Contract workers begin construction of a formic acid plant at the BASF Geismar chemical plant in Geismar, La. (Lori Waselchuk/For The Washington Post)

The sprawling chemical plant in this city along the Rhine River has been a jewel of Germany’s manufacturing-led economy for more than a century. But the plunging price of natural gas in the United States has European companies setting sail across the Atlantic to stay competitive.

German chemicals giant BASF, which operates the plant here, has announced plans for wide-ranging expansion in the United States, where natural gas prices have fallen to a quarter of those in Europe, largely because of American innovations in unlocking shale gas.

Among those most affected are energy-intensive industries such as steel and chemicals, because they use natural gas as a raw material and power source. With Europe lagging in energy production, manufacturers on the continent warn that a chain reaction could shift more and more investment to U.S. shores.

“It’s become clear, with the drop in gas and electricity prices in the United States, that we are, at the moment, at a significant disadvantage with our competitors,” said Gordon Moffat, director general of Eurofer, the main lobbying group for European steel manufacturers.

As new dollars pour into the United States, the outflow from Europe is costing jobs and weighing on decisions about ambitious and expensive green-friendly policies that critics say are contributing to the energy-price gap.

Residents of Mayflower, Arkansas found pools of crude filling their lawns this weekend, raising questions about the safety of the proposed Keystone XL pipeline. Steve Mufson, author of “Keystone XL: Down the Line,” joins us to discuss. (The Fold/The Washington Post)

Here in Ludwigshafen, many people view the United States as the land of the future. Since 2009, BASF has channeled more than $5.7 billion into new investments in North America, including a formic acid plant under construction in Louisiana, where the company will manufacture a chemical used to de-ice runways, tan leather and preserve animal feed.

Top BASF officials say that unless Europe allows a more aggressive approach to energy production, including broader use of hydraulic fracturing, or fracking, even more manufacturing will move to the United States. Fracking involves injecting high-
pressure blasts of water and chemicals into a well to break apart rock and unlock the gas inside.

“It’s a very slow process, but it’s a continuous one,” said Harald Schwager, the head of BASF’s European operations, referring to the manufacturing outflow. “Once a customer of ours decides to build a new factory in the U.S., then this customer will request from us to be close by with our production. And so, over time, you see a self-accelerating process, which will move production into the U.S.”

The company’s Ludwigshafen complex, a warren of spaghetti-twisting pipes and chimneys that makes chemicals for a variety of products such as diapers, foam and car parts, is expanding slightly. Few of the 38,000 workers at the plant, spread over a site eight times as large as the Mall in Washington, see any immediate danger to their jobs. But nervous union officials view the expansion in the United States as a threat.

“Normally these would be good times right now. But we look into the future, and the prognosis is not so positive,” said Robert Oswald, the head of BASF’s union. “If the energy prices remain so much lower in the United States than here, of course that will endanger jobs.”

Growing price gap

The gap in natural gas prices has opened quickly, leaving companies that make investment decisions years in advance scrambling to catch up. As recently as 2007, U.S. natural gas prices were only about 20 percent lower than Europe’s, not enough to fundamentally reshape markets.

But with the boom in U.S. shale gas production, driven largely by fracking, U.S. prices last year dropped to a quarter of the European price. Most analysts expect that U.S. prices will stay low even if they rebound from their rock-bottom levels, providing a boon to all U.S.-based manufacturing through lower electricity prices.

Cheap natural gas lures E.U. to U.S. shores

Gas prices in Asia are even higher than in Europe, further channeling investment to the United States. The International Energy Agency forecasts that the United States will become the world’s largest gas producer by 2015, overtaking Russia, which supplies Europe with most of its natural gas.

“The differentials in the costs are just so big that it’s definitely driving the investment’’ to the United States, said Will Pearson, an energy analyst at the Eurasia Group, an economic consultancy.

Europe has begun to use far more coal, which is cheaper but much dirtier than gas. There is new pressure to start tapping into Europe’s limited shale gas resources, despite environmental concerns.

Long-term challenges

The gap in natural gas prices between the United States and Europe may eventually narrow. U.S. demand for natural gas may increase, driving up prices, as more manufacturers build factories to take advantage of the cheaper energy. The Obama administration also is considering proposals to sharply increase natural gas exports, which could raise prices domestically and push them down in Europe and Asia.

But the momentum favors the United States, and a growing number of European manufacturers have announced plans to invest across the Atlantic. Among them is Austrian steelmaker Voestalpine, which announced last month that it will build an iron-ore processing plant in Texas to take advantage of the low energy prices. The plant is expected to cost $715 million and create 150 jobs. The company aims to almost double its total output by 2020, largely through U.S. expansion, and it has mostly abandoned making any major new investments in Europe.

“We should not expect that the current production level of European industry will remain the same in the next 10, 20 or 50 years,” Voestalpine chief executive Wolfgang Eder said in an interview. “We will have to downsize industrial facilities in Europe in the long term.”

Royal Dutch Shell announced plans last year to build a multibillion-­dollar petrochemical plant in Pennsylvania that will employ several hundred full-time workers and as many as 10,000 people during construction.

Some German lawmakers say they want to find a way to balance environmental considerations with economic ones.

“We are suffering from the high energy prices, our companies are affected by it, because there are German companies that are deciding in favor of other locations and do not want to set up their business in Germany,” Economy Minister Philipp Roesler said at a conference in Munich this year. “The challenge is to promote and expand renewable energies without jeopardizing competitiveness.”

Petra Krischok contributed to this report.