Pennsylvania

Energy. Environment. Economy.

Philly’s energy hub: A renaissance for the Delaware Valley or a pipe dream?

A view of the Sunoco facility in Marcus Hook, Delaware County. Business leaders want to use Marcellus Shale gas to power an industrial renaissance along the Delaware River.

Susan Phillips / StateImpact Pennsylvania

A view of the Sunoco facility in Marcus Hook, Delaware County where Marcellus Shale ethane travels to via the Mariner East pipeline. Business leaders want to use Marcellus Shale gas to power an industrial renaissance along the Delaware River.

The Delaware River had at one time supported a thriving manufacturing hub. Now a group of Philadelphia area business leaders want to bring that back through the use of Pennsylvania’s Marcellus Shale gas. But turning Philadelphia into an East Coast “energy hub” may not be so easy.

On the surface it looks simple. Pennsylvania has a lot of shale gas. But the gas is not selling at high prices right now, forcing producers to slow down. Phil Rinaldi is chair of the Philadelphia Energy Action Team and CEO of Philadelphia Energy Solutions, the largest refiner on the East Coast. He’s the visionary behind the city’s energy hub.

“The reserves in the Marcellus are enormous and they’re trapped there because the market doesn’t exist to take those molecules away at a reasonable price,” he said.

Rinaldi wants to connect all those idle shale gas molecules with Philadelphia’s idle industrial waterfront property. Those sites are already linked to rail lines, and in some cases pipelines.

“You really create a series of businesses that cascade into other businesses that cascade into other businesses,” he said. “So it’s a question of getting that momentum started. Take that Marcellus where you have reserves you measure in centuries, and just basically move that reserve here.”

The cheap Marcellus gas could power heavy manufacturing. Or, it could become the raw ingredient in producing fertilizers or plastics. The region’s ports could start humming by shipping the manufactured products overseas

Organized labor loves the idea.

“Good jobs, good benefits, that’s what I see comin’ out of this,” said Philadelphia AFL-CIO president Pat Eiding.

Philadelphia Energy Solutions is the largest oil refining complex on the Eastern seaboard. Half of all Bakken Crude traveling across the country by rail ends up at the PES plant.

Nat Hamilton/WHYY

Philadelphia Energy Solutions is the largest oil refining complex on the Eastern seaboard. Half of all Bakken Crude traveling across the country by rail ends up at the PES plant.

The Chicken and Egg Problem

Jeannie Nevelos with Select Greater Philadelphia, says the city is an ideal place for investors to build factories.

“Fifty-three million people are within 200 miles of greater Philadelphia,” she said. “If you draw a 200 miles radius around any other major city by far we have the largest population density and that market is a huge driver.”

Nevelos says customers for manufactured goods are already here. The Delaware Valley is home to a number of pharmaceutical and chemical plants.

It’s Nevelos’ job to sell the energy hub idea to manufacturers. But she’s got a problem. A lot more gas needs to travel to Philadelphia through pipelines to make this plan a reality. And even though there’s several major pipeline projects in the construction phase across the state, there’s just not enough new pipes coming online to supply an industrial renaissance for Philadelphia.

“Bottom line is that in order to truly grow here we have to get the interest from the manufacturers, but we have to at the same time grow that pipeline in order to really make this sing,” said Nevelos.

The manufacturers won’t be singing unless they know they’re going to have access to the cheap gas. And on the other side of the state, the pipeline companies won’t build unless they have guaranteed customers in place. It means Nevelos has to reach out with both hands in two opposite directions to pull the gas supply, and the gas users together.

The pipeline issue puts a kink in Rinaldi’s plans.

“There’s a little frustration here we’re feeling,” he said.

That’s because federal regulators won’t allow pipeline projects unless builders can prove that they already have 90 percent of the demand locked up in contracts. And they can’t seal a deal with factories that don’t yet exist.

So Rinaldi’s solution to this problem is to get the producers – the people who pump out the gas – to help underwrite the pipelines. But with gas companies laying off workers and holding fire sales to get rid of their holdings, that could prove difficult.

 

The State’s Role

The Energy Action Team, a group organized by the Greater Philadelphia Chamber of Commerce and led by Phil Rinaldi, put out a 60-page guide to creating an energy hub in the city. “A Pipeline for Growth” details how this could happen, and seeks government support, including a state “ombudsman” who would work to quicken the permit process for new pipelines, and potentially, state financial support.

“The commonwealth has a lively interest here,” said Rinaldi. “This can provide great wealth to the state, great taxable kind of wealth and movement of wealth.”

It’s unclear what form those incentives would take.

Philadelphia Energy Solutions CEO Phil Rinaldi speaks to the chamber of commerce about the benefits of an energy hub for the city.

Susan Phillips / StateImpact Pennsylvania

Philadelphia Energy Solutions CEO Phil Rinaldi (R) speaks to the chamber of commerce about the benefits of an energy hub for the city.

Dennis Davin, Pennsylvania’s secretary of the department of community and economic development, said the idea of an ombudsman came was recommended by the state’s pipeline task force meetings. But the idea of economic incentives was new to him.

“We 100 percent agree that a regional energy hub in Philadelphia would be a great thing,” said Davin. “Our focus is on jobs and investment and creating tax revenue. But I think we would have to take a look at that and see what the needs were.”

In last year’s budget, Governor Wolf had proposed funds for short pipelines that would connect major lines with industrial parks. But that plan died along with the severance tax.

Another problem with pipeline projects is the length of time it takes for the builders to jump through regulatory hoops. Rinaldi says it’s a race against the clock to make Philadelphia an energy hub before states along the Gulf Coast take all those shale gas molecules down south.

Republican congressman Pat Meehan from Delaware County says permits for new pipelines need to be stream lined.

“Just to move [projects] along an identified path and not to fall behind so dramatically so that investors look and say I’ll go someplace else,” he said. “I’ll go to Texas and I’ll build my jobs there.”

 

Hometown Opposition

Not everyone in Philadelphia thinks bringing more fossil fuels into the area is a good idea. A new coalition of environmental groups, Green Justice Philly, has formed to oppose the energy hub.  About fifteen people showed up to protest the roll out of “A Pipeline for Growth” in old city on Wednesday. Tracey Carluccio from the Delaware Riverkeeper, has a very different view from Phil Rinaldi when it comes to the the city’s future as an energy hub.

“Everyone should be crying uncle,” said Carluccio. “We need to stop this proliferation of pipelines and we really need to change what we’re doing and move toward the development of green energy, renewable energy, and sustainable energy that doesn’t have these indelible impacts and doesn’t work against healthy communities, healthy habitats, a healthy Delaware River.”

Protesters demonstrate outside of the Chemical Heritage Foundation in Old City Philadelphia. The Greater Philadelphia Chamber of Commerce was meeting inside to discuss the energy hub.

Susan Phillips / StateImpact Pennsylvania

Protesters demonstrate outside of the Chemical Heritage Foundation in Old City Philadelphia. The Greater Philadelphia Chamber of Commerce was meeting inside to discuss the energy hub.

Locally, environmentalists like Carluccio worry about the destructive nature of pipeline construction. Trees have to be cleared, waterways have to be crossed. And because pipeline right-of-ways have to be kept clear for safety reasons, in some cases the damage to the land is permanent.

Carluccio also says the state and city shouldn’t be investing at all in fossil fuels. She says building more pipelines that carry fossil fuel contradicts any plans to reduce global warming that the country agreed to at the most recent climate talks in Paris.

“At this point we feel, stop it,” Carluccio said. “We can turn away from fossil fuels and we can look forward to renewable and sustainable energy.”

Carluccio advocates investing in solar and wind, creating jobs by installing solar panels on every roof in the city.

Philadelphia’s new Mayor Jim Kenney, who was supported by both organized labor and environmentalists says in a city with such high poverty, he has to support anything that creates new jobs.

“The key for me is putting people to work and getting people out of the prison pipeline and into the pipeline of being good citizens and taxpayers and parents and if we don’t do that, we’re doomed,” he said. Adding: “And we’re not going to be doomed.”

He described his role in the energy hub plan as one of King Soloman.

“Not one side or the other is going to get one hundred percent of what they want,” he said. “It never happens in a democracy if it’s run right.”

 

Upstate Pipeline Battles

In addition to organized opposition on the home front, the key to a Philadelphia energy hub will face certain resistance in rural counties that will have to host any new pipeline construction. Organized opposition helped delay the 119-mile Penn East pipeline by at least seven months. Sunoco’s Mariner East 2 has been delayed due to difficulties securing land as the company continues to take landowners to court over eminent domain.

A sign protesting the building of the Mariner East pipeline in Huntingdon County.

Susan Phillips / StateImpact Pennsylvania

A sign protesting the building of the Mariner East pipeline in Huntingdon County.

Bob Riga, general manager for natural gas pipeline operator Spectra Energy, says the increased opposition movement should not be taken lightly.

“They’re intelligent, they’re organized, and they believe in what they do,” he told a group of business people at the Chamber event on Wednesday.

Just as Riga was speaking, Huntingdon County resident Elise Gerhart had taken to tree-sitting in her own backyard, risking jail time and injury to protect her property from pipeline construction.

“We’re talking about, already, 30,000 miles of planned pipelines in the state,” Gerhart said. “When is it going to stop? When is it going to be enough for these companies. How many are they going to build?”

The energy action team says that depends on what type of factories they can lure to the city. They’re now working to prove their plan is something more than just a pipe dream.

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