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Sunoco's Mariner East Projects Could Mean Big Money For Pennsylvania

Sunoco Logistics Partners LP's Mariner East pipeline projects are expected to contribute up to $4.2 billion to Pennsylvania's economy alone, and they would create more than 30,000 jobs during construction in addition to 300-400 permanent jobs once operational, according to a study released Thursday.

Commissioned by Sunoco, the Philadelphia-based consulting firm Econsult Solutions Inc. found that the $3 billion the company plans to invest in the projects could generate $23 million in personal income tax for the state and another $62 million in tax revenues during the construction period through the direct, indirect and induced activities of vendors and employees.

"You just don't see companies investing $3 billion on capital projects in Pennsylvania every day," said Econsult President Stephen Mullin.

Sunoco plans to extend its existing Mariner East 1 by 50 miles and construct the 350-mile Mariner East 2 pipeline to transport natural gas liquids (NGL) from processing and fractionation complexes in eastern Ohio, western Pennsylvania and West Virginia to the company's Marcus Hook Industrial Complex on the Delaware River south of Philadelphia (see Shale Daily, Dec. 5, 2013). The company will repurpose Marcus Hook -- a former oil refinery -- for storage, processing and distribution of NGLs.

In addition to construction benefits, Econsult said Sunoco plans to spend $60-90 million annually to operate the pipelines beginning in 2017. Total expenditures for operations at Marcus Hook have not yet been finalized. The projects' ongoing service, the firm said, could create a $100-150 million annual economic impact, support up to 400 full-time equivalent jobs with estimated earnings of $22-33 million. Tax revenue from ongoing operations could also reach $800,000 to $1.2 million, according to the study.

Econsult said the majority of employment and expenditure impacts would likely be in southeast Pennsylvania near Philadelphia and far removed from the hotbeds of Marcellus and Utica shale development farther west in the Appalachian Basin. The projects, however, have met staunch opposition in that part of the state from residents who would live near a stretch of the pipelines and compressor stations (see Shale Daily, Oct. 13, 2014). They've vowed to continue fighting Sunoco's efforts as it works its way through the regulatory process and prepares for development.

Susquehanna University economics professor Matthew Rousu, who reviews economic impact studies related to the state's oil and gas industry, said that although he hasn't yet examined Econsult's study, a $3 billion investment could very well generate a $4.2 billion impact.

"The construction would likely create a big temporary boom, and that's a lot of what this is. You almost don't need the study based on that alone, but you want it to add to the credibility of the project," he said. "Even if the cost to do the construction is $1 billion, a lot of that is for labor, and there will be a big boost to hiring in the short term for a massive construction project. It does make sense to get a huge initial boost, whether the impact is smaller in the long run, I couldn't tell you; it depends on how many are actually hired for operations."

Marcellus Shale Coalition President David Spigelmyer said the study demonstrates "the critical interconnectivity that exists between shale producing regions of the commonwealth and the greater Philadelphia region," where support for the industry has been weaker than in other more rural parts of the state.

"Each person that has a job from the project is going to go spend money at grocery stores, they're going to pay rent, and go to restaurants, the movies and theater," Rousu added. "They'll spend locally and others are going to get that money that aren't directly involved; it's a small multiplier. Just hearing those numbers doesn't surprise me, sometimes I hear numbers in this industry or others and I say 'what are you saying?' That doesn't sound stunningly high."

In November, Sunoco announced a successful open season for Mariner East 2 (see Shale Daily, Nov. 6, 2014). It's initial capacity is expected to be 275,000 b/d and will complement Mariner East 1's 70,000 b/d capacity. Propane transport on Mariner East 1 began in December, with ethane deliveries expected to start in the middle of the year. Mariner East 2, which will transport ethane, propane and butane, is expected to be in service by late 2016.

Econsult also said the projects will increase the local availability of propane and other NGLs, which Rosu said could have further economic benefits for the region's manufacturers and residential consumers.

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