Marcus Hook refinery gets makeover as natural gas hub

It is out with the old and in with the new at the 500-acre waterfront facility formerly known as the Sunoco Marcus Hook Refinery, now the Marcus Hook Industrial Complex.

Workers last week ripped down aging petroleum-processing equipment, part of a labyrinth of machinery that has produced gasoline, diesel, and kerosene for more than a century. Other crews built cryogenic storage tanks more than 130 feet tall with three-foot-thick walls that will hold the future: new fuels from the prolific Marcellus Shale region.

Sunoco Logistics Partners L.P., a pipeline company that bought the property for $60 million last year from its sister company, Sunoco Inc., is converting the site into a major center for processing and shipping natural gas liquids.

"We very much hope this is only the first step in this property," said Jonathan Hunt, director of the complex. "We're working on a lot of possible businesses. There's a lot of opportunities here."

Business and political leaders have hailed the rebirth of the Marcus Hook site as part of their vision of transforming the region into an energy hub tied into the shale-gas boom.

"By literally linking Western Pennsylvania resources to markets in Eastern Pennsylvania and beyond, this project represents the first step in achieving that vision," Gov. Corbett said in 2012. "It has the added benefits of creating jobs across Pennsylvania and breathing new life into the former Marcus Hook refinery site."

But somebody neglected to sell the regional economic benefits to West Goshen Township in Chester County, which is crossed by an eight-inch-diameter motor-fuel pipeline that Sunoco is refurbishing to transport the Marcellus fuel as part of the project it calls Mariner East.

Sunoco Logistics applied to local zoning officials two months ago to build a pumping station along the underground pipeline that will transport Marcellus ethane and propane to Marcus Hook. The pump station site, at Boot Road and Route 202, is residentially zoned and requires a special exception as a public utility facility.

Sunoco Logistics also applied to the Pennsylvania Public Utility Commission to be declared a "public utility corporation," which would allow it to sidestep local zoning regulations in West Goshen and 30 other municipalities where it needs to build aboveground facilities along the pipeline's 299-mile route.

Sunoco's moves have triggered an angry backlash. An anti-Sunoco petition posted on Moveon.org has attracted more than 8,400 signatures from across the country.

The township has scheduled a public forum for Tuesday night at West Chester East High School on Ellis Lane, where Sunoco officials are scheduled to explain the project.

An ad hoc group of residents, Concerned Citizens of West Goshen Township, has enlisted lawyer Lilli B. Middlebrooks to represent it at the local zoning proceeding. It also hired Bloomsburg utility lawyer Scott J. Rudin, who on Friday filed objections with the PUC, arguing that Sunoco Logistics does not qualify as a public utility corporation.

The petition to be declared a public utility corporation under Pennsylvania's business corporation law is not the same as being declared a public utility, though the distinction is not entirely clear to residents.

As a public utility corporation, the company would acquire certain land-use powers. But its rates would be regulated by the Federal Energy Regulatory Commission, not the PUC. Critics say Sunoco would get all of the benefits of being a public utility without the burden of state oversight.

Meanwhile, the company anticipates so much growth in the ethane market it has already begun explorations to build a second parallel underground conduit called the Pennsylvania Pipeline from the Marcellus to Marcus Hook. That route would require Sunoco to bury new pipe, and residents fear the company, with public utility corporation status, would have the authority to obtain the rights of way by eminent domain.

Sunoco has told investors it plans to begin propane shipments on the Mariner East project by the end of this year. It asked for expedited treatment from the PUC.

Sunoco's explanations have not reassured residents. "These people are definitely not telling us all the truth," said Tom Casey of West Goshen, who helped create a Facebook page, Just the Facts Please, to rally opposition.

Adding to the suspicion is the befuddling corporate structure of Sunoco Logistics Partners and Sunoco Inc., Philadelphia companies that are controlled or owned outright by Energy Transfer Partners L.P., a giant Dallas pipeline company that acquired Sunoco in 2012.

For much of its history, Sunoco Logistics' purpose was to support the company's refining operations, delivering crude oil and taking refined fuels to market. Now that Sunoco Inc. has retired from the refining business, Sunoco Logistics is becoming more of an independent pipeline operator. The shale-gas boom is providing a growth opportunity.

The "wet" gas produced from shale formations in Western Pennsylvania, West Virginia, and Ohio contains large amounts of liquids, such as ethane and propane. Those materials are more valuable when sold separately - ethane can be processed into an ingredient used to make plastic - so Marcellus producers are eager to find outlets for them.

Sunoco Logistics was one of the first to recognize the ethane market, and it committed to spending $600 million to build the Mariner East and a similar project to transport ethane to petrochemical plants in Sarnia, Ontario. That pipeline went into operation in late 2013.

In the Mariner East project, Sunoco plans to pump 70,000 barrels of ethane and propane a day across the state to Marcus Hook, where the material must be chilled so it can be stored in unpressurized tanks. The ethane will be exported, as there is no regional market for it. The propane can be sold locally or exported.

INEOS Europe AG has signed 15-year ethane supply agreements with two Marcellus producers and is building vessels to carry the material from Marcus Hook to Norway. Shipments are to start in 2015.

In August, Sunoco Logistics won PUC approval setting the stage to convert its cross-state pipeline for ethane. PUC Chairman Robert F. Powelson endorsed the move.

"Mariner East not only links producers with new markets, but it also represents a link between the commonwealth's citizens, well-paying jobs, and a more independent domestic energy future," he said.

Now Powelson may be asked to play a role in a key vote on whether Sunoco's plans can move forward.

215-854-2947 @maykuth