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WVU economist speaks on natural gas

Photo Provided John Deskins, director of WVU’s Bureau of Business and Economic Research.

MORGANTOWN — A West Virginia University economist believes the natural gas industry could have a tremendous impact on the state’s economy, and that the development of public policy and infrastructure in West Virginia can help bring about substantial economic impact from the fossil fuel.

John Deskins, director of WVU’s Bureau of Business and Economic Research, adds that for several years now, economic evidence has dominated the conversation in West Virginia that a booming natural gas industry has a great potential to spur the resurgence of the state’s manufacturing sector. Downstream manufacturing from a natural gas cracker plant in Pennsylvania and the operation of a highly discussed natural gas storage facility in the state could change the economic landscape.

“A real, transformative opportunity lies in downstream activity,” said Deskins, who is also an associate professor of economics at WVU’s John Chambers College of Business and Economics. “And this is manufacturing opportunity, not extraction. We’ve been talking about this for several years. But just because there’s potential here, we can’t just assume it’s going to happen. It’s competitive out there and we need to be very aggressive in making this happen. The natural gas industry could be game-changing for West Virginia’s economy — without question.”

‘Downstream’ benefits of the natural gas industry are those economic activities related to use of raw and refined natural gas and natural gas liquids. These uses include a wide range of products, including heating and the production of electric power, fertilizer and feedstocks used in chemical and plastics manufacturing.

West Virginia has 32 counties in Marcellus while 23 counties contain technically recoverable natural gas within Utica, located below Marcellus and regarded as the “next frontier” in natural gas development in the state.

Deskins explains activity in West Virginia has centered on drilling and exporting natural gas, which has created some jobs, income and tax revenue; however, he notes that the associated jobs benefits are not as widespread as one would hope because the industry is so capital-intensive.

A report issued in 2015 by WVU’s Appalachian Oil and Natural Gas Research Consortium stated the Utica Shale alone contains technically recoverable resources of 782 trillion cubic feet of natural gas, more than 20 times a previous estimate by the U.S. Geological Survey in 2012.

Deskins points to the construction of the $6 billion Pennsylvania Shell ethylene cracker plant in Beaver County, Pennsylvania, as well as support for an Appalachian underground natural gas storage hub in West Virginia’s Ohio Valley.

“There are a couple things at work here,” said Deskins. “The nearby cracker plant is in the midst of construction and is crucial, and so is a proposed natural gas storage hub project in West Virginia. The cracker plant could present many manufacturing opportunities downstream. The storage hub would stabilize the market: in times of low demand, production can remain steady and excess can go into the storage hub; in times of high demand, you can draw down natural gas stored in the hub. It puts a stability factor in the market, and that’s a major point in locating that facility here.”

Deskins encouraged a sense of urgency in natural gas public policy and infrastructure, noting neighboring states are racing far ahead of West Virginia in terms of public policy and infrastructure development. That, he said, has to change.

“The natural gas industry and its downstream manufacturing by-product have the potential to create tens of thousands of jobs,” Deskins said. “We can’t be complacent, and the time to act is now. The biggest economic development question we’ll have for at least the next decade is how much of this downstream petrochemical activity we can attract to West Virginia.”

Fostering the creation of new businesses and bolstering the downstream oil and gas manufacturing sector have been identified as goals for the WV Forward initiative to advance the state’s economic future.

WV Forward is a statewide collaboration led by West Virginia University, the state Department of Commerce and Marshall University to help grow the economy by adding jobs, investing in education, and improving health and wellness to create the most prosperous West Virginia possible.

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