CHARLESTON — Gov. Jim Justice and his staff accused a West Virginia businessman of crossing the line on the state’s efforts to work with China to develop its natural gas industry, but Steve Hedrick certainly wasn’t hiding his involvement.
The roles of Hedrick and MATRIC, the nonprofit development firm he leads, are highlighted in the application for a $1.9 billion federal loan for development of the Appalachia Storage & Trading Hub. West Virginia MetroNews obtained the application, along with 610 pages of materials, from the U.S. Department of Energy.
Hedrick is a West Virginia native and a former U.S. Army officer. He spent years in the chemical industry at companies like Bayer CropScience. He’s now president and chief executive at the Mid-Atlantic Technology Research & Innovation Center, a nonprofit development center built on the old Union Carbide property in South Charleston.
Justice’s accusation about Hedrick puzzled the state lawmakers most directly involved with natural gas development in West Virginia.
“The governor’s move does make one ponder and make one wonder what the hell is going on. You’re right to be scratching your head,” said Delegate Mark Zatezalo, R-Hancock, a vice chairman of the House Energy Committee.
Development of West Virginia natural gas through a central storage hub was Hedrick’s idea for years, said Delegate John Kelly, R-Wood, another vice chairman of House Energy.
“That’s Hedrick’s project. He started it. Maybe the governor needs to back off,” Kelly said.
Kelly added, “If the governor wants private enterprise, then stay the dickens out of private enterprise. Don’t come in and steal the thunder after two years of work these people have already put in.”
Big investment, big accusation
Last November, state Commerce Secretary Woody Thrasher made a splash announcement that China Energy may invest up to $83 billion in West Virginia’s natural gas infrastructure.
The natural gas storage hub was immediately seen as being among the most likely investment targets.
“Hedrick has been involved in the Appalachian storage hub from the beginning, before the Chinese ever got involved in it,” Kelly said. “The Chinese had seen his work and wanted to get involved with it.”
Concluding a November press conference about the possible China deal, Justice crossed his arms in a celebratory handshake with Thrasher and Brian Anderson, the director of the WVU Energy Institute and Hedrick’s partner in the development company for the natural gas hub.
Since the first triumphant announcement of the China deal, trust soured. Last month, about an hour into a press conference, Justice brought up — for the first time — an investigation into He-drick’s activities.
The issue was raised as one of the factors that led to Thrasher’s forced resignation, as well as the departure of Deputy Commerce Secretary Josh Jarrell. The accusation seemed to be that Hedrick was using his relationships for private gain.
“Something didn’t look right about the China situation,” Justice said June 15. “We brought everybody on board immediately because we didn’t like what we saw.”
The administration brought in a private attorney, former U.S. Attorney Mike Carey, and said he went over six months of data and 10,000 emails. The Governor’s Office said it wasn’t sure anything criminal took place, but Justice said the information was turned over to the current U.S. Attorney.
The Governor’s Office alleged Hedrick used his close relationships to gain inside knowledge about the China deal, including strategy.
The Governor’s Office alleged Hedrick was on state flights related to the China deal, including one where he was the only passenger. Other flights included Hedrick travel-ing with prominent representatives of the Justice administration, including Thrasher, Environmental Secretary Austin Caperton and Chief of Staff Mike Hall.
The flights amounted to $23,000. MATRIC, the research company led by Hedrick, said it reimbursed the cost.
MATRIC released a statement by Hedrick shortly after that. It alluded to being invited by the Department of Commerce to take part in talks:
“MATRIC can confirm that President and CEO Steven B. Hedrick was grateful to respond to the request of the State of West Virginia to support the Commerce Department’s mission to attract business to the state.”
A MATRIC spokeswoman said Hedrick was out of pocket last week and unable to comment for this story.
Delegate Kelly acknowledged Hedrick’s judgment might have erred when he accepted the flights. But Kelly noted that representatives of the Justice administration would had to have invited him.
Kelly said the governor has his wires crossed.
“As far as Steve Hedrick getting too far and going across the line, between Steve Hedrick and Brian Anderson, that’s their project as far as I’m concerned,” Kelly said.
“They’re the ones who have basically done all the work. If anyone crossed the line, I think the governor might have crossed the line getting involved with Hedrick’s project.”
The hub
Characterizations of the executive as an industry leader with expertise were up front in the pitch for investment in the enormous natural gas hub loan.
West Virginia’s congressional delegation — and delegations from surrounding states — signed off on their support for the project. The West Virginia delegation scrawled their names on a letter to President Donald Trump.
“The development and construction of a world-class natural gas liquid (NGL) storage and distribution hub in the Appalachian region would not only enhance America’s energy and national security, it could also spur a manufacturing renaissance and bring jobs and economic growth to an area that has struggled in recent years and overwhelmingly endorsed your pro-energy policies in last year’s election,” they wrote.
The natural gas storage hub, with an estimated development cost of up to
$10 billion, is a key part of the vision for the region’s natural gas industry. The underground storage and distribution facility is viewed as a centerpiece for development of downstream products.
Supporters view the project as a way for shale development in Appalachia to compete with the Gulf Coast in Texas and Louisiana.
The vehicle for the project is a nonprofit consortium called the Appalachia Development Group, which was incorporated in Delaware in 2017. Hedrick is the chief executive officer.
Appalachia Development Corp., in turn, incorporated several businesses that evoke facets of the gas supply chain, including Appalachia Development Group Chemical LLC, Appalachia Development Group Pipeline LLC, Appalachia Development Group Trading LLC, and Appalachia Development Group Storage LLC.
The Department of Energy announced this January that Appalachia Development Group made it through the first phase of a development loan guarantee.
The application cast
Appalachian Development Corp. not only as a company but also as a vision guided by key leaders:
“Appalachia Development Group is a vehicle established to deploy the Appalachian Storage and Trading Hub through principal leadership, investment attraction and industrial growth.”
Hedrick is listed as the primary contact on the loan application for the natural gas hub. He is also the first person listed under “key staff.”
His biography in the application includes information about his role, saying he would be responsible for steering up to $10 billion in development that could lead to $36 billion in spinoff investment, 100,000 in new jobs and $6.2 billion in annual payroll and $2.9 billion in annual tax revenue for the Appalachian region.
The loan application for the Department of Energy recalls Anderson’s upbringing as the grandson of a coal miner, as well as his many accolades in science and research.
“Steve Hedrick and Brian Anderson were the go-to people on this project. They know more about this project than anybody going on. They’re the people who went to energy department. They’re the people that talked to them, Delegate Kelly said. “They started it. They started it.”
Early praise, early promise, current clouds
An announcement celebrating the first hurdle on the federal loan came from Appalachia Development Group.
“There is much work to be done to drive this forward, and our team is strong, prepared and highly motivated to move forward,” Hedrick stated in the announcement.
It included comments by Hedrick, as well as by senators Joe Manchin and Shelley Moore Capito and Congressman David McKinley.
Justice’s office put out a separate statement Jan. 3, touting the milestone. The governor said he was pleased by the efforts of the Department of Commerce, WVU and MATRIC.
Support may still exist for the project, but relationships are strained among the central figures.
Thrasher, who was the face of the Commerce department, is out. Justice raised ethical questions about Hedrick.
And the China deal itself is now in question because of much broader issues — the ongoing trade strain between the U.S. and China.
Officials with China Energy canceled a planned appearance last month at an industry conference, where they’d been expected to announce their first investments.
