August 2012, Vol. 239 No. 8

Editor's Notebook

Editor's Notebook: An Industrial Resurgence?

An unfortunate fact of life I quickly learned growing up in eastern Pennsylvania in the 1960s was the lack of decent paying industrial jobs.

Textile and blouse factories were among the many businesses finding it profitable to move south and then out of the country. Once-thriving downtown retail districts died, school districts were left with huge burdens, and cities and towns reverted to stagnant backwater communities.

In nearby Bethlehem what was once the location of the nation’s second-leading steel company employing 20,000 workers eventually closed. The city is pinning its hopes that a huge casino built where the blast furnaces once stood will be their salvation with its plentiful but lower-paying service jobs.

Once-mighty Philadelphia, the industrial hub of America during much of the 20th century, is among our poorest cities with unemployment at 10%. In Pittsburgh, the pollution is gone but so were the jobs as this other major industrial center in western PA watched one steel mill after another close along with related facilities because they could not compete with cheaper imports.

There are continued signs of a growing resurgence in the Keystone state thanks to the Marcellus Shale. Shell Oil plans to build a multibillion-dollar petrochemical refinery 35 miles northwest of Pittsburgh.

This column discusses another example of how this new domestic energy is bringing jobs and hope back to many Pennsylvanians. Last year Sunoco said it would close the largest refinery on the East Coast near Philly, eliminating 850 skilled jobs unless a buyer was found.

On July 2, Sunoco and private equity firm Carlyle Group LP, announced a joint venture that will not only keep what will be named Philadelphia Energy Solutions open, but plans to expand the facility, adding hundreds of additional refinery jobs as well as thousands of construction jobs and even more related to suppliers and contractors.

This is how it works: using low-cost locally produced natural gas will reduce operating costs and emissions. To do this, the company will build a cogeneration plant to produce steam and electricity for the refinery and possibly new production units. They are already exploring a range of new energy and chemical businesses built on the foundation of Marcellus gas which also happens to be rich in natural gas liquids.

This is good news for pipelines as several operators will be involved in transporting the gas to the refinery. As the Wall Street Journal wrote, “The designers of the U.S. pipeline system didn’t envision the bounty of oil and natural gas that would be unleashed in the country’s interior as producers learned to crack open energy-rich shale formations.”

The company is also going to build a high-speed train unloading terminal to bring in crude oil from the Bakken Shale.

Generous tax breaks from the city of Philadelphia were instrumental in Carlyle’s decision, much as Shell was impressed by largesse offered by the Commonwealth. If I owned a competing refinery I might not be thrilled by the deal. Progress does not come without a price and jobs do not materialize without investment. So here we have a situation where private business and government understand the benefits of working together.

Lynne Hancock, an official for the United Steel Workers which represents many of the refinery workers, says there is no question the Marcellus is the driving force behind the new breath of life for the refinery and indirect businesses such as the many restaurants that dot the area,

She pointed to a study by the Pa. Dept. of Labor & Industry’s Center for Workforce Information & Analysis which determined that 18.3 jobs would be lost for every layoff in an oil refinery.

Adds consulting group KPMG: “With a new and abundant source of low-cost feedstock, the U.S. market has suddenly transformed to become one of the most advantageous markets for chemical production in the world.”

How do you spell win-win?

(Jeff Share’s Editor’s Notebook won third place in the 2012 Houston Press Club Lone Star Awards for his April 2011 column entitled “Facing The Danger” which discussed the risks involved in energy production.)