Make most of natural-gas revolution

By Daniel Gabaldon

The revolution in natural-gas production has the potential to provide immense benefits to the U.S. economy. With prudent regulation of the risks to groundwater and methane emissions, the overall environmental benefits should be substantial as well. A switch to natural gas from fuel oil and coal in power generation, and from fuel oil, diesel, and gasoline in transportation and industrial applications, can have attractive economic paybacks and result in substantial emissions improvements.

The Philadelphia region should be at the forefront of the natural-gas revolution. The Delaware Valley borders the Marcellus, the most productive of all North American shale-gas basins. The region has a legacy of economic and technological leadership in energy-intensive manufacturing and chemicals, which stand to benefit from access to low-priced natural gas, producing high-quality technical, engineering, business, and construction jobs.

Philadelphia has an excellent harbor, with the potential to serve as a hub for liquefied natural gas-fueled shipping and possibly LNG exports. Planning of the requisite pipeline to transport the gas to the region is already well underway. While safety, environmental protection, and zoning issues are of course critical and complicated in densely populated Southeastern Pennsylvania, there are ample rights of way and brownfield sites available. And the region enjoys a remarkable depth of educational institutions to provide the engineering and business skills required to capitalize on this opportunity.

Yet compared with several other cities around the country, progress on capturing the next wave of natural-gas-driven investment, job creation, and tax revenue is quite modest in the region.

Compare Philadelphia's record with a city like Jacksonville's. That Florida city doesn't enjoy this area's proximity to gas reserves, existing infrastructure, industrial base, or depth of educational resources. Yet it is at the center of massive investment - plus technical and commercial innovation - centered on capturing the benefits of abundant natural gas. Two consortia of energy and financial players (one including GE) are planning to build LNG terminals in Jacksonville, aimed specifically at serving the rail, maritime, and heavy-duty trucking industries. Local municipalities and UPS are ordering hundreds of natural-gas-fueled vehicles. Local shipbuilder Tote and maritime fleet operators like Crowley are building LNG-powered ships and planning to export LNG to the Caribbean.

Together, these projects represent several hundred million dollars in direct investment - each LNG plant costs about $100 million, and the LNG shipping contract was more than $350 million - with hundreds of jobs in engineering, construction, and the operations of the terminals and transportation businesses.

What explains the difference between these two regions' ability to seize the economic and environmental opportunities presented by natural gas? Is it about more aggressive, investor-owned utilities stealing the march on conservative, publicly owned utilities? No. The gas utility in Jacksonville (JEA) is municipally owned, just like Philadelphia Gas Works.

Is it about a hyperactive city government crafting blueprints and driving change? No. The Jacksonville authorities have been supportive but not heavy-handed in leading this wave of development.

Maybe it boils down to a difference in perspective - that is, thinking about the natural-gas revolution as a source of near-term cash rather than as a catalyst for an industrial renaissance for the region.

Philadelphia seems to be focused on using its gas utility, PGW, as a tempting solution to its immediate fiscal challenges, looking for a quick sale. Jacksonville has been much more focused on using its municipal gas utility and harbor as a platform for sustained growth. It has created partnerships with businesses, leveraging its port facility and utility by attracting capital and investments, bringing together labor, capital, customers, and businesses, and positioning Jacksonville to become a market leader on the East Coast in liquefied and compressed natural gas.

It is not too late for Philadelphia to switch from its "cash out" mind-set to a growth orientation. Southeastern Pennsylvania should seize this historic opportunity to capitalize on its unique geographic, logistical, human, and manufacturing endowments, and use public private partnerships to take full advantage of the natural-gas revolution in its backyard.