Summit's message: Pipeline key in shale-energy revolution

Unless Philadelphia builds a robust connection to Pennsylvania's gas fields, the region is at risk of being bypassed by the Marcellus Shale energy revolution, a gathering of business and public officials heard Friday.

"Creating an energy hub for greater Philadelphia is really a very important opportunity to be seized," energy historian Daniel Yergin told the one-day conference, "Greater Philadelphia: The Next Energy Hub."

The summit at Drexel University, sponsored by the Greater Philadelphia Chamber of Commerce, was billed as a coming-out party for a campaign to attract energy-intensive businesses to fuel an industrial revival in the region.

But business leaders say the three interstate pipelines that serve Philadelphia have insufficient capacity to deliver new supplies from the Marcellus, more than 100 miles away. Their aim is to enlist a critical mass of industries to underwrite construction of a very large pipeline costing more than $1 billion.

"We need a pipeline with ample expansion capability to span a 110-mile divide," said Philip Rinaldi, chief executive of Philadelphia Energy Solutions, the South Philadelphia refinery formerly operated by Sunoco.

Business and big labor groups have lined up behind the campaign, envisioning a construction boom of pipelines, fuel-production facilities, and petrochemical operations, as well as an upturn in associated rail and port traffic.

About 100 environmentalists, who say the last thing Philadelphia needs is more oil-and-gas infrastructure, voiced their dissent outside the invitation-only event at the Creese Student Center.

"We're here to give these visiting speculators and the con men who invited them here a warning that Philadelphia is not a sacrifice zone," said Tracy Carluccio, deputy director of the Delaware Riverkeeper Network, one of more than a dozen groups that organized the peaceful march.

The protesters urged the investors to put their money into renewable-energy ventures instead of fossil-fuel infrastructure.

The activists did not go unnoticed by some speakers indoors, who warned industries that they risked losing a "social license" to operate if they ignored concerns about health, safety and the environment.

"I think it's important not to dismiss their concerns," said Jason Bordoff, founding director of the Center on Global Energy Policy at Columbia University. He said cited concerns about climate change and the safety of trains ferrying a growing amount of crude oil to refineries.

Yergin, author of several histories of the energy business, including the Pulitzer Prize-winning The Prize, said an energy hub would create more than manufacturing jobs at new power plants, petrochemical facilities, or fuel-production plants. The hub would attract engineering, research, technical, and financial employment, too, he said.

"You've got to really open your minds. You've got to look more broadly to see how large the impact will be," said Yergin, who also founded the consultancy IHS Cera. "When you're talking about an energy hub, you're talking about a whole ecosystem that would benefit directly and indirectly."

Promoters of the energy hub say Philadelphia is ideally suited to develop into a center for transshipping - transferring from one vehicle or vessel to another - and consuming Marcellus Shale products. The region has an abundance of manufacturing sites; a vast rail, road, and maritime transportation network; and a workforce and culture accustomed to manufacturing.

"We have the feed stock at our fingertips to rebuild manufacturing that we lost over the last four decades," said David Spigelmyer, president of the Marcellus Shale Coalition, the industry trade group. He said manufacturing is the next natural step in the state's build-out of the shale-gas industry.

Advocates say Philadelphia already has a long history as an energy center. Formerly the site of seven oil refineries, the Delaware River is still home to five that receive crude oil by train, and ship and distribute the fuels they produce to regional and international markets.

And Sunoco Logistics Partners L.P., the Philadelphia pipeline company, is busy investing billions of dollars to build its Mariner East pipelines to deliver Marcellus natural-gas liquids such as ethane, propane and butane to former refinery sites in Marcus Hook and Westville. Much of the liquid is being shipped overseas.

Building a new pipeline is more complicated than lining up a list of potential industrial customers.

Federal and state regulatory agencies typically want pipeline operators to verify that they have committed buyers for capacity, so that other customers are not left holding the bag for surplus "stranded investments."

But the promoters of a new Philadelphia pipeline - as yet unmapped - say they aim to design the project with enough spare capacity to accommodate future growth.

"This isn't like encouraging a call center in Ireland to come here," said Rob Wonderling, the chamber's president. "These are complex economic-development transactions that take a lot more time."

Pipeline advocates say they are exploring mechanisms to finance the project.

They lost one potential investor on Thursday, when UIL Holdings Corp. abandoned its $1.86 billion bid to buy the Philadelphia Gas Works, the municipal gas utility. Most industrial leaders had supported the sale to the Connecticut company because UIL would have been able to invest more in development projects than the financially strapped PGW.

Wonderling said the failure of the PGW sale "sends a short-term negative signal." But he said other deals would present themselves.

"We'll use it as a learning experience," he said.