Federal Loan Guarantees are Out-of-Place for Risky & Unnessary Industrial Projects

House to Debate Amendment With Big Implications for Expanding Petrochemical Industry

From an Article by Sharon Kelly, DeSmog Blog, June 13, 2019

A recent Congressional amendment, which backers say will soon reach the House floor for debate, could have major ramifications for the petrochemical industry’s plan to move into the Ohio River Valley and start manufacturing plastics and chemicals in Appalachia.

The U.S. Department of Energy (DOE) is currently considering extending $1.9 billion in federal loan guarantees to the Appalachia Development Group, which submitted an application for loan guarantees through the DOE’s Title 17 Loan Guarantee Program in 2017.

The Appalachia Development Group would use that loan guarantee to build a $3.4 billion storage hub that could store over 10 million barrels of so-called natural gas liquids (NGLs), which can be used to make plastics and petrochemicals and are in high supply due to fracking in the nearby Marcellus and Utica Shales.

Green groups supporting the amendment say that those DOE loan guarantees are meant for energy projects — specifically those that cut down on greenhouse gas emissions — not for the petrochemical industry.

Petrochemical Expansion Prospects

The impacts if the amendment becomes law could be significant for Appalachia Development Group, all NGL storage hub builders, and, by extension, anyone who wants to build a plastics manufacturing plant in the region — as well as for the climate.

If built, an NGL storage hub could lay the groundwork for the future construction of four or five more plastic manufacturing facilities known as “ethane crackers,” like the massive plant that Shell is building in Pennsylvania.

“When you look at the ethane market that is developing, I just can’t imagine those plants operating without storage in that market,” Energy Storage Ventures’ David Hooker told the Associated Press in April.

Appalachia Development Group has said that it believes it qualifies for the loan, in part because it was invited by federal officials to enter the second stage of their application for the Energy Department backing.

“Proposed projects mandatorily must meet the necessary requirements of the standard in order to receive an invitation from the Department of Energy’s Loan Program Office to submit a Part II Application,” Steve Hedrick, head of Appalachia Development Group, told Kallanish Energy.

House Amendment on DOE Loan Program

The amendment to House Resolution (H.R.) 2740, a major appropriations bill, was introduced by Reps. Ilhan Omar of Minnesota and Pramila Jayapal of Washington.

Officially known as Amendment 105 in Rule II on H.R. 2740, it “[c]larifies that the Department of Energy’s Section 1703 Loan Program is providing loans only to clean energy projects that avoid, reduce, or sequester air pollutants or human-caused emissions of greenhouse gases,” according to the House Appropriations Committee’s amendment tracker.

It comes on the heels of a May 7, 2019 letter in which 143 environmental groups called on the House Appropriations Committee to make it clear that petrochemical projects do not qualify for those loan guarantees.

Environmental group Food and Water Watch says it’s hoping to build support for the appropriations amendment in Congress.

“We’re supporting the amendment because we think that the loan guarantee for the petrochemical hub is a misuse of the Title 17 loan program to begin with, given that that program is supposed to be for innovative energy projects that reduce greenhouse gas emissions,” said Mitch Jones, climate and energy program director for Food and Water Watch. “And this, one, doesn’t reduce greenhouse gas emissions and, two, is not an energy project. It’s a plastic project.”

“The broader issue is that, because we have to move off fossil fuels because of climate change, we shouldn’t be using a greenhouse gas reduction program to make loans to an industry which is dependent upon the continued use of fossil fuels,” said Jones.

Federal and State Support for Storage Hub

Top federal officials have said a natural gas liquids storage hub could support the creation of a petrochemical industry corridor in the Ohio River Valley and states like Pennsylvania, Ohio, West Virginia, and Kentucky. “There is an incredible opportunity to establish an ethane storage and distribution hub in the Appalachian region and build a robust petrochemical industry in Appalachia,” U.S. Secretary of Energy Rick Perry said at a December 4, 2018 National Petroleum Council Meeting in Washington, D.C.

If approved by the House, the appropriations amendment would also need to make it past a Republican-majority Senate and the final bill would then need to be signed into law by President Trump.

The notion of building an NGL storage hub in Appalachia has previously drawn support from backers in Congress. West Virginia Senator Joe Manchin, who sits on the Senate Energy and Natural Resources Committee, has supported the idea.

“The benefits of a natural gas liquids storage hub in Appalachia are abundant. It would be an economic driver for the region, would expand energy infrastructure, and would increase our domestic production of the petrochemical resources we rely on,” Sen. Manchin said in an April statement. “As Secretary Perry said, a storage hub in Appalachia is a ‘win-win.’”

The appropriations amendment is headed next to the floor of the House. Backers told DeSmog they expect a debate on the amendment may be scheduled within a week.