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Promoters see energy hub, economic revival in transmission of Marcellus fuel

HOUSTON, Pa. - Philadelphia's reindustrialization starts 300 miles away at a sprawling processing plant in Southwestern Pennsylvania where liquid fuels extracted from Marcellus Shale gas begin a cross-state journey to the Delaware River.

MarkWest plant in Houston, Pa.
MarkWest plant in Houston, Pa.Read more

HOUSTON, Pa. - Philadelphia's reindustrialization starts 300 miles away at a sprawling processing plant in Southwestern Pennsylvania where liquid fuels extracted from Marcellus Shale gas begin a cross-state journey to the Delaware River.

In the last five years, a forest of metal distillation towers has sprung up like a poplar grove from the Washington County countryside, surrounded by rows of cylindrical storage tanks. The complex, owned by MarkWest Energy Partners of Denver, separates high-value liquid fuels such as propane and butane from the "wet" natural gas produced near here, the sweetest spot in the prolific Marcellus Shale formation.

Those natural gas liquids will be pumped through a repurposed pipeline to Marcus Hook, where Sunoco Logistics Partners L.L.P. is demolishing the retired Sunoco petroleum refinery and replacing it with new equipment to handle Marcellus liquids. Most of the propane, butane, and ethane will be shipped to European petrochemical plants that are retooling in expectation of decades of plentiful Appalachian supply.

Industrial and political leaders in the Philadelphia region hope this initial movement of fuel to Marcus Hook - propane already is being brought in by rail and truck - is only the first trickle in a flood of Marcellus Shale products that will be routed through Southeastern Pennsylvania.

Energy-hub promoters envision an industrial revival in a region where manufacturing has been on the ropes for decades. They forecast a proliferation of new businesses built on vacant riverfront brownfields, employing high-paid workers to produce petrochemicals, plastics, fertilizer, methanol, and motor fuels - all from natural gas.

"We can turn Philadelphia into the Silicon Valley of energy," said Michael L. Krancer, a Blank Rome law partner and former Pennsylvania environmental protection secretary who is one of the chief cheerleaders of the energy-hub concept. His firm also represents Sunoco Logistics.

Not everyone is on board. Fierce dissent has arisen along the route of the pipeline, called Mariner East, particularly in West Goshen Township, Chester County, where opponents say they have nothing to gain from the new export-energy trade.

Environmental leaders say the zeal to embrace a fossil-fuel economy has crowded out alternative, green visions.

"Is this the type of city Philadelphia wants to be?" asked Joseph Otis Minott, executive director of the Clean Air Council. "What are the environmental implications of this? Is this sustainable long-term? None of that debate seems to be taking place."

In Washington County, south of Pittsburgh, where Range Resources Corp. drilled the first Marcellus exploratory well 10 years ago this month, the projected production is staggering. Range is on course to triple its current daily production of 1 billion cubic feet of gas by the end of this decade.

"We've got a five-year plan, a 10-year plan, and a long-range plan," said John K. Applegath, who heads Range's Southern Marcellus operations. "There's decades of drilling."

By the end of this year, Marcellus production in Pennsylvania and surrounding states is expected to account for a quarter of the nation's total gas supply.

"If the Marcellus were a country, it would rank as a top-10 producer in the world," Frank M. Semple, chairman of MarkWest Energy, told a shale industry conference in Pittsburgh last month.

MarkWest, which has five processing facilities in the Marcellus, is one of several "midstream" companies that gather natural gas from producers and purify it before sending the gas into major pipelines for delivery to customers.

"This region is so prolific in terms of production, the infrastructure is just catching up," Randy J. Cleveland, chief executive of XTO Energy Inc., said in a recent interview. XTO, an ExxonMobil subsidiary, recently opened a natural gas liquids plant north of Pittsburgh.

Natural gas contains mostly methane, but the wet Marcellus gas in Southwestern Pennsylvania has elevated levels of high-energy compounds such as propane, ethane, and butane - called natural gas liquids (NGLs) because the materials condense easily at low temperatures.

NGLs are a challenge because they burn hotter than methane. Producers like Range realized early on they would produce so much wet gas they needed to strip out some NGLs to keep the gas within specifications to burn in power plants and home furnaces. Otherwise, they would be forced to curtail drilling.

"This gas is so deliciously rich, we realized about seven years ago we were going to have a problem," said Matthew Curry, Range's director of business development. "It's also an economic opportunity."

Propane, butane, and ethane are more valuable than natural gas, if buyers can be found. MarkWest and others were enlisted to build cryogenic plants in places like Houston that chill the natural gas to separate the NGLs. Each gas turns into liquid at a different temperature.

An eager market was found in the petrochemical industry, which can use the cheaper NGLs to replace more expensive raw materials derived from petroleum.

That's where Sunoco Logistics stepped in. It saw an opportunity to convert an underused refined-fuel pipeline crossing Pennsylvania and Ohio to transport the NGLs.

The project Sunoco calls Mariner West went on line late last year, delivering ethane from Pennsylvania across northern Ohio to a petrochemical plant in Sarnia, Ontario.

The Mariner East project, which connects the Houston, Pa., plant to Marcus Hook, is scheduled to begin shipping propane this winter, and ethane next year. Most of the fuel will be shipped to Europe.

Local opposition has slowed the construction of some pumping stations on the pipeline - Sunoco is seeking a ruling from the Pennsylvania Public Utility Commission to bypass local zoning rules. When it is completed, Mariner East will transport 72,000 barrels of NGLs a day.

That's only the beginning. Production of Appalachian NGLs is expected to grow tenfold in a decade, to a million barrels a day. A pipeline to transport the stuff to the Gulf Coast is in the works. So-called ethane crackers are planned for Beaver County and West Virginia that could take some NGL production.

Sunoco Logistics also is planning a second Mariner East pipeline to Marcus Hook. It would carry four times as much natural gas liquid as the first pipeline.