Mountaineer project was mentioned in the Energy Department’s “Natural Gas Liquids Primer,” released late last month, which focuses on the Appalachian Region. While noting that the opportunity to take advantage of the full economic value of NGLs produced in Appalachia has been identified by regional leaders, DOE said it prepared the primer to educate the public and enhance the discussion regarding NGL resources and related infrastructure in the Appalachian region.

The concept of a storage hub for NGLs, including ethane, was first described last summer during the region’s first conference on the idea that drew numerous energy industry executives to a daylong symposium in Southpointe.

While researchers from West Virginia University later confirmed that there are multiple geologic areas in the the tri-state area that are suitable for such a storage hub – which would be placed in large limestone or salt caverns – Mountaineer’s work has been leading the effort.

An essential bridge

The Mountaineer project is seen as a key anchor to a true regional Appalachian storage hub and will store much needed NGLs in the salina formation salt caverns with potential to increase substantially over time. According to DOE, the Mountaineer project provides an essential bridge between the prolific Utica and Marcellus shales and regional industrial project development.

The project’s location was also recently selected by WVU as a geologic site that would support a proposed Appalachian Storage Hub for ethane.

Mountaineer has already invested $20 million to date in its project to secure up to 3.25 million barrels of storage capacity that’s scalable to more than 10 million barrels. The company said in a press release it plans to spend $150 million over the next three to five years and, based on market demand, that investment could top $500 million in total private capital investment.

“We’re pleased to see that the federal government has identified the need for NGL storage in the region and specifically cites Mountaineer NGL Storage as part of this Natural Gas Liquids Primer,” said David Hooker, Mountaineer’s managing director. “We commend the DOE for providing this resource to help educate the public on the importance of keeping NGLs local to the region and believe our project is vital to help foster additional investment across the NGL supply chain.

Keeping NGLs here

“As this report clearly identifies, net exporting of NGLs is a certainty if we do not create storage solutions. Our company is the first to take real proactive steps to address underground storage in the Appalachian Basin.”

The reason for keeping more NGLs in the region is an economic one. According to a recent report by the American Chemistry Council, by 2025, West Virginia, Pennsylvania, Ohio and Kentucky “could see 100,000 permanent new jobs” from this developing industry in petrochemical and plastics manufacturing.

When business and economic development executives in Washington and Greene were recently asked about their outlook for the new year, many cited the construction of Shell’s $6 billion ethane cracker plant in Beaver County as a project they expect will positively impact development here. When completed in 2019, it will serve more than 70 percent of the North American polyethylene customers, all of whom are within a 700-mile radius of Pittsburgh.

A study released last year by IHS Markit found that the Appalachian Basin has the capacity to support as many as four additional ethane cracker plants, with a forecast of $2.7 billion to $3.7 billion in investments in NGL assets. That level of investment would have the potential to turn Southwestern Pennsylvania into a major petrochemical manufacturing hub.

But ethane storage hubs like the Mountaineer project will be the key to expanding the manufacturing base.

At the close of its release, Mountaineer noted that demand for its concept is already exceeding its expectations.

Last year, the company announced a successful open season which resulted in requests for more than three times the amount of its initial planned capacity.

“Recent reports by the American Chemistry Council and West Virginia University have all confirmed the need for NGL storage and the importance of keeping the natural resources local,” the company said. “The (Mountaineer) project will help ensure that NGLs remain in the region to be used locally by downstream energy consumers, such as petrochemical manufacturing.”