Amendment Allows Sunoco to Move Ahead With Shale Transport Project

Philadelphia Inquirer
9 November 2011
By Andrew Maykuth,

Three huge 900-foot fuel tankers have little in common with the sleek yachts that compete in the America's Cup race. But two Pennsylvania federal lawmakers have found a way to lash the vessels together in one piece of legislation.

Congress recently approved the America's Cup Act of 2011, which would waive a law that requires certain vessels that sail in U.S. waters to be flagged in the United States.

At the behest of U.S. Sen. Pat Toomey and U.S. Rep. Pat Meehan, both Republicans, the America's Cup legislation was amended to allow three foreign-flagged tankers to work in the Philadelphia area for Sunoco Inc.

The massive tankers are the linchpin of Sunoco's Mariner East project, which the Philadelphia refiner announced last year. The aim is to transport a liquid byproduct of Marcellus Shale natural gas to industrial customers on the Gulf Coast.

Mr. Toomey and Mr. Meehan argue that the Sunoco project means jobs -- 300 to 400 construction workers to build a terminal in Marcus Hook, and 25 full-time positions once the cargo begins to flow.

"It's kind of hard to argue why you should let a few sailing ships come in for a few weeks of racing and not put an industrial ship to work that will be there in place long after the race is done," said Mr. Meehan.

The lawmakers had been working to get legislation to allow Sunoco to reflag the liquefied natural gas vessels.

But then the legislators heard that California lawmakers were hastily preparing the America's Cup Act to allow 60 foreign-flagged vessels to participate in preliminary races scheduled to start Saturday in San Diego.

They saw an opportunity to attach the Sunoco proposal to speed up their objective.

"This is, for me, for our region, an important economic opportunity," said Mr. Meehan.

The legislation waives the Jones Act, a 1920 law that requires that all goods transported by water between U.S. ports to be carried in ships that are owned, built and flagged in the United States and crewed by U.S. citizens or permanent residents. The law's aim is to protect the U.S. Merchant Marine.

The Pennsylvania lawmakers argue that it's not much of a stretch to reflag the liquefied natural gas tankers, named the LNG Gemini, the LNG Virgo and the LNG Leo. The vessels were built in Massachusetts in the late 1970s to transport supercool liquefied natural gas and initially bore U.S. flags. They are owned by subsidiaries of General Dynamics Corp. and were reflagged in the 1990s to the tiny Pacific republic of the Marshall Islands.

Sunoco wants to hire the ships to carry ethane, a liquid byproduct of natural-gas production. Ethane is the raw material for producing ethylene, a building block for plastics.

Marcellus Shale drillers in Western Pennsylvania are producing an abundance of ethane, which is more valuable than natural gas.

But there is a shortage of ways to transport the material to markets.

Sunoco plans to convert an existing pipeline across Pennsylvania to carry ethane and then ship the liquid by sea to petrochemical plants on the Gulf Coast.

Thomas P. Golembeski, Sunoco's spokesman, said the company has not officially chosen to locate the terminal in Marcus Hook, where it operates a dock at its oil refinery. But the legislators talk as if the Marcus Hook location is a done deal.

Though some anti-drilling staff members of Philadelphia City Council privately expressed opposition to the Mariner project when Sunoco first announced it, Mr. Meehan -- whose congressional district includes Marcus Hook -- regards the project as a way to generate Marcellus jobs in Southeastern Pennsylvania.

"We are looking at a very unique opportunity for our region to participate in the bonanza that is the shale gas," he said.

Mr. Toomey said Sunoco plans to spend $300 million to $400 million on the terminal and storage facilities.

"The net effect is hundreds of millions of dollars of investment, significant economic growth and hundreds of jobs that begin virtually immediately when Congress acts to grant the waiver, for which there is no controversy," Mr. Toomey said at a hearing last week before the Senate Commerce Committee.

Andrew Maykuth: 215-854-2947,