Energy leaders tout Marcus Hook as vital to taking advantage of boom
PHILADELPHIA – At many shale-related events in Washington County, officials proclaim that region, with its abundant gas reserves and wells, is the “Energy Capital of the East.”
Hundreds of miles away in Philadelphia, where there is no shale drilling, leaders looking to tap into the gas boom are speaking of an energy hub that former Department of Environmental Protection Secretary Mike Krancer last week said would “rival and surpass Houston soon.”
The steps toward connecting both claims are taking place on 800 acres along the Delaware River south of the city in Marcus Hook, where rusty stacks and holding tanks are giving way to gleaming towers and pipes.
Nearly 1,000 contractors enter the site each day to convert the former Sunoco oil refinery into a terminal at which sister company Sunoco Logistics can receive and process hundreds of thousands of barrels of propane, ethane and other liquids pulled from Marcellus and Utica shale wells 300 miles to the west.
If Pennsylvania is to take full advantage of its shale boom, industry leaders and observers say it needs projects such as a revitalized Marcus Hook Industrial Complex to move products across state lines and overseas while attracting manufacturers to set up close by.
“Whether it's natural gas or other products, they need a final destination,” said Jonathan Hunt, senior director for terminal operations at Philadelphia-based Sunoco Logistics, which is spending at least $3 billion on the multi-phase Mariner East pipeline project to connect the shale fields of Western Pennsylvania, Ohio and West Virginia to the revamped terminal.
“For the economic development to continue, they need the whole chain. A lot of that can end up here in Marcus Hook.”
Expanding the project beyond a decades-old Mariner East 1 pipeline that Sunoco retrofitted and extended for west-to-east flow this year faces opposition from environmentalists and landowners.
“Sunoco is saying this project benefits the public. As far as we're concerned, it does not,” said Sam Koplinka-Loehr, shale gas organizer for the Clean Air Council, which has raised safety and legal concerns.
The group has a pending lawsuit challenging Sunoco Logistics' status as a public utility that can seize land for the pipeline through eminent domain. In several counties along the proposed path of the larger Mariner East 2 projects, landowners are fighting its use of eminent domain in court. The company cites Public Utility Commission rulings establishing its utility status dating back years.
Advocates say the Mariner East projects, which could expand to a third pipeline and a propane dehydrogenation plant, bring a list of public benefits: cheaper energy costs, well-paying jobs, and a steady supply of propane and other natural gas liquids or NGLs.
Marcus Hook can give Pennsylvania gas producers an edge on exports and can attract more industries such as the facility that chemical company Braskem built there to take advantage of NGLs that are used to make plastics.
“You're really close, not just to the resource, but to the customers,” Anusha Kothandaraman, director of strategy for Braskem America, said last week during a discussion about shale-related manufacturing at the Shale Insight gas conference here. “The impact from this can be even bigger than the impact from drilling.”
People living closer to the drilling activity have more likely seen the positive impacts of new businesses and hotels, landowners benefitting from royalty checks and cheaper gas bills.
“Folks on this side of the state haven't seen a lot of those benefits that can come from getting the gas to markets,” said Department of Community and Economic Development Secretary Dennis Davin.
In Marcus Hook, some of those impacts can be seen in a changing skyline above the sprawling site that Sunoco Logistics acquired in 2011.
Crews are putting the finishing touches on a 500,000-barrel propane tank, a 300,000-barrel ethane tank and a towering de-ethanizer between them.
Nearby, workers are driving piles and laying foundations for four more tanks to handle the expected volume of Mariner East 2, which will mostly parallel the original pipeline and go online next year.
They will augment 2 million barrels-worth of underground storage in caverns carved out of the granite last century.
“It's a mix of old and new here,” Hunt said as workers dismantled stacks and towers left over from the oil refinery, but prepared to expand the “racks” at which railcars and trucks can load and unload various liquids.
Existing rail and truck terminals at the site offer an easy transition to regional distribution point for propane and fuel additives such as pentane, byproducts of some shale wells.
“From here we can take products from the basin and supply the whole Northeast,” said Sunoco spokesman Jeff Shields.
Along the river, restored docks open shipments of the liquids to the world. Ships already are taking propane out to the Atlantic Ocean, and this fall larger vessels are expected to start taking ethane to Europe under a 15-year contract between INEOS and driller Range Resources.
Range expects the project to generate $90 million annually for the driller and producer, COO Ray Walker told analysts this month, calling Mariner East “something we're really looking forward to.”
Such deals illustrate the potential economic boon for Pennsylvania producers that can export the liquids that come up in some shale wells, said PUC Commissioner Robert Powelson, who called converting Marcus Hook and Mariner East “the right decision.” Prices for the liquids in Europe are four times the cost of producing and moving it here.
“I call that an economic competitive advantage,” he said.
Industries should focus on Marcus Hook instead of existing terminals and petrochemical plants along the Gulf Coast because “it makes more sense to move (NGLs) 350 miles to a demand center rather than 1,200 miles to the Gulf Coast,” said Joseph Colella, a senior vice president for Sunoco Logistics.
Another big economic impact is in the return of jobs that disappeared when Sunoco and other companies idled refineries during two decades.
Along with the contractors during construction, Sunoco Logistics added more than 100 full-time employees to the 50 that remained on the site when its sister company shut down, and it plans to eventually employ several hundred more.
The hiring stopped what Hunt called a “20-year drumbeat of death” for the region's energy workforce.
Up Delaware Avenue from his office, Monroe Energy, a subsidiary of Delta Airlines, restarted a closed refinery and brought back hundreds of more jobs to make jet fuel. Further up the Delaware, Philadelphia Energy Solutions took over the largest oil refinery on the East Coast and now handles 20 percent of the crude produced in North Dakota's Bakken shale.
Philip Rinaldi, the CEO of Philadelphia Energy Solutions who said he wears proudly the “Fossil Phil with a heart of shale” tag he received from anti-oil activists, considers those revived operations “a taste of what is yet to come.”
“Act 1 is the oil refining business. But Act 2 is the … Marcellus resources, the natural gas, the NGLs and all that comes with it,” said Rinaldi, who chairs the Greater Philadelphia Energy Action Team. “Philadelphia has an opportunity to improve the economic climate of the entire state of Pennsylvania.”
David Conti is a staff writer for Trib Total Media. He can be reached at 412-388-5802 or firstname.lastname@example.org.