What’s driving Exxon’s big Gulf Coast investments?
The oil giant is trumpeting a $20 billion US investment. But shale gas has been leading a boom in US chemical and plastics manufacturing for years, reversing a decades-long drift overseas.
Exxon Mobil announced plans on Monday to invest $20 billion over the next decade in 11 petrochemical and oil refining plants in Texas and Louisiana, billing the investment as part of a Gulf-Coast manufacturing renaissance that would bring thousands of jobs to the region and fill state coffers with tax revenues.
"Exxon Mobil is building a manufacturing powerhouse along the U.S. Gulf Coast," said Exxon CEO Darren Woods, according to Reuters. "These businesses are leveraging the shale revolution to manufacture cleaner fuels and more energy-efficient plastics."
The White House’s reaction was jubilant, with President Trump issuing a string of Twitter posts that linked the announcement to his “Buy American” agenda.
"This is exactly the kind of investment, economic development and job creation that will help put Americans back to work," he said in a statement released by the White House.
But some observers say that the investments are in large part a continuation of plans dating back to 2013, raising doubts about whether Exxon might have launched a rebranding to curry favor with a media-savvy president. The White House’s congratulatory statement was largely an echo of Exxon’s own release, reported The Wall Street Journal, and a slew of tweets from President Trump claiming credit for the decision came in the hours after he met with former Exxon CEO and current Secretary of State Rex Tillerson.
But the announcement may also elevate and give political resonance to a mostly overlooked branch of the “shale revolution”: the role of shale gas in powering an under-the-radar boom in US chemical and plastics manufacturing.
“It’s kind of a new world we’re in, right? Because the whole plastics industry moved overseas decades ago, and now we’re seeing bits and spurts, or resurgences, tied totally to shale,” says Robert Howarth, a biogeochemist at Cornell University’s Department of Ecology and Evolutionary Biology in Ithaca, N.Y., in a phone interview with The Christian Science Monitor.
That may be an understatement. According to a 2014 study from University of Michigan researchers, the US chemical industry went from a $9.4 billion trade deficit in 2005 to a $3.4 billion surplus in 2013, a turnaround that came in large part off the strength of ethylene production – a chemical derived from natural gas.
Ethylene is used for a huge range of plastic products, from PVC pipes to diapers to Coca-Cola bottles. And it’s much cheaper than the crude-oil-based feedstock used by many European and Asian plastics companies, meaning the recent glut of shale gas has translated into a price advantage for US chemical and plastics manufacturers. In 2014, American Chemistry Council Cal Dooley cited the abundance of shale gas in calling the United States “the most attractive place in the world to invest in chemical and plastics manufacturing.”
“It’s an astonishing gain in competitiveness,” he said then.
It’s unclear exactly how much of Exxon’s Gulf Coast plans will focus on chemical and plastics production, but the firm says it will ramp up processing of polyethylene – a compound used in film and plastic bags – at its Beaumont, Texas, facilities, and potentially build a new refinery to produce ethane, from which ethylene is derived, according to Reuters. But a similar expansion may be in the works in Appalachian states such as West Virginia, Ohio, and Pennsylvania, where oil and gas firms have been planning ways to open up processing alongside shale extraction.
That is likely to worry environmentalists, who say the “cracker” plants where ethylene is processed pose pollution hazards to nearby communities, while feeding an “inherently wasteful” plastics industry that clogs landfills and oceans. That’s on top of the dangers environmentalists attribute to the extraction of shale gas itself.
“This cheap and dirty fossil fuel is also proliferating its toxic legacy by facilitating the expansion of petrochemical plants, which are polluting and unsustainably producing materials that often end up in landfills,” wrote Food and Water Watch in a February report.
It comes as industry experts say the US might be on the verge of a second shale gas boom. Since September, oil production has been growing even faster than during the 2011-2015 period, reported Bloomberg in February.
Barry Rabe, a climate policy expert at the University of Michigan’s Gerald R. Ford School of Public Policy in Ann Arbor, Mich., says it remained unclear whether that growth might continue.
“An ongoing question is, what is the future of shale or offshore development here?” he tells the Monitor. “With the slight increase now in oil and gas prices, does that really trigger an increase in production?”