The boom in low-cost natural gas obtained from shale is driving investment in plants that use gas for fuel or as a raw material, setting off a race by states to attract such factories and the jobs they create.

Ethylene cracker at Dow Chemical plant in Hahnville, La.

Shale-gas production is spurring construction of plants that make chemicals, plastics, fertilizer, steel and other products. A report issued earlier this month by PricewaterhouseCoopers LLC estimated that such investments could create a million U.S. manufacturing jobs over the next 15 years.

West Virginia is vying with Pennsylvania and Ohio to attract an ethylene plant thatRoyal Dutch Shell PLC said it plans to build in the Appalachian region to take advantage of the plentiful new gas supplies.

Shell is due to announce a site early in 2012. Ethylene, produced from ethane in natural gas, is used to make plastics and other materials that go into an array of products, including pipes, paint and antifreeze.

West Virginia’s legislature, meeting in a special session, passed a bill this month setting rules for shale gas drilling and production. The legislation ensures “a reliable supply” of shale gas in West Virginia and should dispel regulatory uncertainty that could slow investment, Keith Burdette, the state’s commerce secretary, said in an interview.

The U.S. chemical industry is the biggest potential winner from the shale boom—which involves a technique opposed by some environmentalists called hydraulic fracturing, or fracking, to obtain gas locked in rock formations—but other industries also see benefits.

natural gas prices chart

Development of shale gas has been ramping up over the past two years and now accounts for more than one-third of all U.S. natural-gas production, according to IHS Global Insight, an economic think tank that earlier this month released a shale-gas study financed by energy-production companies.

“This shale gas development is a game-changer of huge proportions,” said Dan DiMicco, chief executive officer of Nucor Corp., a steelmaker based in Charlotte, N.C. Nucor is building a $750 million plant to make iron from natural gas and iron-ore pellets near the Mississippi River in St. James Parish, La. Mr. DiMicco said the investment wouldn’t have been possible without the lower costs that have come with shale gas.

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