Revive Phila. energy hub

By Mark Alan Hughes

and Elise Harrington

How do we square an economic opportunity based on fossil fuels with the environmental challenge of climate change? Philadelphia and the Delaware watershed are facing that question, and elections for governor in 2014 and mayor in 2015 will almost certainly demand some answers.

Last month, a conference at the University of Pennsylvania explored the possibility of Philadelphia returning to its historic role as a global energy hub, a strategy that would exploit our legacy to foster innovation. Participants discussed an astonishing array of possibilities, leading our keynote speaker, Bruce Katz, founding director of the Brookings Institution's Metropolitan Policy Program, to write: "I walked away feeling that Philadelphia and [its] incredible network . . . are at the cutting edge of some transformative stuff."

We've been here before. In 1847, the Philadelphia and Reading Railroad reached the Delaware River at Port Richmond, connecting the world to the anthracite coal fields. Eventually, the Port Richmond yards would become the largest privately owned tidewater terminal in the world. It consisted of 230 acres, including 21 wharfs that could accommodate 250 vessels and rail yards that could accommodate more than 5,000 cars.

This enormous energy infrastructure of mines, coal breakers, railroads, freight yards, and docks helped generate the industrial base that made Philadelphia the "workshop of the world" in the half-century that followed. By 1880, William Cramp and Sons Shipbuilding was the largest iron ship maker in the United States, and Baldwin Locomotive was producing twice as many trains as anyone else. In 1907, the Atlantic Refinery burned 350,000 tons of coal to produce oil and oil derivatives that accounted for nearly one-fourth of Philadelphia exports, including half the world's lamp oil.

These legacy assets form the basis for the new possibilities. The Atlantic Refinery is now Philadelphia Energy Solutions (PES), which has unlocked enormous value by opening a new rail facility within the refinery to accommodate oil from the Bakken Shale in North Dakota. PES is now the largest consumer of that field's light, sweet crude, successfully pivoting what had been a technical liability of the refinery into a basis for value.

There are also active discussions on a potentially bigger play: connecting Philadelphia assets to the Marcellus Shale. The promise is the same kind of energy-based economic spin-off that created Cramp, Baldwin, and so many other fortunes and jobs. Natural-gas-fired heat and power facilities can produce very efficient energy for making things. And natural gas itself has components and by-products that can support a number of chemical processes, like plastics and fertilizers.

But all this raises the question, how do we square the economic opportunity with the environmental challenges? These challenges are serious and range in scale from the tainting of our drinking water to the destruction of human settlements around the world. Can a city that seeks to be equitable, engaged, and environmentally sustainable also exploit fossil-fuel energy to advance its economy?

We believe the answer is yes, but only if we address all these dimensions simultaneously. Only a conversation that is broad enough to make trade-offs can avoid stalemates and maximize value.

Jobs and profits won't matter if we poison our groundwater and release methane into the atmosphere. How much are the locational advantages of Philadelphia, close to market and to resources, worth in terms of sustainable and equitable development? Is local support for critical infrastructure investment in Philadelphia worth industry support for more transparent regulation of fracking practices in Marcellus counties?

Research suggests that the natural-gas boom won't significantly help lower our carbon emissions (basically because it is displacing renewables and efficiency in addition to replacing coal). A carbon price (not a tax; all the dollars can stay in private hands) is the most reliable way to limit emissions worldwide. Such a price would only increase the competitive advantage that natural gas has over coal and oil. Is local support for a natural-gas strategy worth industry support for a carbon price?

These and other trade-offs can only be discovered and resolved in a conversation candid enough to work through the issues. Our watershed and our energy resources depend on each other to prosper. Managing that complexity requires both power and poise, which is what distinguishes great cities from the rest.