$83 Billion West Virginia Petrochemical Deal with China on Skids Due to Trade War, Corruption Probe

Read time: 9 mins
Brian Anderson, Woody Thrasher, Jim Justice

Last November, China and West Virginia signed an $83.7 billion dollar, 20-year agreement to build a massive petrochemical hub in the state but that deal may be on hiatus in the midst of a de facto trade war spurred by President Donald Trump and a corruption investigation unfolding in the Mountain State. 

The deal would be worth more than the total gross domestic product of West Virginia, which was $76.8 billion in 2017. China's sizable investment would create a sprawling petrochemical center in West Virginia, focused on storing and refining natural gas obtained via hydraulic fracturing (“fracking”) in the Marcellus Shale. Full details are sealed in a yet-to-be-released Memorandum of Understanding (MOU), which was inked during a trade mission attended by Trump and Chinese President Xi Jinping last fall in Beijing, China.

While the Chinese side has cited the billions in trade tariffs imposed by Trump as the impetus for at least temporarily stepping away from the deal, in West Virginia an ongoing state- and federal-level official corruption investigation involving individuals who were part of the MOU signing has also slowed progress. Some of those individuals were named in a February investigation DeSmog published on the petrochemical hub.

In total, China had pledged to invest $250 billion in the U.S. market at the November summit. Several fossil fuel industry executives attended the Chinese trade mission, including the CEOs of liquefied natural gas (LNG) exporting companies Cheniere, Delfin, and Texas LNG.

Thrasher Investigation Opens Can of Worms in West Virginia

The first domino to fall in the investigation surrounding the MOU was Woody Thrasher, West Virginia's Secretary of Commerce. As the main regulator and promoter of business in the state, Thrasher was tasked by Governor Jim Justice with oversight of the China-West Virginia deal. (Thrasher is a former Democrat with a business background who converted to a Republican at an August 2017 Trump rally.)

However, Thrasher was forced to resign on June 14 at the governor's request for reported mishandling and misreporting of money for a state flood recovery program.

But these incriminating details only came to light as a result of a broader investigation by Justice's office, when it discovered what it considered ethically dubious activities, centering around self-dealing, related to the MOU, according to the publication MetroNews.

As previously reported by DeSmog, Thrasher and his family business, The Thrasher Group, stood to gain economically from the MOU, and representatives from the company have attended business and industry meetings on creating a petrochemical hub in West Virginia and along the Ohio River Valley. Chad Riley, CEO of The Thrasher Group, spoke at the Northeast U.S. Petrochemical Construction Conference held in Pittsburgh, Pennsylvania, June 18-19.

The Thrasher Group provides architectural, engineering, and construction services for oil and gas field and pipeline projects. Woody Thrasher never divested from the company when he became Secretary of Commerce and maintained a 70 percent ownership stake

Public Money, Private Interests

At the heart of the ongoing probe is a corporation named the Appalachia Development Group, which led the petrochemical hub's concept and initial marketing phase. The company is owned by the Mid-Atlantic Technology, Research, and Innovation Center (MATRIC) and has a technical assistance partnership with the West Virginia University (WVU) Innovation Corporation and the WVU Energy Institute.   

The partnership registered its website on November 10, one day after West Virginia signed the MOU with the state-owned China Energy Investment Corp., as first reported by DeSmog.

Justice, as part of the ongoing investigation into Thrasher, says he learned that one person who has been representing the state in the hub's creation also stood to profit from the deal: MATRIC CEO Steven Hedrick. Hedrick, as first reported by DeSmog in February, is also one of the principals of Appalachia Development Group.

As reported by ProPublica and The Charleston Gazette-Mail, Justice told reporter Ken Ward, “People that were there in China maybe representing their own special interests, we didn’t think was right.”

Ward reported that West Virginia paid $23,000 for Hedrick's travel and participation on the delegation to China, in which he acted as an official representative of the state. But Hedrick refused to sign a contract solidifying his official state role, which Ward explained was “an agreement to abide by the state ethics law’s prohibition on using public office for private gain.” Hedrick has since repaid this money, as demanded by the state. 

Ward further reported that “Hedrick asked China Energy officials to specifically target some of their investment toward his company’s natural gas storage hub” and that during the trip “Hedrick stayed behind an extra day and pitched his project to China Energy after others from the state had left.”  

WVU Energy Professor Brian Anderson Still Afloat

The Appalachia Development Group has taken down its website, but an archived version shows that Hedrick was listed as CEO, while West Virginia University (WVU) professor and director of the WVU Energy Institute Brian Anderson was listed as Chief Technical Lead. The incorporation status for the company, too, is still listed as active on the West Virginia Department of State's website. Anderson confirmed to DeSmog via email that the Development Group still exists and that it “has switched webhosting providers and the site is being transferred.”

As an outspoken advocate of creating the fracking-fueled petrochemical hub, Anderson did not go on the China trade mission. But just a few days after it, he participated in a press conference promoting the MOU alongside Justice and Thrasher.

And it was Anderson who first said at the June industry conference in Pittsburgh — where he and the CEO of China Energy Corp. were expected to announce an update on projects triggered by the MOU — that the entire premise of the deal has been put in jeopardy.

After making those remarks, Anderson soon walked back the gravity of them in an interview on the radio program “Talkline,” broadcasted by MetroNews.

“It’s certainly not a roadblock. Right now it’s a bit of a speed bump. If it lasts too long it could certainly be a hurdle,” Anderson explained. “It has not slowed the development. The development teams are still pursuing the project. However, the timing of the leadership of China Energy and that coinciding with the trade war was going on was just not something the leadership of China Energy was going to do.”  

Anderson also told DeSmog that the MOU and the hub itself are “separate projects and not at all interdependent.”  

Federal Investigation

At a June 15 press conference, Governor Justice's legal counsel Brian Abraham said that the investigation has been referred to the U.S. Department of Justice. He also said that Governor Justice's investigation into the China deal came first and the flood recovery program probe was merely an offshoot of the broader China MOU investigation.

“Investigators including former U.S. Attorney Mike Carey looked at six months of data and 10,000 emails,” MetroNews reported of the press conference. “Abraham said the findings contributed to this week’s forced departure of Commerce Secretary Woody Thrasher, as well as to the earlier departure of Deputy Commerce Secretary Josh Jarrell.”

Carey, the West Virginia Governor's legal counsel, and the West Virginia Secretary of Commerce did not respond to a request for comment for this story.

Jarrell stepped down from the West Virignia Department of Commerce in May, according to his LinkedIn page, and now works at the firm Steptoe & Johnson. According to the Appalachia Development Group's archived website and as previously reported by DeSmog, the corporation's attorney Kathy Beckett also works at Steptoe & Johnson. Jarrell recently spoke in place of Thrasher, who was scheduled to speak before his resignation, at the petrochemical industry conference in Pittsburgh.

Beckett and Jarrell did not respond to a request for comment for this story.

Anderson maintained to DeSmog that the investigation centers around what was known as the Department of Commerce’s West Virginia Executive Loan Program (EXCEL WV), and not the Appalachia Development Group or the MOU. That short-lived program launched by Thrasher in late 2017 was run out of the Department of Commerce's Development Office. (The website is now defunct, but DeSmog obtained a cached version of it and the application for the program is still online). EXCEL WV took in company executives on “loan” for their time and expertise in the area of state business development.

“The concept is to team retired executives with loaned executives,” Thrasher said to the West Virginia Chamber of Commerce in August 2017. “We don't like to call them retired execs, so we are calling them second career executives that will mentor these loaned executives.”

Among those participating in the EXCEL Program was Clay Riley, the VP of Business Development at The Thrasher Group. So too was Bob Steptoe, whose family serves as the namesake of the Steptoe & Johnson firm. Riley appeared in two promotional videos for EXCEL which are up, but unlisted, on YouTube.

Kris Hopkins, Executive Director of the West Virginia Development Office during the launch of EXCEL, left the office in May for a new job at a private equity firm in North Carolina, according to his LinkedIn profile. On his LinkedIn page, he lists the signing of the MOU as one of his top achievements while serving as executive director of that office.

Anderson said that both Governor Justice's office and the DOJ are looking into the “possibility that [the West Virginia Commerce Department] may have inadvertently allowed for the lines to be blurred between the public and private sector.”

And though Anderson remains unscathed so far in the corruption investigation, Beckett credited him as being part of the team “behind each headline, meeting, legislation, [and] report” related to the Appalachian Storage Hub in a May 2017 blog post. Anderson, a state employee by virtue of his professorship at WVU, a public university, confirmed that he too was interviewed as part of Governor Justice's investigation. 

“I was happy to be interviewed by the Governor’s team to help provide information regarding the China Energy MOU development and development” of the Appalachian Hub, said Anderson. “My involvement in both projects is through my appointment at WVU as Director of the Energy Institute supporting the University’s Land-Grant mission in Economic Development.”

Main image: West Virginia University professor Brian Anderson (left) explains the China Energy deal alongside then-West Virginia Secretary of Commerce Woody Thrasher (center) and Governor Jim Justice (right). Credit: Dave Mistich / West Virginia Public Broadcasting, used with permission

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