Sunoco Logistics Partners L.P. announced Thursday that it
will build an enormous, $2.5 billion pipeline project that will quadruple the
volume of Marcellus Shale natural gas liquids moving through the Philadelphia
area.
The Mariner East 2 project, the second phase of a plan to
move materials like propane, butane, and ethane from Appalachian shale-gas
fields, would dramatically expand industrial activity at the company's Marcus
Hook Industrial Complex.
Sunoco Logistics said it would build a pipeline at least
16 inches in diameter to follow the route of its first Mariner East project, an
83-year-old fuel pipeline crossing Pennsylvania that the company is repurposing
to carry liquids to Marcus Hook.
Industry and political leaders have rallied behind the
Mariner East projects as a way to closely tie Philadelphia to the Marcellus
Shale region, which now accounts for nearly a quarter of the nation's natural
gas production.
"This is tremendous news for our regional economy
and energy workers," said U.S. Rep. Patrick Meehan (R., Pa.), whose
district includes Marcus Hook.
Residents in the shale-gas production areas and those who
live along a rapidly growing network of pipeline corridors have objected that
they bear a disproportionate cost for the energy boom.
The first Mariner East project has aroused fierce
opposition in several Chester County communities that the pipeline runs
through. Environmental activists also worry that the pipeline will enable the
revival of pollution-emitting industries along the Delaware waterfront.
"I'm concerned that the company is ramming these
projects through communities as fast as possible and without any regard to
their concerns," said Joseph Otis Minott, head of the Clean Air Council.
He called Sunoco Logistics a "bad actor and a bad neighbor" for its
ongoing effort to bypass zoning boards to build facilities along the route of
the Mariner East 1 project.
Sunoco Logistics has been talking publicly for more than
a year about expanding capacity to deliver materials to Marcus Hook. Survey
crews have reached out to landowners in towns like West Goshen, East Goshen,
Upper Uwchlan, and Wallace Townships with the aim of widening rights-of-way to
accommodate the new pipeline.
345,000 barrels
daily
Mariner East 2 is expected to deliver 275,000 barrels per
day of natural gas liquids (NGL) to Marcus Hook. Combined with Mariner East 1's
capacity of 70,000 barrels per day, the pipelines will provide 345,000 barrels
per day from the shale regions. A barrel contains 42 gallons.
That means the Marcus Hook complex will be handling
double the volume of fuel it processed during its previous lifetime as a Sunoco
oil refinery. The refinery, which had a capacity of 175,000 barrels of crude
oil a day, closed in 2012 and is being dismantled to make way for the Marcellus
energy hub.
The company said it expected Mariner East 2 to begin
operations by the end of 2016, subject to regulatory and permit approvals.
Initially, most of the ethane, propane, and butane
delivered to Marcus Hook would be loaded on ships and exported. Some propane
would be sold to local markets or shipped by barge to Northeastern markets.
Business and industrial leaders hope the projects will
boost the expansion of manufacturing. Natural gas liquids are used mostly as a
raw material in petrochemical production.
"This vital energy project will provide a
comprehensive solution in the region to transport, store, and process NGLs from
the Marcellus and Utica Shales, and will provide the foundation for the
continuing rebirth of the local manufacturing sector," said Michael J.
Hennigan, Sunoco Logistics chief executive.
"The project also enables the continuing development
of the Marcus Hook Industrial Complex, as we convert a former refinery site
into a world-class natural gas liquids hub in Southeastern Pennsylvania,"
he said.
In its announcement Thursday, Sunoco Logistics said it
was also "actively developing" a natural gas liquids manufacturing
complex at an 800-acre Marcus Hook property, including propane dehydrogenation
to manufacture propylene.
The company offered no details on the propylene project,
but one potential customer is adjacent to the property. Braskem America
operates a polypropylene plant that uses propylene as its primary raw material.
Polypropylene is a type of plastic with broad uses.
In a conference call with investment analysts, Hennigan
lauded the possibilities for the Marcus Hook site, where the project calls for
construction of capacity to refrigerate and store NGLs. Gases like ethane and
propane need to be chilled or kept under pressure to stay in liquid form.
"We don't see any limitations on expansion
capability," he said.
The Mariner East 2 pipeline will be about 350 miles long,
originating at intake points from producers in eastern Ohio, West Virginia, and
Western Pennsylvania, with Scio, Ohio, being the westernmost origin.
Unsettling
homeowners
Pipelines like the Mariner East project are regulated by
a hodgepodge of state and federal agencies, a source of frustration to
residents and activists trying to oppose them. Regulators are reluctant to
disclose many details about routes, citing homeland security issues.
Sunoco says its pipeline construction and operations must
conform to safety rules of the Pennsylvania Public Utility Commission and the
Federal Pipeline and Hazardous Materials Safety Administration. But neither
agency governs the siting of the pipelines.
As a public utility corporation - a designation that some
residents on pipeline routes have challenged - Sunoco says, it is allowed to
take right-of-way by eminent domain.
The pipeline's route can be affected by the reviews it
will undergo with a host of federal and state agencies, including the U.S. Fish
and Wildlife Service, the Pennsylvania Department of Environmental Protection,
and the U.S. Army Corps of Engineers. The Federal Energy Regulatory Commission
will review the project and will decide whether its rates are justified.
The company, in touting the economic effects of its
investment, compared the $3 billion it is spending in Pennsylvania on various
Mariner projects to the cost of building about six Lincoln Financial Fields.
Sunoco Logistics says there is high demand from gas
producers to find markets for the natural gas liquids. It is competing with
other pipeline operators that want to transport Appalachian ethane to the Gulf
Coast, where the material is in demand by exporters and from petrochemical
producers.
Sunoco recently held an "open season" for
shippers to commit to buy capacity for the Mariner East 2 project.
Austrian petrochemical company Borealis announced in
August that it had signed a 10-year contract to ship ethane from Marcus Hook to
a Swedish plant it owns. It is buying its ethane from Antero Resources Corp., a
shale-gas producer, which announced in July that it is an anchor shipper on the
Mariner East 2 project for 51,500 barrels a day of ethane, propane, and butane.
The primary customer for the first Mariner East project
is INEOS Europe, which in 2012 signed a 15-year agreement to ship Marcellus
Shale ethane to Norway.
Sunoco Logistics has not identified other shippers that
have contracted to use the pipeline. Sunoco serves as the delivery agency for
the material, and collects a fee on every barrel it delivers.
BY THE NUMBERS
$2.5B Cost of building the Mariner East 2 pipeline.
350 Length of pipeline in miles. Intake points would be
in Ohio, West Virginia, and Western Pa.
275,000 Number of barrels of natural gas liquids that
would be delivered per day
to Marcus Hook.
Source: Philly.com
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