Philadelphia Energy Solutions (PES), the owner of two refineries, Girard Point and Point Breeze, notified their 1,100 employees of the news on Sunday in an internal memo obtained by Reuters.
This is the second time the company has been in financial distress. Six years ago, private equity firm Carlyle Group LP and Energy Transfer Partners LP’s Sunoco Inc rescued Philadelphia Energy Solutions in a deal supported by tax breaks and grants.
According to the internal memo, employees were told that in a new agreement with creditors, the company secured $260 million in financing, adding the bankruptcy filings would have no immediate effect on workers. About $75 million of the new funding comes from Sunoco Logistics.
According to PES, having to adhere to the EPA’s Renewable Fuels Standard are listed as partly to blame. The law mandates that either refiners blend biofuels made from ethanol into their fuel supply or they have to buy credits from companies that do. PES decided to buy credits, and since 2012, has spent almost $800 million on credits to keep up with the law. PES lists the credits as its second highest expense next to buying crude oil
The company’s two refineries are able to convert 335,000 barrels of crude per day to products such as gasoline, jet fuel, and diesel. In 2012, PES did well financially with cheap shale oil from North Dakota that was brought in on oil trains. At that time, the oil trains were the only way to transport crude to the East Coast.
However, over the past several years, oil pipelines have come online, and oil prices have dropped. Sandy Fielden is director of research for commodities and energy at Morningstar, a research and investment advisory company. Fielden points out that besides the pipelines making oil trains unprofitable, the price differences on imports and domestic shale oil also narrowed, going from $18 a barrel in 2012 to about $3 a barrel by the end of 2015, reports State Impact.
Fielden also notes the Bush-era Renewable Fuel Standard requirements are not new, so the company would have known to factor in the costs. But it is easy to see where this could end up fueling a debate between Big Oil and Big Corn over the future of the Renewable Fuels Standard.
Yet, this situation is a bit the same as the two solar panel companies that complained to the ITC when they went bankrupt, blaming overseas manufacturers for their financial woes. This resulted in stiff tariffs laid down by President Trump on imports.
As for PES, Frieden says, “They’re trying to squeeze the government to say OK, well, ‘You guys are in trouble and we don’t want to lose all those jobs so we’ll give you a pass on your obligation to have to buy all these RIN certificates.”
