PA Energy: Boom and Bust

Pennsylvania's energy industry is booming and sagging at the same time. Three refineries in the Philadelphia area are for sale and will close next year, if buyers aren't found. On the opposite side of the state, natural gas production from the Marcellus Shale deposits remains high. It's projected to represent almost 25 percent of U.S. natural gas production by 2020 and support some 256,000 jobs by that point.

If Sunoco and ConocoPhillips close all three refineries that are located in South Philadelphia, Marcus Hook, Pa., and Trainer, Pa., more than 2,000 jobs will be eliminated, business columnist Mike Armstrong of the Inquirer reported recently. He noted that all three process light, sweet crude from North Africa and Europe and would have to be expensively upgraded to handle heavier Canadian crude oil, which could be delivered to the refineries by reversing the flow of a Canadian pipeline operated by Enbridge.

ConocoPhillips' refinery in Trainer processed 185,000 barrels of crude daily until it was shut down this month. Houston-based ConocoPhillips announced Sept. 27, 2011, that it would seek a buyer, immediately begin the process of idling the facility, and permanently close it in six months if it doesn't sell. The refinery is located on the Delaware River about 10 miles southwest of downtown Philadelphia.

"After exploring a wide range of alternatives for the refinery, the decision to sell is based on the level of investment required to remain competitive," said Willie Chiang, the company's senior vice president of Refining, Marketing, Transportation and Commercial. "U.S. East Coast refining has been under severe market pressure for several years. Product imports, weakness in motor fuel demand, and costly regulatory requirements are key factors in creating this very difficult environment. This action is consistent with our stated strategic objective to reduce our refining portfolio.

"Trainer Refinery has a rich history, and we are both proud and appreciative of the efforts and strong performance demonstrated by our employees. Our people have shown a long-standing commitment to operating in a safe, reliable, and efficient manner," Chiang said.

Pennsylvania Gov. Tom Corbett proposed stronger regulatory standards Oct. 3 for Marcellus Shale operations, including larger setbacks between gas wells and any private well or public water system and increased Department of Environmental Protection authority to withhold or revoke permits. But at the same time, Corbett stressed that his priority is encouraging gas drillers to continue creating jobs in Pennsylvania, Laura Olson reported in the Pittsburgh Post-Gazette.

This website is a good source for information about the companies exploring the Marcellus Shale, regulations affecting their operations, and blogs and groups both favoring and opposing increased drilling.

Chesapeake Energy is the most active Marcellus Shale driller. Its CEO, Aubrey McClendon, spoke about horizontal drilling and hydraulic fracturing in a speech Sept. 11, 2011, at the Marcellus Shale Insights Conference in Philadelphia. "Our company has performed this process 16,000 times -– the most of any company in the world. And we are getting better at it with every well. Not only are we getting better economically, we're getting better in terms of protective barriers, water management, wastewater recycling and air quality improvement," he said, adding that the industry "has an excellent track record of safety and environmental integrity."

Posted by Jerry Laws on Oct 17, 2011

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