Solution to ‘Captive Rail’ Could Aid in Luring Cracker

The State Journal
20 December 2011
By Taylor Kuykendall, Reporter

Officials on the West Virginia Marcellus to Manufacturing Task Force established by the Governor are hoping to send a message that they are readying solutions for problems with the siting of an ethane cracker.

The "captive rail" issue is not exclusive to West Virginia. In his presentation to the task force, Patrick Donovan, director of maritime and intermodal transportation, said 90 percent of chemical producing facilities nationally are considered to be a captive rail served facility.

Captive rail served facilities are places where a manufacturing facility is served by a single railroad entity, with no competitive transportation.

Donovan said there was a number of available solutions that could include public and private partnerships for solving the captive rail issue.

"The public sector is not as enabled or as nimble as the private sector is in moving projects forward," Donovan said. "So it's a matter of syncing these up to require a longer planning phase on the public sector to ensure that delivery of a project happens, it is in keeping with the private sector demand."

In West Virginia, two class one railroad operators, CSX and Norfolk Southern Railroad, provides service in the state. Often, and as may be the case in sites considered for an ethane cracker, the railroads are separated by a river. This means often despite being able physically spot a potential competing rail system, manufacturers must use the railroad on their side of the river.

In their Tuesday meeting, the task force discussed possibilities for encouraging competition, such as building a bridge connecting the two rail systems. Other captive rail solutions include multi-modal transportation systems, intermodal transportation systems and other public private options.

Each method comes with its own set of complexities. For example, multi-modal transport has potential to ensure competitive shipping rates, but maximum load varies – a barge has 15 times the capacity of a rail car and 60 times the capacity of a semi-trailer truck.

The bridge could potentially be financed by tolls or other methods.

"Working with short line and class one rail provides the potential for the State of West Virginia to create a network of open rail lines allowing for the movement of products is a potential solution to the captive rail issue," material distributed in the meeting stated.

An ethane cracker process wet gas, abundant in the Marcellus shale deposits in West Virginia, into chemicals such as ethylene, and later polyethylene, that are useful in a number of manufacturing process such as plastic production.

The committee is essentially putting together a package of incentives and solutions that could offered and tweaked depending on the site chosen. At least two large corporations are considering a site, while a local investor has indicated he is also attempting to raise capital for a cracker.

"Most everything we're looking at as part of the statutory package is just gluing together the right pieces to create the best advantage and we have for the most part identified that," Burdette said. "It will be an ongoing process. Even our best offer will be our best offer until we talk to them about a few things we need to tweak one way or the other."

Even if West Virginia fails to land the cracker facility, Burdette said there are likely to be other benefits for the state.

"Even if, god forbid, one of those projects don't come to West Virginia, our mission is to pivot as quickly as we can and start focusing on companies that can use the products created by those projects," Burdette said. "It's an evolving effort."

Burdette said some of the sites he believes are being considered in Ohio may even benefit West Virginian citizens more.

"We have a greater population base on our side than they do," he said.

Still, "everybody's watching everybody else," Burdette said, and luring a cracker to the state is the task force's number one priority.

"We want the investments here; we think this is the best place to do it," Burdette said.

Two of the potential ethane cracker builders are likely to be picked in the next 30 days, Burdette said. Those companies may wait until later to actually announce their selection.

Burdette said there may be a couple of solutions to linking manufacturers to other rail lines including a bridge, belt lines or short line rail service.

"It is important … that the signal is clear: this is not an unresolvable issue, that West Virginia is in fact willing to pursue solutions that might mitigate this problem should it present itself," Burdette said.

Recent passage of sweeping Marcellus shale legislation pushed by the governor in a special session is also likely to help lure a cracker, Burdette said.

"I think it sent a very positive message. … Pennsylvania hasn't been able to deal with these issues yet, Ohio is marching on the state capitol," Burdette said.  "We worked our way through this session, finished it in record time with overwhelming majorities, and that sends a very positive signal to industries."

Burdette insisted the task force would succeed in capturing the manufacturing benefit of the Marcellus shale.

"One way or another we're going to find a way to benefit," he said.