When the global oil giant Royal Dutch Shell finalized its plan for a massive, $6 billion petrochemical plant on the banks of the Ohio River in far western Pennsylvania in the summer of 2016, an ecstatic Gov. Wolf called the scheme “a game-changer” for the state.
In a series of interviews, the then-first-term Democrat said he was “elated" at what he called the largest private investment in the Keystone State since World War II and a reversal of fortune for the beleaguered blue-collar workforce in the greater Pittsburgh region. And America’s fifth-largest state was throwing its own weight behind the project, thanks in large part to a massive tax break for then highly profitable Big Oil icon that had been estimated by experts as worth $1.7 billion over 25 years and which had been approved under Wolf’s GOP predecessor Tom Corbett. The state also declared the site a Keystone Opportunity zone — another tax break — and invested in roads, site development and job training.
Four years later, the Shell project — seeking to use ethane from fracking sites in Pennsylvania and nearby to make consumer plastics — is pushing forward, but other big petrochemical projects that threatened to make the Ohio Valley look, for better or worse, like Houston, appear to be on hold. The fracking industry is bracing for a wave of bankruptcies. Indeed, the whole fossil-fuel industry was looking bad even before the recent stunning collapse of global energy prices — for a few remarkable hours, the futures price of a barrel of West Texas crude was less than zero — and that will likely have huge economic consequences for Pennsylvania.
Instead of a “game-changer,” was everything the state experienced over the last decade-plus — including the thousands of ugly fracking rigs that dotted the rural landscape, and the The Graduate-like touting of “one word ... plastics” as our future — really just a shell game? (Pun intended.) And beyond the shaky economics that at its worst reeks of the subprime mortgage crisis, can there be any moral justification in a time of climate change, and when the world is increasingly littered with plastic gunk, for Pennsylvania’s relentless, short-sighted embrace of fossil fuels as its salvation?
A report released earlier this month by the Center for International Environmental Law — warning the U.S. government that bailing out Big Oil, Gas and Plastics with coronavirus relief dollars would be “an unfillable sinkhole” — spells out why the pipe dream for state officials of plastics plants using fracked-in-Pa. natural gas lining the banks of the Ohio may be just that, a dream. The report argues that industry estimates of an ever-rising global demand for plastic products like those to be manufactured by the Shell ethane cracker and its competitors were bogus — even before the pandemic crashed the economy.
“The whole push to build out this massive infrastructure for new plastic capacity has been driven not by any existing demand for plastics” — either in the U.S. or in international markets, Carroll Muffett, the president and CEO of CIEL, told me in a phone interview. “It’s driven by this flood of very cheap gas. The industry had this massive resource and they needed something to do with it.”
This is the shell (or Shell) game I mentioned earlier. The rise of fracking in the 2000s — with more than 10,000 supposedly active wells in Pennsylvania’s gas-rich Marcellus Shale formation — made America again the world’s largest energy producer. But the laws of supply-and-demand caused prices to plunge and triggered a desperate search for new markets. That meant schemes to ship natural gas abroad — the goal of divisive and arguably despised pipeline projects like Sunoco’s Mariner East 2 cutting through Philadelphia’s western suburbs — or to make plastics here at home.
CIEL’s Muffett said the oil-and-gas industry’s faith in this surging demand for consumer plastics was based on theories that Millennials would embrace plastics — when in reality this environmentally conscious generation hates them — or there’d be massive new demand in the Southern Hemisphere, when in fact most African nations banned single-use plastic wrapping even before Europe did. Now, Muffett said he’s seeing the industry making a pathetic effort to use the coronavirus crisis and fear of germs to push new uses for plastics. “They’ve even suggested maybe we should shrink-wrap apples and bananas,” Muffett said.
Good luck with that.
The reality is that both job-hungry politicians and greedy Wall Street investors have been engaged in years of magical thinking, convincing themselves there was an ever-rising demand for fossil fuels even as the ticking of the climate-change bomb grew louder. The journalist Bethany McLean — famous for her role in exposing Enron’s financial con job 20 years — has found some of the same dubious accounting practices in the steady growth of U.S. oil-and-gas production, leading to a wave of bankruptcies (even before the recent price plunge) and more misery looming, with a staggering $100 billion in debt accumulated by wildly optimistic drillers coming due the next four years. “In reality, the dream was always an illusion, and its collapse was already underway,” she wrote in the New York Times as the coronavirus hammer fell.
Some estimate that 70 percent of America’s shale drillers will go bankrupt, with massive layoffs. Here in Pennsylvania, while the Shell ethane cracker is steadily rising — and with state officials even allowing some limited construction to resume despite the coronavirus shutdown — other plastics plants on the drawing board for western Pennsylvania or nearby may never be built.
One has to wonder, though, when Pennsylvania’s political leaders will catch on to the new reality. Although it’s been forgotten amid the global pandemic, the governor and his progressive-on-everything-except-fracking lieutenant governor, John Fetterman, are still technically pushing a plan to fund the state’s desperately needed infrastructure projects through a 20-year tax on fracking. That would mean a Keystone State locked into fossil-fuel production well beyond the date that scientists say it needs to be dramatically curtailed to prevent climate catastrophe.
Of course, Pennsylvania’s Republicans are even worse on fracking. Top GOP lawmakers are still insisting they will try later this year to override Gov. Wolf’s veto of House Bill 1100, a measure aiming to give even more taxpayer subsidies — hundreds of millions or even billions of dollars — to petrochemical plants like the Shell facility, were they to ever be built here. The economic stupidity of measures like this is only topped by the amorality, in an era when the planet is already grossly polluted by literally trillions of tiny plastic nurdles of the type that would be produced by Shell and by a massive wad of floating gunk in the Pacific.
Enough already! It’s way past time for Pennsylvania’s political establishment to end the corporate welfare and let the actual free market of capitalism have its way with the dying fossil fuel industry. It’s harder work than signing off on tax breaks written by your lobbyist pals, but both Wolf, who has been “just OK” on alternative energy, and the AWOL Legislature need to fully embrace wind and solar — and the real, lasting jobs that could be created in that sector, as opposed to the paper fantasies of Wall Street kleptocrats. When “Less Than Zero” is no longer an Elvis Costello deep cut but the actual price of Texas crude, that ought to be your wake-up call. The age of fossil fuels in Pennsylvania is finally over.
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