How Pennsylvanians Can Get Gas for Less Than $2 a Gallon

The key is right in Philadelphia's backyard.

Psst: Don’t tell anybody, but the worst-kept secret in Pennsylvania is that the natural gas industry—the only economic salvation our dying state had—is leaving, and being replaced by job loss, budget holes and despair. Instead of experiencing a booming economy rooted in the rebirth of American manufacturing, Pennsylvania is now witness to yet another long exodus of our best and brightest. And the Commonwealth’s march toward permanent mediocrity is accelerating.

Natural Gas Industry Exiting Pennsylvania

As with most things, our elected officials couldn’t see the forest for the trees, and now that the gas industry is packing up its mobile rigs and making for greener pastures (or, more accurately, black pastures, as in Black Gold), the recently passed gas “impact” tax will be as impactful as Mitt Romney’s position du jour.

Why is the gas industry leaving? Simple. They are losing money hand over fist, as natural gas is sitting at a 10-year low due to lack of demand. So let’s get this straight. We ignore cheap, abundant and clean natural gas while continually getting hosed at the pump from record-setting oil prices. And as a direct result of soaring gasoline prices, inflation is rising unchecked and true economic growth is vaporizing before our eyes.

Only in America—literally.

No other country on the planet would permit this kind of self-destruction, willfully sending hard-earned money to overseas adversaries while doing everything in its power to bite the (domestic) hand that feeds it. The U.S. remains dependent on others for its energy needs. In addition to the obvious national security concerns (we wouldn’t be expending blood and treasure in the Middle East if we drilled domestically), we are willfully engaged in the greatest transfer of wealth in the history of mankind—as hundreds of billions go to China and Middle Eastern oil barons because we refuse to harness our limitless natural resources.

The way out of the recession—permanently—is to keep American petro dollars here. And by the way, “here” doesn’t mean Canada, since it too is a foreign nation. So Republicans need to stop their grandstanding about the Keystone XL pipeline, which, if approved, would only re-direct American money to our Canuck friends. By definition, that neither achieves energy independence nor creates large-scale American jobs.

America will never compete with Chinese labor costs, but the untold story is that we don’t have to. We beat them by having the world’s cheapest energy costs, and that, along with reworked trade policies, would level the manufacturing playing field and get America making things again.

Just look at Proctor and Gamble’s manufacturing plant in Pennsylvania. An energy bill in the tens of millions was virtually eliminated after the discovery of natural gas under the plant. Saving that much money leads to company’s expansion, additional jobs, more service industries, and a larger tax base.

But instead of embracing that kind of success, our leaders have punted the ball. Here are four questions Harrisburg should answer:

1. Why haven’t all state buildings and vehicles been mandated to operate on natural gas?
2. Why haven’t tax incentives been offered to private sector companies willing to invest in natural gas refueling stations?
3. Why haven’t efforts been made to rescind job-killing and innovation-stifling regulations?
4. Why weren’t the success stories of companies like Proctor and Gamble told and sold by our top political leaders?

Convert the Philadelphia Region’s Refineries (a.k.a. This Way to Cheap Gas)

There is an opportunity that could provide the same type of boom on a much greater scale: Convert the Sunoco* and ConocoPhillips refineries in Philadelphia to process natural gas rather than the much more expensive crude oil.

Delta Airline’s subsidiary just bought the Conoco refinery to make its own jet fuel, and an airline getting into the fuel business has the right idea because lower fuel prices will make their bottom line take off. But given the airline industry’s track record, that type of diversification could send Delta into a tailspin, possibly ending in a crash-and-burn scenario.

However, if Delta really wanted to lower costs over the long haul, it might consider retooling its refinery to convert abundant natural gas from 100 miles away to jet fuel—rather than relying on oil shipments in a volatile market from across the world.

Sure, converting a refinery to process natural gas rather than oil takes a significant investment, but it is one that would pay huge dividends given that America’s insatiable appetite for energy (and in Delta’s case, jet fuel) will only increase. And that’s a good thing, because increased energy demand means companies are thriving, jobs are being created, people are traveling and the economy would be truly gaining strength.

After the refinery conversion (and elimination of many energy-sector regulations that drive up costs), immense amounts of “dry” natural gas, primarily from northeastern Pennsylvania, could be piped down to the refinery, utilizing the right-of-way alongside the Northeast Extension of the Turnpike.

The dry natural gas would then be converted to gasoline, diesel and jet fuel—at a consumer price point that may well be under $2 per gallon.

In addition to Philadelphia’s refineries being in an ideal location for disbursement of those refined products, there is yet another opportunity for economic growth. To meet what would surely be increased domestic and overseas demand, a pipeline could be constructed down the Delaware River, terminating offshore so that tankers could safely take on their loads out at sea. (A liquefied natural gas tanker explosion, whether accidental or deliberate, would be akin to a small nuclear weapon. While extremely unlikely, that possibility would nonetheless present huge political challenges in allowing large tankers in the Delaware River.)

Refine Our Way of Thinking

Despite their good intentions with trying to save the refineries, some politicians have missed the boat by only pushing the idea of exporting natural gas from Philadelphia. That won’t create jobs, as we would merely be shipping the gas to be refined elsewhere. How ironic that would be, watching Pennsylvania export its lifeblood in the shadow of three refineries, any and all of which could keep all of the economic benefits here, and none of which will likely be profitable refining oil as currently outfitted.

Failure to convert the refineries may well kill off the gas industry altogether, making us ever more dependent on foreigners for our vital energy needs while prices continue to soar.

But if we rekindle that slumbering can-do American spirit and put America first for a change, the possibilities would be limitless, and we would no longer be bent over a barrel.

And what a gas that would be.

*This week’s Sunoco sale involves its pipelines and likely won’t affect its diminished refineries. I will soon be exploring the “wet” gas option of energy policy in an upcoming column for the Philly Post.