An oil pipeline encircling Philadelphia gets a new life delivering shale gas

A petroleum pipeline that encircles the Pennsylvania suburbs around Philadelphia will be converted to deliver natural gas from Bucks County to Marcus Hook under a $189 million deal announced Thursday between Talen Energy Corp. and New Jersey Resources Corp.

Talen, which is based in Allentown, is selling its Interstate Energy Co. LLC pipeline unit to Adelphia Gateway, LLC, a subsidiary of New Jersey Resources, which is based in Wall, N.J. The 84-mile underground pipeline was now delivers either oil  or natural gas to two Talen power plants in Northampton County.

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The new owners of the Interstate Energy Co. plan to convert the southern section of the petroleum pipeline, shown in orange, to deliver natural gas to customers in the Philadelphia suburbs.

Adelphia Gateway plans to convert the southern 50-mile portion of the pipeline, which now transports oil in a northern direction, to transport gas southward to customers in Montgomery, Chester and Delaware Counties. Adelphia on Thursday launched an “open season” to solicit bids from potential new customers.

The 18-inch diameter pipeline will connect with the Texas Eastern natural gas pipeline at an existing interchange near Rich Hill Road in Richland Township, Bucks County and would deliver up to 250,000 thousand cubic feet of gas a day, providing a substantial new source of gas to the region.

“Today, the Philadelphia market is constrained with limited access to affordable energy sources,” said Steve Westhoven, senior vice president of NJR Midstream, a subsidiary of New Jersey Resources. “With the Adelphia Gateway project, we look forward to applying our market expertise to serve customers and support economic development opportunities in the region.”

Adelphia will to continue to supply natural gas on the northern 34-mile section of pipe to Talen Energy’s Martins Creek and Lower Mount Bethel generating stations.

The pipeline was built in the 1970s to deliver oil from Sunoco’s former Marcus Hook refinery to power plants owned by Pennsylvania Power & Light Co. It was partly converted to natural gas in 1996. With the refinery’s closure and oil’s fall from favor as a fuel source for electricity generation, the pipeline becomes the latest piece of energy infrastructure converted to  accommodate new gas production from Pennsylvania’s Marcellus Shale fields.

The sale requires the approval of the Federal Energy Regulatory Commission and the Pennsylvania Public Utility Commission, and is expected take about a year to close.