New York’s ‘Cracker’ Loss Reflects Bad Policy

Published March 23, 2012

After months of public courtship and deliberation, Royal Dutch Shell has announced it will build its $3.2 billion “cracker” facility in Pennsylvania. Prior to Thursday’s announcement, the company was reportedly considering locations in Ohio and West Virginia. Notably absent from that list of shale states was New York.

As New York’s neighbors worked to implement the necessary safeguards that allow the industry to thrive, New York instead has been considering proposals to extend for another year its moratorium on hydraulic fracturing.

A natural gas “cracker” converts ethane into ethylene, a feedstock for plastics that is also used in the manufacture of consumer goods ranging from cosmetics to textiles. The plant is the first of its kind on the eastern seaboard and a clear reflection of the industry’s belief that the shale boom is not a bubble but rather a vast resource that will create jobs for decades to come.

Legislators who support a continued moratorium say the jury is still out on hydraulic fracturing. They say they lack the perfect information that would allow them to confront the difficult decisions that need to be made, so the only prudent course of action is to wait a little longer. Assemblyman Robert Castelli (R, C, I-Goldens Bridge) recently said, “Natural gas has been in the ground for 288 million years. It can stay in the ground a little longer until we make an informed decision.”

The loss of Shell’s cracking plant shows this is the wrong approach to take in evaluating the costs and alleged benefits of inaction. Of course the natural gas will remain patiently in the ground for the foreseeable future, as Castelli notes, but the shale industry and associated jobs will not wait around while New York lawmakers gnaw their fingernails.

The American Chemistry Council suggests an ethylene production complex in New York, such as Shell’s, would create 10,000 jobs in the investment phase and 14,000 permanent jobs once operational. The permanent workforce would have wages totaling $1.1 billion a year, and state tax coffers would receive an additional $177 million in annual revenue.

The people who are injured most by this decision, of course, are not the politicians in Albany but the people in small towns throughout western New York who are suffering from high levels of unemployment. They are missing out on economic opportunities that would have allowed them to avoid foreclosure, save for retirement, or put their kids through college. To suggest that the government’s delays have no costs is clearly false.

The good news is that it’s not too late for New York to change course. There will be more opportunities to compete for new jobs: Companies such as Dow Chemical, Lyondell Bassell, and Chevron Phillips Chemical are all publicly considering expanding their domestic manufacturing facilities.

New York should have a set of sensible regulations in place that ensure public health is protected while defending the rights of property owners, supported by adequate state funding that enables regulators to do their jobs. These objectives are achievable without a moratorium. In fact, the process should be expedited to ensure New York can compete for the economic rewards of responsible extraction.

New York is fortunate to have such natural resources, but it’s not the only state thus blessed. As other states actively compete for this economic activity, New York is being left behind.

John Monaghan ([email protected]) is the energy and environment legislative specialist at The Heartland Institute in Chicago.