Sunoco abruptly shuts Marcus Hook refinery

Originally published Dec. 2, 2011: Sunoco Inc., blaming deteriorating market conditions, on Thursday said it would immediately shut down its historic Marcus Hook refinery ahead of a July 2012 deadline.

The beleaguered Philadelphia refiner said all but 100 of the 590 employees at the Delaware River operation would lose their jobs within two to three months. Hundreds of contractors lost their jobs immediately.

"This was a very difficult decision given the impacts to employees and nearby communities, and we will work closely with them throughout this process," Sunoco's chairman and chief executive officer, Lynn L. Elsenhans, said in a statement.

Local political and labor leaders were furious.

"I understand they're losing money, but it wouldn't kill them to hold out through the holidays," said James Schiliro, the mayor of Marcus Hook. "They just crushed everyone's holiday."

Dennis Miller, president of the United Steel Workers local that represents 300 refinery workers, said the shutdown would reduce the Delaware County borough to "a ghost town."

Miller said he walked out of a meeting Thursday after management officials told him they planned to idle the refinery now rather than wait until July 1, the deadline the company set for either finding a buyer or shutting down the plant.

Labor and political leaders have been holding rallies to try to recruit buyers to keep the 178,000-barrel-per-day plant open.

"To have them come up and slap us like this is just an insult," said Miller.

Sen. Pat Toomey (R., Pa.) said he was "deeply disappointed by this terrible news for the Marcus Hook community."

"I remain committed to working together with the rest of the Pennsylvania delegation to find willing buyers for the refinery so that these jobs can be saved," Toomey said in a statement.

Thomas P. Golembeski, Sunoco's spokesman, said that 65 Marcus Hook salaried employees would be redeployed within the company. Sunoco intends to increase the utilization rate of its remaining refinery, the 300,000-barrel-per-day plant in Philadelphia, which is also under a July 1 deadline to be sold or shut down but could be idled earlier if market conditions deteriorate.

Laid-off salaried employees will be paid for 60 days and are eligible for severance benefits and job-placement services. Unionized workers will be paid for 90 days.

Miller said the union plans to dispute the terms because its contract with Sunoco requires a six-month shutdown notice.

Only 35 employees would remain at Marcus Hook after the plant is idled, Golembeski said.

Sunoco said that profit margins for motor fuel had declined dramatically since it announced plans in September to exit the refining business and focus the company on retail fuel sales and its logistics unit that transports fuel mostly by pipelines.

"Market conditions have deteriorated significantly and the outlook for both motor fuel demand and refining margins remains weak," Elsenhans said in the announcement, which was released after markets closed Thursday.

"Our retail and logistics businesses are performing well, but given the negative realities of the Northeast refining marketplace, we need to accelerate the timeline for idling our Marcus Hook processing units."

The closure, along with the ongoing shutdown of the neighboring Conoco Phillips refinery in Trainer, will have profound economic implications in the region. Several hundred contractors who work at the Marcus Hook plant were discharged Thursday night, said Miller, the union chief.

The Marcus Hook refinery also supplies raw materials under a long-term agreement to the adjoining polypropylene plant owned by Braskem S.A., a Brazilian company that bought Sunoco's chemical operations last year.

Sunoco's separate racing-fuels unit in Marcus Hook will remain operating, Golembeski said.

Refineries across America have been hit hard by declining fuel sales and disappearing profit margins. But older refineries like Sunoco's that depend upon more expensive low-sulfur crude oil from Africa or the North Seas have suffered even more.

Golembeski said Sunoco decided to keep the Philadelphia refinery open for now because it produces more distillate fuels - diesel, heating oil, and jet fuel - that have better margins. "Both refineries are losing money, but Marcus Hook is losing more," he said.

Sunoco opened the Marcus Hook refinery in 1901 to refine crude oil brought by ship from Texas. It was the first of seven Delaware River refineries that made up the largest fuel-manufacturing center in the Northeast.

Marcus Hook was the second refinery developed by the Pew family, which built Sunoco into a major integrated oil company by the middle of the 20th century.