Philly refinery auction’s first collateral damage: A $120 million biogas plant
The planned $120 million biogas plant at the refining complex may not happen if the bankrupt refinery is sold to Hilco, the favored Chicago industrial redevelopment firm.
A proposal to build a $120 million biogas plant at the Philadelphia Energy Solutions refining complex could become collateral damage if a plan to sell the bankrupt refinery to a Chicago industrial redevelopment firm is approved.
Under a reorganization plan that will be considered Wednesday by the U.S. Bankruptcy Court, PES would renounce an agreement signed several years ago with Point Breeze Renewable Energy Project to build a plant that produces methane from food waste on a 23-acre parcel at the northern edge of the refinery site.
In a filing late Monday, PES said that the renunciation of the lease agreement with the Point Breeze project was an “essential” element to the $240 million deal for Hilco Redevelopment Partners to take over the 1,300-acre refinery site.
Hilco, which PES chose after a court-authorized auction process, has told PES and city officials that it plans to demolish the refinery and redevelop the property as an industrial park.
The Chicago developer “would not have entered into the purchase agreement” to buy the refinery if the agreement with the green energy producer were in place, PES said in a proposed confirmation order filed late Monday with the bankruptcy court in Wilmington.
U.S. Bankruptcy Court Judge Kevin Gross has scheduled a confirmation hearing Wednesday in Wilmington on the refinery’s plan. The hearing on the contentious plan could stretch into Thursday.
Point Breeze Renewable Energy, which is owned by RNG Energy Solutions, signed agreements in 2017 to build a plant that can convert more than 1,100 tons of food waste a day into renewable natural gas, or RNG. The primary market for the methane is as a transportation fuel because it qualifies for renewable energy benefits.
When the project was announced in 2018, it was presented as a green solution to recover energy from food waste diverted from landfills. The project would capture about 159 metric tons of greenhouse gases a day, or the annual output of carbon dioxide emitted from about 135 million miles driven by a typical passenger vehicle.
“The project will bring hundreds of much-needed jobs over its two-year construction, as well as dozens of permanent jobs, and I look forward to seeing this effort move forward,” Mayor Jim Kenney said in a statement in 2018.
The Point Breeze project was currently obtaining permits for its project and argued that its lease agreements with PES should survive the bankruptcy and be inherited by the new buyer, according to objections Point Breeze filed Feb. 3 with the bankruptcy court.
But the refinery argues that Point Breeze had not obtained financing for its project, and its agreement had not formally commenced at the time of PES’s bankruptcy filing in July. Rejection of the leases would allow the refinery to maximize its value by “unburdening the debtors’ property from these onerous agreements.”
Though the biogas project was announced in 2018, Point Breeze had actually signed the joint venture agreement with PES a year earlier, in 2017. The agreement survived through the first PES bankruptcy in 2018.
But with the refinery’s closure in June after a devastating fire and its second bankruptcy filing in July 2019, the foundation beneath the agreement began to weaken.
In December, PES received city approval to subdivide a 23-acre parcel from the refinery complex to create a separate taxable property for the Point Breeze project.
Philip Rinaldi, the former PES chief executive who wants to resume refining operations on the site, announced in August that his proposal would include the Point Breeze project in its plans. But Rinaldi’s plan for the refinery has not gained traction.
Hilco, the redeveloper, apparently had no use for the biogas project — at least on the 23-acre site off Maiden Lane to the west of the Schuylkill Expressway.
Hilco has offered few public details about its redevelopment plans, but the company is believed to want to use the site that would be occupied by the Point Breeze project as the location for an interchange to connect its proposed industrial park to the Schuylkill Expressway.