The city best known for Rocky, cheese steaks and
sharp-elbowed sports fans is developing a new reputation as a nexus of oil and
gas transportation, which bodes well for its economy.
With little fanfare, Philadelphia is undergoing a
revolution powered by the U.S. energy renaissance. Renewed investment and
activity in the region's sprawling railway network and aging infrastructure is
turning the City of Brotherly Love into a potential energy hub that some
believe can rival Houston.
Energy experts cite two major factors working in Philly's
favor: it's proximity to the booming Marcellus Shale, where 5,400 shale wells
churned out nearly 2 trillion cubic feet of natural gas during the first six
months of the year; and the city's bustling commercial railroad system, which
has made it a transit point for oil being shipped from North Dakota's Bakken
formation.
Along the Northeast corridor, "there are maybe six
distribution pipeline proposals for natural gas," said Vincent Devito, a
law partner at Boston-based Bowditch & Dewey. "A lot is intended for
exports and the quickest and easiest way is through Philadelphia's
infrastructure."
Read MoreLow oil prices to bite into 2015 US shale
growth: IEA
Devito, a former Department of Energy official, said the
city is already a draw for gas and energy related businesses "that like to
be close to the pipeline for easy access," he said. "Philly is in a
fortunate spot because they are part of the Northeast corridor, there's a lot
of business and remarkable opportunities for business and economic
development."
Most recently, Philadelphia's profile in the energy
sector got a large boost from Sunoco Logistics Partners, a pipeline investment
vehicle that announced it would construct a $2.5 billion pipeline from the
Marcellus into Philly. The new pipeline will complement an existing gas artery
that may hike the region's natural gas transport by fourfold.
With the U.S. experiencing an embarrassment of fossil
fuel riches, Sunoco and other companies are channeling billions into pipeline
investment across the country. As local rail companies like Monroe Energy
negotiate for increased access to Bakken crude, Philadelphia is one of several
regions that stands to benefit from the influx of oil and gas.
"Philly has physical infrastructure, land and access
to export markets, or you can transport [natural gas] to other markets in the
U.S.," said Adam Karpf, a portfolio manager at Atlantic Trust, which has
$24 billion in assets under management.
The new Houston?
The city is not what most would normally consider an
energy hub. Traditionally, oil and gas production has taken place in locations
further south, like Houston and New Orleans.
However, the U.S. energy boom has upended many of those
assumptions, transforming unlikely cities into hubs of fossil fuel production.
Combined with a set of refineries that are being retrofitted for natgas
purposes, Philadelphia could eventually rival energy powerhouses in Texas and
Louisiana, some energy watchers say.
"Houston is not as close to the demand centers as
Philadelphia is. The East Coast is an amazing engine of demand," said
Michael Krancer, chair of the energy industry practice at Blank Rome law firm.
The city's 8.4 percent unemployment rate is well above
the national average, and even above Pennsylvania's. Many of the cities and
states that are ground zero for shale production have seen jobless rates
plummet. For that reason, energy watchers are reasonably optimistic that Philly
can see some of the same magic other oil and gas producing regions have
experienced through the shale boom.
Energy development in the region can help stem a brain
drain of educated professionals out of the area, Krancer added.
"The potential is even greater than Houston,"
he said. "The parts of the state that are benefiting the most from this
are the parts of the state that have been economically challenged for a
generation or two."
Source: CNBC.com
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