New use for bankrupt Philly refinery? City wants something ‘cleaner, safer for Philadelphians’

A city report released Tuesday encourages a reuse of the shuttered Philadelphia Energy Solutions oil refinery that is “cleaner, safer, and better for Philadelphians,” but acknowledges that the 1,300-acre complex, currently up for sale in bankruptcy court, will likely continue as a petroleum processing facility for the near future.

The report by Mayor Jim Kenney’s Refinery Advisory Group, which held a series of public hearings in late summer assessing the refinery complex, makes several recommendations and defines “a set of values” about the future of the refinery, which shut down and declared bankruptcy following a June 21 fire and explosion.

But the 45-page report, authored by the panel’s co-chairs, Managing Director Brian Abernathy and Fire Commissioner Adam Thiel, also acknowledges that the city’s role in shaping the site’s reuse is limited by U.S. Bankruptcy Court, the property’s private owners, and the site’s current zoning, which allows heavy industrial activity.

The findings may serve as a reality check for environmental and community advocates who envisioned a city takeover of the site or its mandated retirement as a fossil-fuel facility. They cite the refinery’s status as the city’s largest stationary emitter of air pollution, and the dramatic June fire that served as a rude pre-dawn reminder that the East Coast’s largest oil-processing facility is located less than a mile from the homes of 113,000 people.

“Though this report contains several recommendations for how city operations should be evaluated and strengthened in the future, as well as several recommended attributes and features that future owners of the site should consider implementing, it does not attempt to make any specific recommendation for how this privately owned site should – or should not – be used in the future,” the report says.

The report, entitled “A Close Call and an Uncertain Future: An assessment of the past, present and next steps for Philadelphia’s largest refinery,” is posted on the city’s website.

» READ MORE: Explosion-damaged South Philadelphia refinery files for bankruptcy, again

The city’s 26-member advisory group drew its members from labor, academia, business interests, and city government, as well as environmental and community groups, and faced an impossible task of finding consensus about a path forward for a facility regarded by some as a threat to the city’s health and safety, and by others as a vital economic engine with 150-year-old roots in South Philadelphia.

Two advocates with opposing views on the refinery’s future both characterized the report’s findings as a “fair” distillation of the advisory group’s work, as well as the plant’s harms and its benefits.

Joseph Minott, executive director of the Clean Air Council, which advocates for the refinery’s closure, said the findings were “a little weak on what the city could do” and suggested government could impose greater restrictions on permits and zoning. Ryan O’Callaghan, a spokesman for Steelworkers Local 10-1, which represents refinery workers, said the report’s findings make a strong case for the continuation of fuel production.

But a spokeswoman for Phillly Thrive, an activist organization that has organized civil disobedience to oppose the refinery, said the advisory group sided too much with business interests. “We tried to read it with an open mind, but this report emphasizes economic justification over the health of its citizens,” Carol Hemingway, Philly Thrive’s membership coordinator, said in a statement.

PES, which had revenue of nearly $10 billion a year before its closure, paid total annual compensation of $237 million to employees and contractors and has total annual expenditures of more than $1 billion, according to an analysis by Econsult Solutions quoted in the report.

Before its closure, the company had an annual “tax impact” of $33.2 million in direct and indirect payments to the city treasury, and $30 million to the state, according to Econsult’s analysis.

All but 175 of the refinery’s 1,100 workers were laid off after the refinery closed, and 17 more union workers have been notified they can be let go after Sunday.

PES is evaluating confidential proposals to buy the complex that were submitted by a Friday deadline. The bidding procedures approved by U.S. Bankruptcy Judge Kevin Gross call for final bids to be placed Jan. 10, 2020, followed by an auction Jan. 17 if there is competition to buy some or all of the property.

The refinery wants to create a bonus pool of millions of dollars for seven key employees based on how much the refinery fetches from a sale and in insurance proceeds, underscoring that the aim of the bankruptcy proceeding is to generate the greatest return for the assets.

“It remains to be seen what types of businesses emerge offering viable, credible proposals for the site’s future and those details will not be known until formal bids are submitted and the bankruptcy auction, if any, takes place,” the report says.

Though the city is one of several parties that will be allowed to consult with potential bidders and exert some influence over the site’s future use, the report cautions that “the city will not be able to dictate who buys the site.”

A change of ownership represents an opportunity for the city, according to the report. “There are no other developable sites available in the city that come close to this size,” it said.

But the property’s long history as an oil refinery, and the existing infrastructure for storing and transporting products, make it “likely” that some or all of the site could be maintained for petroleum processing, the report said, quoting IHS Markit and the Sustainable Business Network of Greater Philadelphia.

If the city attempted to take over the land by eminent domain, it would need to establish a public purpose for the condemnation, and the action would expose the city to environmental liabilities that are now the responsibility of current and past owners. Condemnation proceedings “would be subject to lengthy and time-consuming litigation, and the total process would likely cost taxpayers hundreds of millions of dollars (or more) — funds that the city does not have available for this purpose,” the report said.

The report recommends the new buyers work to repair trust between workers and management, improve working conditions, and invest in modern and updated operations, hire employees from the surrounding community, hold regular inspections and make the results publicly available, and incorporate more environmentally friendly operations.

The city should consider being more involved in monitoring any future use proposals and operations at the site, making sure a new owner is better capitalized and invested in long-term success, paying for security and testing if the site becomes vacant for an extended period, exploring re-zoning the land for another uses, implementing stronger environmental regulations and compliance monitoring, and banning or more strictly regulating certain hazardous materials.

The advisory group’s report differs from a resolution unanimously approved last week by Philadelphia City Council that urged bidders for the refinery to adopt the city’s clean-energy goals. Environmental and community activists were invited to the Council session, but business and labor leaders were not.