Saturday, September 29, 2012

Marcellus Shale Shame

This week, Kathryn Klaber (Marcellus Shale Coalition) is pitching Pennsylvania's shale gas revolution to Philadelphia:

Today, thanks to the tightly regulated development of American natural gas, our region's economy is on the upswing. ...

... Philadelphia's refinery sites are experiencing new life that few could have predicted just a few years ago - buoyed by abundant supplies of natural gas, a fundamental building block for a strong manufacturing sector.

Energy Transfer Partner's acquisition of Sunoco and the Carlyle Group's Sunoco investment are proof of the undeniably positive impact that shale-gas development continues to have on greater Philadelphia's economy. Thousands of jobs will be saved. The prospects for leveraging Marcellus Shale natural gas are indeed promising for Sunoco's Marcus Hook refinery, especially in light of this week's announcement, and may well be a lifeline for hundreds of jobs.

East Coast refineries are on the ropes. Pennsylvania Governor Tom Corbett is bailing out Philadelphia. In a sense, he's subsidizing Delta Air Lines:

In a move from somewhere out in left field, Delta Air Lines decided in late April to tackle energy risk management head-on by taking a rather unorthodox step of managing their fuel cost exposure by…purchasing a refinery. $150 million later (after a $30 million subsidy from the Commonwealth of Pennsylvania), Delta bought the Trainer refinery just south of Philadelphia, which produces 185,000 barrels a day. In addition to the purchase, they are now retrofitting the refinery (to the tune of $100 million) to maximize its jet fuel output.

Corbett would rather invest in industry than people. Klaber and Corbett are selling snake oil at the expense of tax payers. From former Secretary of the Pennsylvania Department of Environmental Protection and Commissioner of the Pennsylvania Public Utility Commission John Hanger:

Pennsylvania's string of bad economic numbers drives home the point that the gas boon alone is not enough to bring prosperity to Pennsylvania, especially when state government slashes budgets for education and does not make needed investments in transportation. The gas industry provides a welcome, needed boost. But it cannot erase strategic budgeting and economic development mistakes.

Emphasis added. Corbett shorts education in order to hand Delta Air Lines $30 million. Quid pro quo, selling out Pennsylvania's future:

We've written before about the declining support by Midwestern states for the state colleges and universities -- especially the big research universities -- that bear their name. A new report has just documented just how sharp this decline has become, why it's a national problem and what it means for our ability to support ourselves in the future.

The report is called "Diminishing Funding and Rising Expectations: Trends and Challenges for Public Research Universities" and is the result of a study by the National Science Board, an arm of the federal National Science Foundation.

Basically, the report says that most states -- including all Midwestern states -- are cheaping out the universities and research that will be their key to competing in a global economy.

Saving refinery jobs makes for good publicity. Klaber is trying to cash in on the "good" news to help the flagging reputation of the energy industry. She gets a pass because she is just doing her job. Corbett, on the other hand, is supposed represent PA residents. He's more beholden to Delta shareholders. Corbett appealing to talent to stay in Pennsylvania:

Speaking to a packed ballroom in Southpointe Thursday evening, Gov. Tom Corbett stressed his commitment to keeping young professionals in Pennsylvania and growing the industries that give them the kind of career opportunities that previous generations had to leave the state to find.

Corbett was a guest speaker at a Young Professionals in Energy event and addressed his audience as workers “who are the tip of the spear in our New Industrial Revolution.”

He repeated his mission to “put this state on sound financial ground,” ensure that every Pennsylvanian who wants a job has one, and that citizens of this state are trained to the “careers of this new century.”

Corbett is old school. He privileges industry over talent. He's a smokestack chaser. He's drunk on brain drain hysteria. He doesn't want his progeny to leave, so he doles out millions of dollars. Meanwhile, education goes begging. In terms of economic development, Corbett is a failure. He's living in the past. Pennsylvania is bent over for business.


Jardinero1 said...

It is really difficult to permit a new refinery in the US these days. It is less onerous to retrofit an existing refinery. You can convert dirt cheap natural gas into jet fuel and diesel.

I don't think that the is such a bad deal for PA. It preserves critical refining infrastructure and jobs and forces Delta to keep one foot firmly anchored in Philly.

Jim Russell said...

It preserves critical refining infrastructure and jobs and forces Delta to keep one foot firmly anchored in Philly.

Is that worth $30 million? What about the opportunity costs? I take your point about retrofitting. I'm not sure if that's the wisest use of $30 million.

Jardinero1 said...

Refineries really add a lot to the local property tax base. Refinery jobs are high skill, well paid jobs, if you take the refinery away those skilled workers will relocate to where refineries are either being permitted and built anew or expanded, mainly on the Texas Gulf Coast. So I think thirty million is cheap, especially since it is a twofer, you get the refinery and Delta and all the prospect of expanding both in the future, especially given the proximity to the marcellus shale and the already built pipeline infrastructure.