Don C. Brunell: Abundant Natural Gas is Giant Step Toward Energy Independence

In the last half century, Americans yearned for energy independence. We were tired of being held captive by foreign governments--some of which continue to be hostile toward the United States and our way of life.

Thankfully, things have changed in the last few years.

The American Petroleum Institute (API) put it best. “Over the past decade alone, America has undergone a major energy revolution, rapidly shifting from an era of energy scarcity to an era of energy abundance”.

API believes advances in hydraulic fracturing—or “fracking”—in conjunction with horizontal drilling are responsible for the welcome boom. They made our country the world’s top producer of natural gas and unlocked more oil reserves than located in Saudi Arabia.

The American Chemistry Council (ACC) credits the surge in natural gas production with reversing the fortunes of our country’s plastics industry. Companies forced off-shore because of high domestic feedstock prices are returning home to abundant low cost natural gas.

ACC officials recently told the Wall Street Journal (WSJ) that $185 billion in new U.S. petrochemical projects are under construction or in planning. In 2016, expenditures in chemical plants alone accounted for half of all American capital investments. That is up from less than 20 percent in 2009.

It projects plastics will become the major driver of U.S. exports and net exports will more than triple by 2030--growing from $6.5 billion in 2014 to $21.billion. China, Mexico and South American countries are leading destinations.

Those exports bring money back to the United States and plastics investments are expected to support 2.7 million American jobs in the next decade. Plastics manufacturers pay workers nearly $85,000 annually with good benefits. That is comparable to what Boeing pays its machinists in Washington.

Plastics manufacturers in Washington directly employed over 6,600 workers in 2014 and supported 3,500 related jobs, according to ACC data. Those totals do not completely account for companies which mold plastic parts for their products nor investments made in the last two years.

Companies like Dow Chemical, are investing heavily in our country. Dow is completing $8 billion in new and expanded petrochemical facilities mostly located along the Gulf of Mexico.

It produces plastic pellets. “Some of the pellets are exported to Brazil, where they are reshaped into the plastic pouches filled with puréed fruits and vegetables,” the WSJ reports.

“Integrated oil firms including Exxon Mobil Corp. and Royal Dutch Shell PLC also are racing to take advantage of the cheap byproducts of the oil and gas being unlocked by shale drilling”. Those gases, once flared off at well sites, are now diverted to plastics production.

Foreign companies, often partnering with American firms, are also expanding petrochemical units in the U.S. They produce the materials eventually used to fashion car fenders, smartphones, shampoo bottles and other plastic products being bought more and more by the world’s burgeoning middle classes, WSJ added.

In addition, there are spinoff industries making plastics additives. ACC reported nearly $2.5 billion in new capacity is expected from expansion of ancillary plastics processing plants.

The U.S. is also exporting shale gas derivatives (ethane) to European countries, For example, in Scotland, petrochemical producers, such as Ineos, are running short of North Sea feedstocks used in the production of plastic products.

Ineos is now supplying its Grangemouth operation near Edinburgh with ethane made from U.S. shale gas. That gas is drawn from the Marcellus shale deposits in western Pennsylvania, converted to ethane in the Philadelphia area, and sent 3,500 miles by tanker ships across the Atlantic.

The bottom line: This is good news for America and Americans seeking well-paying jobs with benefits.

(Don C. Brunell is a business analyst, writer and columnist. He retired as president of the Association of Washington Business, the state’s oldest and largest business organization, and now lives in Vancouver. He can be contacted at [email protected].)