Could Philadelphia become the most important new energy hub in the U.S.?
Nobody’s counting out Houston, which still enjoys the distinction of having the biggest energy economy in the country. But last week a University of Pennsylvania professor and an associate who organized a major conference of energy experts sponsored by the university in October argued that Philly is poised to become a U.S. “global energy hub.”
Surprised? You wouldn’t be if you knew Philly’s history. A century or so back, when Houston was just a settlement along the Buffalo Bayou, Philly was an energy capital, explained the professor, Mark Alan Hughes, and his co-author, research associate Elise Harrington. Here is an excerpt from their article in the Philadelphia Inquirer:
In 1847… [Philadelphia’s] 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.
Could Philly rival Houston again? I spend a lot of time both in Houston and Philadelphia, where I’m based. I certainly see increasing business connections developing between the two cities.
And certainly some smart money sees the Greater Philadelphia area as an oncoming American energy hub. Greater Philadelphia is the site of two now thriving oil refineries; the Philadelphia Energy Solutions (“PES”), a joint venture between Carlyle Group and Energy Transfer Partners, and Monroe Energy, a wholly owned subsidiary of Delta Airlines.
The PES refinery, located in Philadelphia, employs over 1,000 workers and processes about 330,000 barrels of crude oil per day that makes it the largest oil refining complex on the Eastern seaboard. PES has already invested more than $250 million in capital and created 100 new permanent jobs at the refinery in just its first year of operations. PES is bringing in lower cost, lower sulfur crude oil from North Dakota’s Bakken shale that is extracted by horizontal drilling and hydraulic fracturing. PES, in tandem with
The former Marcus Hook, Delaware County Refinery is being remade into a direct link between the Greater Philadelphia area and the natural gas liquids rich Western Pennsylvania and Appalachia Marcellus and Utica Shale fields.
All the companies I’ve mentioned are responsible for a lot of economic activity in Philly. (Some are clients of Blank Rome.)
Penn’s Hughes and Harrington, I should note, got a couple of things wrong. For example, they said: “Research suggests that the natural gas boom won’t significantly help lower carbon emissions (basically because it is replacing renewables and efficiency in addition to replacing coal).” The Energy Information Administration and the Environmental Protection Agency both report that the American carbon footprint has been dramatically lowered thanks to greater use of natural gas for electricity generation. Also, natural gas is about the best partner wind and solar can have right now, since gas generation can be used to solve the key problem with those two renewables: their intermittent nature. (Click here to read more on this topic.)
Hughes and Harrington are dead on, though, about the big picture: Greater Philadelphia boasts an embarrassment of riches to be uniquely poised as a great American energy hub. And they unabashedly say it can do that while being faithful to Philadelphia’s other traditions of being equitable, engaged, and environmentally sustainable.
We are just seeing the tip of the iceberg. As the domestic natural gas and energy economy expands, the Greater Philadelphia is located near the energy resources and in the heart of the location of the demand—60 percent of the United States’ population is within about a day’s drive. The region has a world-class transportation infrastructure, including a world deep-sea port, rail lines, and airport. There is an experienced, well-trained, and well-stocked labor force. There are top-notch higher education institutions along with a renowned health care network.
All this means that the Greater Philadelphia Area will be transformed into the Houston of the Northeast. Or is it that Greater Philadelphia will transform Houston into the Philadelphia of the Gulf Coast?
Michael L. Krancer is Partner & Energy, Petrochemical and Natural Resources Practice Group Leader at Blank Rome LLP and former Secretary of the Pennsylvania Department of Environmental Protection. His blog, Energy Trends Watch, follows developments in energy, petrochemical and natural resources.
