Future of PES refinery could be decided Friday behind closed doors

Auction is scheduled, but it's 'very much an inside decision process,' one observer said

  • Catalina Jaramillo/WHYY

The future of the 1,300-acre site by the Delaware River, currently occupied by the Philadelphia Energy Solutions refinery, could be decided Friday behind closed doors in New York.

The company filed for Chapter 11 bankruptcy in July, a month after a catastrophic fire and explosion destroyed part of the refinery’s capacity. The refinery shut its operations right after the fire, laying off nearly 1,000 employees.

The refinery complex has been in the midst of a sale process since November. By then, 15 parties had expressed interest in acquiring the facility. Final formal bids were submitted Jan. 10, under nondisclosure agreements. The assets of PES could be sold to one or more buyers.

An auction is expected to take place Friday at the New York City offices of the company’s law firm Kirkland & Ellis LLP, to maximize the sale price and provide the biggest value to PES. But the company also could decide to take one bid and call the auction off.

“It’s very much an inside decision process, and it’s very hard to tell,” said Peter Winslow, a representative of SMART, a coalition of environmental organizations, who has been closely following the proceedings in U.S. Bankruptcy Court in Wilmington.

In December, Bankruptcy Judge Kevin Gross approved the company’s restructuring proposal, which lacked critical information for creditors. According to court documents, PES will send that information after the sale and insurance recovery process — the company is expecting a $1.25 billion insurance payout — for creditors to vote on the plan before Feb. 3. The restructuring plan and the winning bidder would be presented in bankruptcy court at a confirmation hearing on Feb. 6.

Last summer’s closure of the refinery, the largest on the East Coast and the biggest stationary source of air pollution in the city, opened the door for many to imagine cleaner uses of the site. But a November report produced by the city’s Refinery Advisory Group concluded that in the short term the complex most likely will continue to have a heavy-industrial use.

Judge Gross granted the City of Philadelphia’s request to be consulted during the bidding and auction process. Mike Dunn, a spokesman for the city, said that PES had received the advisory group’s report and had already disclosed the names of the bidders under a nondisclosure agreement.

The city will be represented at the auction by attorneys with the Law Department and representatives from the Managing Director’s Office. But Managing Director Brian Abernathy has said the city has limited powers and influence to determine the future of a privately owned site.

So far, only a few bidders have presented their plans for the refinery complex publicly. Among them is former PES chief executive Phil Rinaldi, whom environmentalists dubbed “Fossil Phil.” Rinaldi’s Philadelphia Energy Industries proposes to restart the Point Breeze and Girard Point refineries, rehiring some former PES employees, and host an anaerobic digester facility and a 10-megawatt solar project by RNG Energy Solutions.

In a letter to the bankruptcy court dated Jan. 10, State Sen. Larry Farnese urged the judge to reject proposals that don’t protect the health, safety and welfare of Philadelphia residents or align with the city’s climate goals.

“This moment presents the greatest opportunity in Philadelphia’s history to redefine a future land use for such a large amount of land at one time. It is critical that all stakeholders work together to ensure proper remediation of the site and encourage opportunities for future uses at the site that protect the environment and public health,” Farnese wrote.

In a separate letter dated Tuesday, State Sen. Anthony H. Williams asked the judge to “require bidders to commit to at least 60% of the workforce [being] comprised of city residents with a special emphasis on surrounding communities of color and historical high unemployment.”

Neighbors of the refinery and local activists are planning to rally Friday in New York outside the law office where the auction is scheduled to occur. Activists with Philly Thrive have been calling Mayor Jim Kenney’s office, saying his administration needs to “make it clear throughout the auction process that the City of Philadelphia can no longer host polluting companies on that land,” according to a script sent to members.

An investigative report published Thursday by E&E News, NBC News and the Investigative Reporting Workshop — a nonprofit newsroom based at American University — revealed that in May the refinery released levels of benzene, a chemical linked with cancer and other diseases, at levels more than 21 times the federal limit, and said that the city failed to inform the public.

James Garrow, a spokesman for the city Department of Public Health, said testing at an air-monitoring station at 24th and Ritner streets did not show such high levels. “And that’s in the community, so that’s a much truer indication of … the air that people are breathing.”

Also paying attention to the auction process are the refinery’s former workers, some of whom are still unemployed and waiting for its future to be decided.

Ryan O’Callaghan, a spokesman for United Steelworkers Local 10-1, which represented some of the refinery employees, said they don’t know who the bidders are or how will the sale process unfolds.

“We’re confused,” O’Callaghan said. “We don’t know.”

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