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Recognizing both opportunities, challenges of natural resources

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According to Margo Thorning and Tom Witt, the Mountain State has the potential to expand on numerous opportunities offered by the coal and natural gas that currently abound in the state.

Both Thorning and Witt presented reports to the House Oil and Gas caucus Feb. 25. 

Thorning, senior vice president and chief economist of American Council for Capital Formation, said that with those oil and gas opportunities also come challenges.

Part of the challenge, she said, is understanding the ongoing tax reform issue, current federal tax provisions used by the oil and gas industry and what the potential economic loss of those provisions would mean.

Current federal tax provisions include accelerated depreciation, intangible drilling costs, geological and geophysical expenses, percentage depletion and interest expense.

As to the question of whether or not those provisions are subsidies, Thorning said she thinks they are.

Thorning went on to say that a loss of the current federal tax provisions could potentially mean the slow down of cash flow, the increase of the cost of capital for new investment for both corporate and non-corporate business and the slow down of investment.

As to the expanded opportunities, Witt, chief economist at Witt Economics LLC and professor emeritus at West Virginia University, said investments are what has the ability to put the Mountain State at the top of the coal and natural gas food chain.

In his presentation, Witt noted, the potential for several petrochemical investments have been discussed in the Appalachian Region, including one in Wood County being evaluated by Odebrecht. 

The economic impact of an ethane cracker is great, Witt said.

"Building an ethane cracker and associated polyethylene manufacturing facilities is a watershed economic opportunity for the state and region," he said. "This opportunity would expand a high-value manufacturing industry that creates high wage jobs, new technologies and the prospect for expanding downstream plastics industry investments."

Before changing economics, Witt said the Mountain State used to be "a hub of chemical activity."

For advice about how the state can continue expanding on opportunities, Witt drafted a series of six small books explaining six different concepts: Economic Opportunities for West Virginia Overview; The Development of Shale Gas and Energy Use and the Chemical Industry; Understanding the Ethylene Value Chain; Oil and Gas Production and Petrochemicals in West Virginia; Shale Resources in West Virginia and Appalachia; Economic Impact of a New Ethane cracker and Downstream Polyethylene Plants in West Virginia.

According to Thorning, West Virginia is ranked second among the states in gas producing wells and gas production. Pennsylvania is at the top of the list. 

Witt said additional steps should be taken to continue advancing the Mountain State in the coal and natural gas industry.

Those additional steps include new educational programs, progressive policies, competitive transport for domestic products and developing a robust market for ethylene cracker co-products.

Expanding training programs already are in place to ensure local residents are qualified for potential construction jobs, investing in training beginning at the high school level and continuing through community colleges and trade schools, keeping a sufficient ethane supply in the Appalachian Region rather than having it sent via pipeline to other regions and strengthening existing infrastructure are also things that will help propel West Virginia forward, he said.