THE BURNED OVER DISTRICT

One can really hope not, but now that the industry has hit peak profit from drilling, the next step is "downstream" infrastructure enhancement. Some of it is currently in place and the industry is looking to expand it.

“Philly has the best ports, the best workforce, the best transportation and roads, great educational institutions and two very healthy refineries,” said Michael Krancer, a former secretary of the Pennsylvania Department of Environmental Protection, now a lawyer working with some of the energy companies involved in pushing for the city to become an energy center.

“To put it mildly, eastern Pennsylvania is where the opportunity is to valorize our shale industry,” he said.

Krancer and others want to make Philadelphia a hub for processing and distributing the massive amounts of energy flowing through the state, thanks to the Marcellus Shale hydraulic fracturing boom.

Their plan would see much of the energy being produced through hydraulic fracturing, or fracking, in the western part of the state piped to Philadelphia, where some refinery infrastructure already exists. If the proponents of this plan are successful, the second phase would be to build more infrastructure to turn that fuel into value-added products like plastics and chemicals, all at refineries and factories in the Philadelphia area.

There’s not much standing in the way economically. Several companies have long been pushing to build different parts of the framework. The biggest challenge may be convincing the public and local environmentalists that the plan won’t harm Philadelphia neighborhoods, some of which are already packed with oil and gas infrastructure, and the Delaware River, which runs right next to where much of the development has been proposed.

“If you've only got people talking about the benefits and others only talking about the costs — i.e., environmentalists — you’re not going to get a deal,” said Mark Alan Hughes, the director of the Kleinman Center on Energy and Policy at the University of Pennsylvania. “The big challenge is, can we overcome this political divide?”

Much of the plan hinges on a facility southeast of Philadelphia, Marcus Hook, where Sunoco Logistics Partners is converting a refinery that used to handle oil into one that can handle natural gas. The conversion will take place regardless of whether other parts of the project go through as Sunoco tries to take advantage of cheap natural gas prices in the state. Once the plant is converted, it could be the first in a string of other development plans around Philadelphia.

A second component is adding capacity for natural gas to two oil refineries, the longest-running ones on the East Coast, owned by Philadelphia Energy Solutions.

The third and perhaps most crucial aspect of the project is building a pipeline that can handle several times more natural gas liquids than the ones currently running from the Marcellus to Philadelphia. Sunoco Logistics Partners officially announced on Nov. 7 that it will be building that pipeline, the Mariner East 2, which will carry four times as much natural gas as its current Mariner East pipeline. The Mariner East 2 will take two years to build. Natural gas pipelines usually aren’t subject to local regulations and are overseen by a presidentially appointed panel, the Federal Energy Regulatory Commission. But pipeline projects are notoriously contentious, and smaller pipelines to Philadelphia, including the first Mariner East, have run into community opposition.

The real question is, what part of the Delaware River will become the Houston Ship Channel North?