PGW Can Help Fuel an Industrial Resurgence in the Philadelphia Region

Philadelphia. November 13—At today’s meeting of the City Council of Philadelphia, Enovation Partners’ directors William Kemp and Todd Allmendinger testified about how to use the assets of Philadelphia Gas Works (PGW) to help drive economic development through public-private partnerships.

The Philadelphia region possesses potent competitive advantages, flowing from its proximity to the massive energy production of the Marcellus and Utica shales, its status as a major transportation hub both domestically and internationally (port, rail, trucking), its world-class educational institutions and workforce capabilities, and its long history of leadership in chemicals, pharmaceuticals, and other energy-related industries. Public-private partnerships could strengthen PGW’s capability for contributing more broadly and flexibly to Philadelphia’s future as a key player in America’s industrial renaissance.

Kemp and Allmendinger also provided examples of how other metro regions, such as Jacksonville, FL, and Brownsville, TX, have used public-private partnerships to move forward on similar gas-related economic development opportunities. Their panel included supporting testimony from Alan Mosley of the Jacksonville Chamber of Commerce and Alicia Farag of the Gas Technology Institute.

PGW is the nation’s largest municipally owned gas utility. The testimony comes as Connecticut-based utility company UIL Holdings Corporation trying to keep alive its offer to purchase PGW, a move supported by Philadelphia Mayor Michael Nutter. City Council President Darrell Clarke recently announced that the council was against the sale and would not hold hearings on it.
 

Shale Gas, Collaboration, and Regional Growth

The revolution in natural-gas production can provide immense benefits to the U.S. economy, began Allmendinger. With diligent regulation of groundwater and methane-emissions risks, the overall environmental benefits should be substantial, too. Switching to natural gas from fuel oil and coal in power generation and from fuel oil, diesel, and gasoline in transportation and industrial applications, promise attractive economic and environmental paybacks.

The Philadelphia region should be at the forefront of that natural-gas revolution, said Allmendinger. Compared with many other cities around the country, however, the region’s progress on capturing natural-gas-driven benefits is modest. For instance, said Allmendinger, Jacksonville, FL, doesn't enjoy the proximity to gas reserves, infrastructure, industrial base, or educational resources that Philadelphia does. But it is using its municipal utility and harbor as platforms for sustained growth, creating partnerships with businesses, attracting capital and investment, bringing together labor, capital, customers, and businesses, and positioning Jacksonville to become an East Coast market leader in small-scale LNG and compressed natural gas (CNG).

• Three consortia of energy and financial players are competing to build LNG production and distribution terminals in Jacksonville, aimed specifically at serving the rail, maritime, and heavy-duty trucking industries. The regional market can support at least two such facilities.
   
• Local municipalities and UPS are ordering hundreds of natural gas-fueled vehicles.
   
• Shipbuilders and maritime operators are building LNG-fueled ships and plan to export LNG to utilities and industrial customers in the Caribbean region, as a superior alternative to diesel or bunker fuel oil.

Together, these projects represent several hundred million dollars in direct investment and hundreds of jobs in engineering, construction, terminal operations, and transportation.
 

Pennsylvania Growth in Natural Gas and LNG as Fuels

Another support for the Philadelphia region’s economic renaissance, said Allmendinger, is the fact that new sources of low-priced natural gas are displacing diesel fuel for transportation and high-horse-power applications—in trucking, waste management, public transportation, rail, marine, and mining.

Allmendinger pointed to the CNG fueling-station construction effort at Pennsylvania’s public transit agencies, approved by the state’s Public-Private Partnership (P3) Board. The private partner will design, build, finance, operate, and maintain the stations; many Pennsylvania companies want to participate. PGW President and CEO Craig White recently joined Governor Tom Corbett in opening Philadelphia’s first public CNG fast-fill pumps.

While the export of LNG from the Port of Philadelphia may face challenges, the Port’s activities will require LNG as a fuel, said Allmendinger – for marine vessels, locomotives, industrial, and off-grid power generation projects. This will require storage, distribution, and fueling operations. Several Pennsylvania energy companies are interested in expanding their operations into these areas.

To meet expanding LNG and CNG needs across the nation, natural gas utility companies are accelerating large-scale replacement programs to upgrade infrastructure while at the same time implementing technologies and practices to create operational efficiencies, according to related testimony by Alicia Faraq, senior manager for the data and integrity management research program at the Gas Technology Institute. PGW has supported the development of next-generation technologies and business practices that create operational efficiencies while maintaining public safety and ensuring long-term system integrity, said Faraq.

The market response to the growing advantages of LNG and CNG is accelerating, said Allmendinger. PGW could leverage its physical assets and human resource capabilities to gain a significant and profitable share of this market. “To move as quickly as needed and field the required marketing expertise, PGW would be well advised to seek suitable partners in a P3 structure,” said Allmendinger.

In response to questions by council members about how to structure public-private partnerships, Kemp testified that PGW should bring to the negotiating table its capabilities and objectives and work out with its private partners the ownership and operating structure that would succeed best in the marketplace. The structure would be fitted to the opportunity. Agile public and private companies make these types of strategic partnering decisions as a normal course of business.

"Southeastern Pennsylvania should seize this historic opportunity to capitalize on its unique geographic, logistical, human, and manufacturing endowments, and use public-private partnerships to take full advantage of the natural gas revolution in its backyard.”
 

About Enovation Partners

Enovation Partners is an energy and infrastructure consultancy using flexible teams of high-level, deeply experienced partners and principals to work directly with company executives to take advantage of changes and opportunities in the industry.
 

About Gas Technology Institute

GTI is the leading research, development, and training organization addressing energy and environmental challenges to enable a secure, abundant, and affordable energy future. For more than 70 years, it has provided economic value to the natural gas industry and energy markets by developing technology based solutions for industry, government, and consumers. www.gastechnology.org

Link to testimony

PRESS RELEASE

Eric R. Blume
Director of Communications
eblume@enovationpartners.com
+1.202.281.8462