Next mayor to influence whether the area will be an 'energy hub'

Philadelphia's next mayor is likely to face decisions that can either enhance or hinder the effort to develop the region as an "energy hub," a destination for oil and gas produced from shale formations.

Jim Kenney, the Democratic nominee in next month's mayoral election, said he might be more sold on the energy-hub concept if he understood exactly what it entailed.

"I know it's two words, energy hub," Kenney said in an interview. "If someone could explain it to me, because there's so many different components to it. . . . Nobody has really shown me a design of what goes where, or what is intended to go where."

"Energy hub" has become a catchall that encompasses a changing menu of industries that either use natural gas as fuel or as a feedstock in the production of products such as petrochemicals, plastics, or fertilizer. It also could involve businesses that store and repackage fuel before it moves on to another destination.

The Greater Philadelphia Chamber of Commerce is expected to unveil a strategy by year's end to develop more pipeline capacity into the region, a key component to an energy hub. And Philadelphia Gas Works, the city-owned utility over which the mayor has extensive control, is weighing options to expand liquefied natural gas production to tap into a growing market for off-system fuel sales.

Both major-party candidates in the Nov. 3 election say they are receptive to more energy-related businesses in Philadelphia.

Republican Melissa Murray Bailey calls the energy hub a "great opportunity to bring back a thriving blue-collar economy to Philadelphia."

Kenney, the odds-on favorite by virtue of his party's dominance in the city, touts the potential for redeveloping vacant industrial waterfront land. "In the last few years, we have seen our country's renewed domestic energy production turn nearly shuttered plants into job- and revenue-producing economic engines," he states in a position paper on his campaign website.

In an interview, the candidate is more circumspect.

"My point of view at this moment is to have no firm conclusion either way as to what's going to happen, and try to find out as plans are revealed if it's something we can be supportive of," he said.

Kenney's instincts are to seek a consensus between business leaders who believe natural gas can be a major economic engine and environmental activists who fear the expansion of fossil-fuel-related industries will undermine efforts to build a sustainable city.

"For somebody to say, 'Absolutely not, never, no way,' that's not really a tenable position," he said. "The other side is, Are you going to be like Texas? No, we're not going to go that way either."

In many respects, Philadelphia already is an energy hub. The region's oil refineries receive hundreds of railcars daily that deliver crude oil from domestic shale fields. And Sunoco Logistics Partners is investing $3 billion into pipelines and a massive export terminal in Marcus Hook to handle natural gas liquids such as propane and ethane from the Marcellus Shale.

An energy hub could entail construction of industrial complexes that don't produce the kind of visuals that inspire civic pride or attract tourists, but do generate wealth and taxes.

"I think the 'energy hub' issue automatically sends people to oil trains and asthma," Kenney said. "It's like there is no middle ground there for some folks. I think the government's responsibility, when it comes to environmental protection and job protection in a city that has a 26 percent poverty rate, I think somewhere you have to find the middle ground. I don't know where that middle ground is at the moment."

Kenney was a member of City Council when it declined to hold hearings or a vote last year on Mayor Nutter's proposed $1.9 billion sale of PGW to a private utility. One of the purported virtues of the sale was that the utility, under private owners, would be a bigger player in the region by having more access to capital and not being constrained by the city's borders.

He blamed the deal's collapse squarely on Nutter, whom Kenney said failed to communicate the rationale for the privatization and to include Council in the process. He said he urged Council President Darrell L. Clarke to hold hearings on the sale, but it was clear Nutter's proposal would never get the necessary nine Council votes.

"I could have stood on top of my desk and demanded a hearing and not gotten it, and potentially get elected mayor and have to go back and deal with the same people I just kicked in the shins," Kenney said. "That to me is not an example of good Council-mayoral relationships."

Though he is not necessarily opposed to privatization, Kenney said, a sale is off the table for now.

Rather, he believes that Council should reconfigure PGW's unwieldy governance structure to make the utility operate more like a private company, so that the public entity can profit in "an environment where natural gas is going to become an interesting, innovative possibility."

amaykuth@phillynews.com

215-854-2947@maykuth