Pennsylvania

Energy. Environment. Economy.

Southeast Pa. Refineries Look to Marcellus Shale as a Savior

Susan Phillips / StateImpact Pennsylvania

The borough of Marcus Hook has hit hard times with the closing of the Sunoco refinery. State and county officials want to convert it to a natural gas processing facility.

As Governor Corbett and Harrisburg lawmakers try to lure a natural gas processing plant to Beaver County, near Pittsburgh, others seek to revive a shuttered Sunoco refinery in suburban Philadelphia by connecting it to the shale gas boom.

The borough of Marcus Hook may be one of the oldest European settlements in the state, stretching back to a Swedish trading post in the 1640’s. But it has a long history in the refining business. In 1892, to serve Pennsylvania’s oil rush, the borough’s first refinery was built, followed by a 300-mile pipeline from the borough’s port to oil fields in western Pennsylvania. Walking down the streets today, the tidy homes are dwarfed by the giant pipes and towers of the Sunoco refinery, which has operated here for more than one hundred years.

At the end of Robert Touhey’s street, lies the refinery that shut its doors earlier this year.

“Most of my life I’ve put up with the smells and the sounds,” said Touhey.

He says when the refinery was turning crude oil into gasoline, it made a sound like a roaring waterfall. But not today.

“It’s very quiet, very quiet,” said Touhey. “Coming home at night now as you drive down the street it just looks like a dead end, it’s just dark and almost ominously scary.”

It’s been hard times for thousands of workers who depended on the oil refineries strung along the path of I-95 from Philadelphia down to Wilmington. The Marcus Hook plant is just one of three recently facing shut downs following others in Delaware.

About 400 people have already lost full-time union jobs in Marcus Hook, and hundreds of private contractors lost work, too. High crude oil prices overseas have fueled these refinery closures.

Shale to the Rescue

Susan Phillips / StateImpact Pennsylvania

Small businesses in the Borough of Marcus Hook have suffered in the wake of the refinery closure.

Two other nearby plants, have recently gotten good news.  Delta Airlines bought the ConocoPhillips plant in Trainer, Delaware County, with plans to make its own jet fuel.   And just this week the Carlyle Group, a private equity firm, announced plans to save Sunoco’s Philadelphia plant. The plan is to take advantage of cheaper oil from the newly tapped Bakken Shale formation, in North Dakota.

But no buyers for Sunoco’s Marcus Hook plant have surfaced.

So Delaware County officials asked the energy analysis firm IHS to do a study on how the 781-acre facility could be reused.

The answer? Marcellus Shale.

Joseph Waldo is with IHS Global Insight, which came up with options to convert the mothballed site into a natural gas processing plant.

“Most of these options have to do with taking natural gas from Marcellus Shale, or Utica Shale, and value adding it into something else for consumption,” said Waldo.

Plastics

And that something else is plastics.

Natural gas, when it’s in its liquid forms, are essential ingredients for making plastics.  The consultants think the Marcus Hook refinery could be converted into a plant for processing these Marcellus shale liquids to be used to make things like plastic water bottles.

Anthony Palmer is managing director of IHS Chemical Consulting. Palmer thinks it would be cheaper to process natural gas liquids closer to the plastics factories in the northeast. Today, those natural gas liquids get processed down along the Gulf Coast.

“I want to stress that there is a market for these products up here — bottles, films, bags, many of those are produced closer to the end user, and that’s up here in the Northeast. There’s plenty of polyethylene resins produced in the Gulf Coast that gets shipped up to the Northeast, why not produce it up here.”

Palmer says converting the oil refinery to a natural gas processing facility would be cheaper than building one from scratch. He says the Marcus Hook site offers investors ready-made infrastructure, a dock that can serve large tankers, and good rail and highway connections.

Susan Phillips / StateImpact Pennsylvania

Department of Environmental Protection Secretary Michael Krancer at a press conference in Marcus Hook detailing the results of the IHS study.

Not to mention, a friendly state government. Department of Environmental Protection Secretary Michael Krancer says his agency would do all it can to help entice investors to back the project.

“We as the Department of Environmental Protection will work hand in glove, very closely, cooperatively and spiritedly with anyone who would want to participate in activities at this facility,” Krancer told reporters at a news conference last week.

Reversing the Flow

But here’s a problem. The current pipeline system runs from the east to the west.  But the gas would have to come from the western part of the state to the east. So to pipe natural gas to Delaware County from say, Washington County, either new pipelines need to be built, or the flow has to be reversed. Jay Apt is a business professor at Carnegie Mellon University who follows the energy industry.

“Getting the wet gas from the Pittsburgh area over to Philadelphia is going to be probably the most interesting part of the problem,’ said Apt.  ”It’s the supply chain that is the most critical piece.”

Apt says investors would want to see a cost effective way to get the gas to Philadelphia.  For this and other reasons, converting the oil refinery to a natural gas processing plant could require some type of state financial incentive. Governor Corbett recently offered 1.7 billion dollars in tax credits to Shell for a natural gas processing plant in Beaver County.

DEP Secretary Krancer says it’s too soon to talk about any subsidies the administration might want to offer a Marcus Hook proposal.

Susan Phillips / StateImpact Pennsylvania

Bill Maitland (R) says he's read Marcellus Shale drilling comes with jobs and water problems.

Back on the streets of the borough, it’s hard to find anyone who has even heard of Marcellus Shale gas. But in two or three years it might help save the town’s economy.

Jerry Connolly owns a bar, which on a hot day like this, would have been filled with workers if the plant were still operating.

I asked him, what he knows about Marcellus Shale.

“Really this is the first I’ve heard about it,” said Connolly. “I really don’t know anything about it.”

One of Connolly’s customers, Bill Maitland, did know something about it.

“All I know about it is that people up in Elk County, Cameron County, Potter County, they’re all for it because it’s bringing jobs,” said Maitland. “But that people are having problems with that fracking because it’s messing up their water systems.”

Either way, both Maitland and Connolly say they would welcome the jobs a natural gas processor would bring to Marcus Hook. It may take years though, for state and county officials to broker a deal that might bring more beer drinkers back to Connolly’s bar.

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