It could be anywhere from six months to two years before the U.S. Department of Energy decides whether it will guarantee a $1.9 billion loan for an underground storage hub in Appalachia.
Appalachian Development Group is trying to secure the loan guarantee to help build the hub somewhere in the quad-state region — Kentucky, Ohio, Pennsylvania or West Virginia. ADG recently was invited to continue to Part II of DOE’s vetting process for the loan guarantee, which would facilitate construction of secure storage for high-value natural gas liquids.
ADG CEO Steve Hedrick had said the initial cost for a storage hub would be “north of $3 billion,” but West Virginia University Energy Institute Director Brian Anderson had said costs for a full build-out could eventually reach as high as $10 billion. A federal loan guarantee would help erase some of the uncertainty surrounding financing for the hub, the American Chemistry Council said in a 2016 study.
That study suggested keeping the NGLs in the Appalachian region rather than shipping them to the Gulf Coast could spark as much as $36 billion in investments by chemical and plastics companies and create more than 100,000 jobs in the quad-state area.
Hedrick said ADG has already completed its pre-engineering work needed to satisfy Part I of DOE’s application process. The focus now is on developing the framework for requesting information and proposals for the permitting, detailed design, engineering and construction of the hub.
“ADG will work closely with the DOE on Part II of the application process while simultaneously working to avail the market with the opportunity to secure an equity position in this development,” said Hedrick, who also is president and CEO of Mid-Atlantic Technology, Research & Innovation Center in Charleston. “We all have to be patient as we move forward.
“With the invitation for ADG to now complete Part II of the application process and seek the issuance of the loan guarantees, we are excited to take next steps.”
Hedrick said they still haven’t selected a site for the hub, saying their plan is to use the “best available and most technically sound geologic formations, in the most viable geographic locations.”
“This may include hard rock limestone formations, sandstone formations or salt strata,” he said. “All of these geologic formations exist in Appalachia, as was outlined in the geologic study led by WVU and brought forward from Ohio, Pennsylvania and West Virginia. While plans are in fact made, it is premature to publicly discuss specific prospective sites until further permitting and engineering has been completed.”
Anderson, who headed that research team, said the announcement that China Energy Corporation had signed a memorandum of understanding to invest up to $84.7 billion in energy projects in the Mountain State hasn’t changed the timeline, but it does bring a sense of urgency to the project.
China Energy’s interest “serves as a significant indicator that the (storage hub) is a critical component of the infrastructure needed for substantial growth in the petrochemical industry in Appalachia,” he said, pointing out it’s a vertically-integrated company that “believes in investing in the supply chain to their proposed petrochemical investments.”
Anderson said the hub would integrate the NGL storage network with surface infrastructure, including pipelines that provide the inter-connectivity between petrochemical sites, fractionation and storage.
“As such, the flexibility in locations provided by the geology of the region identified in the geologic report last summer is extremely valuable to minimize the disturbance caused by the pipeline network,” he said.
“The maximization of the potential growth of the petrochemical industry is less reliant on the location of the storage as it is on the development of available industrial sites and the coordination of the inter-connectivity of these sites through the surface infrastructure associated with the ASTH.
Anderson said DOE’s announcement was an extremely important step to bringing the project to fruition, saying it indicates that the project meets eligibility requirements associated with the Advanced Fossil Loan Program.
“The two primary requirements are that the project will deploy advanced and innovative technologies and that the project will reduce emissions of CO2 and other gases as compared to existing technology,” he said. “The (storage hub) will be incorporating cutting edge technologies that serve to protect the environment and minimize the environmental impact.”