The future of Philly’s shut-down PES refinery is wide open. Its neighbors are keeping a wary eye on what happens next

• Catalina Jaramillo
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  Catalina Jaramillo is a part-time reporter for StateImpact PA. She covers water issues in the Delaware Watershed. She was born and raised in Santiago, Chile, and has written for several publications in Chile, Mexico and the U.S. She’s a graduate of Columbia School of Journalism and has been a Fulbright and Metcalf fellow.

Sonya Sanders, a longtime South Philadelphia resident, says she has to pinch herself at the thought that the Philadelphia Energy Solutions refinery might truly stay closed permanently and the site’s cleanup might become a reality.

Even though she knows nothing is written in stone yet, Sanders said it already feels like a new beginning.

“That fear that’s been over the community — scared to breathe, scared of what’s next, what’s going to happen, am I going to end up like my neighbors — that fear has been lifted,” said Sanders, who is 47 and grew up next to the refinery.

Along with neighbors and activists from Philly Thrive, Sanders has been fighting to shut down the complex for more than three years. Her husband has cancer, as do some of her neighbors, and she said she’s been afraid pollution from the refinery could make her or her son sick.

“It’s going to take a lot of time for us to get over what happened, but it’s a process,” she said.

Last week, a U.S. Bankruptcy Court judge approved the sale of the 1,300-acre property to a company with no plans to restart the refinery. A refinery complex has been situated along the Schuylkill River for the last 130 years, and the judge’s decision was only the first step toward what could ultimately change the city’s landscape.

First, both Philadelphia Energy Solutions and Hilco Redevelopment Partners, which offered to pay $252 million to remediate, recycle and redevelop the property, will have comply with several legal obligations before the deal can close. The purchase agreement sets a May 31 deadline for the closing, though it allows for a three-month extension if some regulatory approval has not been obtained.

Hilco is hoping to accelerate the process, said Brian Abernathy, the city’s managing director, who co-chaired the Refinery Advisory Group formed after the explosion and fire last June that shuttered the refinery and prompted PES to file for bankruptcy.

“Hilco has said they’ll close on the site within 60 days of the final ruling,” Abernathy said. “By their own indications, they think they can have some operations in place within 18 months, which is exciting and exactly what we wanted to see happen in the sense of wanting to see economic activity there as quickly as possible.”

The company has not publicly commented on its plans for the refinery site.

Abernathy, who has been in ongoing conversation with Hilco, said although he can’t say for certain that it won’t continue refinery-related business, he’s expecting “light industrial logistical operations using the energy assets that are currently there, specifically around energy logistics and the pipeline operations.”

“Hilco is not a refinery, and not a refinery operator — they’re a developer of multi-use light industrial,” Abernathy said.

Eight years ago, Hilco bought Sparrows Point in Baltimore, 3,100 heavily polluted acres that had been home to a Bethlehem Steel plant, for $72 million. It turned the site into Tradepoint Atlantic, a distribution hub with 15 tenants, including Amazon, Under Armour, FedEx, Home Depot, Gotham Greens, a hydroponic greenhouse, and an offshore wind-energy farm.

To do so, Hilco dismantled and demolished the old plant, reached agreements with local, state and federal regulators and committed $51 million toward the cleanup of the property, which the Environmental Protection Agency says contained contaminants including benzene, hydrocarbons known as PAHs, and lead. In 2018, Baltimore County assisted the company with $78 million to build roads, sewer and water lines, and the federal government granted $20 million to upgrade port facilities. By 2025, Hilco expects to reach $2 billion in investment and to create 17,000 jobs.

Observers say Hilco will need to take a similar road in Philadelphia. But there are still plenty of unknowns.

Environmental cleanup

To redevelop the site into something other than a refinery — and to close the sale — Hilco, PES and Sunoco, the refinery’s former owner, will need to agree to removing a deed restriction incorporated into the 2012 buyer-seller agreement between Sunoco and PES. The deed restriction narrows the definition of construction and development allowed in the area to “actions or projects” that are “related or associated” to the “refinery business, the energy industry generally and the chemical industry.”

In January, Pennsylvania’s Department of Environmental Protection, which also is part of that agreement and oversees the ongoing cleanup at the site, said it will consider amending the restriction to allow development to a higher use. Sunoco did not agree, however, and the issue remains unresolved.

Dismantling the refinery and redeveloping the property into something different might have costly implications for Sunoco, now known as Energy Transfer. Through its subsidiary Evergreen Resources, the company has been working on the legacy environmental cleanup at the site, which is heavily contaminated with cancer-causing benzene and other substances, under various programs since 2003. By December, Sunoco is expected to have presented cleanup plans for 10 areas of the site. So far, eight remedial investigations have been approved, and no plans have been presented. A required public involvement meeting is also pending, after a failed attempt last fall.

But what really complicates the issue is that until now, the cleanup has been performed with an operating refinery, and to a standard that assumed a refinery would continue to be there. If the refinery is removed, further site characterization and cleaning would be required, which will have implications for the cost of the cleanup.

Who pays what is something all parties will need to agree on.

Virginia Cain, a DEP representative, said those conversations, which will need to be initiated by PES, Sunoco and Hilco, have not yet happened.

Robin Tilley, a representative with Evergreen, said in a statement that the company will meet Hilco, DEP and EPA over the next several weeks “to update the remedial strategy for the former Philadelphia Refinery, taking into account Hilco’s proposed reuse plan for the site.”

Abernathy, the city’s managing director, said the administration of Mayor Jim Kenney is not “particularly stressed” about the deed restriction because it believes it can be solved in negotiations. The city also believes Sunoco, PES, Hilco, DEP and EPA will reach agreement on the cleanup process.

“I am certain that there will be some changes to clean the site up to a higher standard,” Abernathy said.

Permits and regulatory approvals

To complete the sale, the property must be free and clear of any liens, encumbrances, rights, claims, or other obligations or liabilities.

That means Philadelphia Energy Solutions will have to close claims, pay fees for violations, finish contracts and leases, terminate the collective bargaining agreement with the unions representing its onetime employees, get resignations from its executives, close permits held with DEP, and resolve other legal matters, following the purchase agreement and its Chapter 11  reorganization plan.

Hilco will also need regulatory approval, including a go from DEP for a “commercially reasonable site-specific soil management plan” consistent with the company’s plans to redevelop the property “into a tri-modal industrial park with ancillary commercial uses,” according to the purchase agreement.

DEP’s Cain said that Hilco has not presented a soil management plan yet, but that the department is ready to collaborate. “It’s too early,” she said, to determine which PES permits will need to be closed, which ones could be transferred to Hilco, and which ones Hilco will need.

Abernathy said Hilco will need several permits, services and infrastructure from the city. Hilco also is interested in getting local support for state economic incentives, such as the Keystone Opportunity Zone that is currently in place.

Dismantling the refinery

If Hilco doesn’t continue in the business of refining oil, terminating a 130-year legacy in Philadelphia, it will most likely need to dismantle the refinery, sell what it can for parts or scrap, then demolish the rest.

That could take years.

“It’s going to be a long process,” said Marvin O. Schlanger, a retired executive who spent years in the refining and petrochemical business.

Although dismantling refineries is not unusual, Schlanger said, the Philadelphia refinery is larger in size and scope than most of them.

“There’s above-ground equipment and above-ground infrastructure, and there’s underground infrastructure, that all has to be dealt with in a safe and environmentally sound manner,” said Schlanger, who is also a member of the board of the University of Pennsylvania’s Kleinman Center for Energy Policy.

To be dismantled safely, each piece of equipment, tanks and pipes will have to be tested to make sure there’s no gasoline, crude oil, fuel oil or gases such as butane, propane or methane inside. That would ensure that employees handling them are safe and that no off-gases, or fires, affect surrounding communities. The remaining hydrocarbons have to be disposed of in a safe manner, through a wastewater plant or a waste gas system.

“That’s a very detailed and complex process, and it has to be absolutely thorough,” Schlanger said. “There are no shortcuts.”

Since PES shut down, the company has already removed some hydrocarbons from the site.

Once the equipment is safe, it can be sold for use in other refineries or for scrap. Schlanger said it will depend on the condition of the equipment and on Hilco’s plans. Selling off portions of the equipment usually takes more time, not only because they have to be removed more carefully but also because of the time it might take to find interested buyers.

With the equipment gone, the next step would be to deal with above-ground foundations and structures and underground infrastructure. If Hilco decides to demolish, specialty contractors will need to come in and remove any asbestos, Schlanger explained, and to make sure everything is done following safety regulations and in a way that is consistent with the existing remediation plan and poses no additional hazard to the community. Some of the underground infrastructure may be reused, such as water and sewer lines, but others, like hydrocarbon sewers, will need to be dealt with.

Schlanger said it’s very hard to say how long all these steps will take.

When Sunoco’s Eagle Point refinery across the Delaware River in West Deptford, New Jersey, shut down permanently in 2010 — seven refineries have ceased to exist on the East Coast in the last 10 years, not including PES — the dismantling and demolishing process took three years, from November 2011 to April 2014.

“It doesn’t surprise me that a site could take three years to make significant redevelopment progress,” Schlanger said. “To some extent, the owners are in control of that. They can influence the timeline by how much money and how many resources they’re willing to commit to dismantle the refinery.”

Hilco could also start developing in better suited areas, while starting the dismantling and environmental remedial processes.

For its Baltimore redevelopment, Tradepoint Atlantic, Hilco sold the newest and most valuable piece of the old plant, a 12-year-old cold mill, for parts. The rest was sold for scrap and demolished.

“About 18 months in, we realized that the land was actually the most valuable part of the deal,” Eric Kaup, Hilco’s general counsel, told Bloomberg last year.

Community involvement

Both Philadelphia’s City Council and the Kenney administration have said they expect the refinery’s new owner to engage “meaningfully with the surrounding communities.”

“I think they’ve shown that they are likely to be a really strong partner with the city and recognize the importance of this site to the city’s future,” Abernathy said. “So in that part, I feel comfortable with Hilco as a developer.”

Philly Thrive lead activist Alexa Ross said that when Hilco emerged as the winning bidder for the refinery, company CEO Roberto Perez called her to let her know she could have a direct line to him.

“That’s a very good sign … for turning the page that has been PES’ complete lack of communication. So that is hopeful,” Ross said at the time.

Carol Hemingway, a 70-year-old neighbor of the refinery and a member of Philly Thrive, said she’s optimistic about the future, but also cautious.

“I’ve seen in the past how it is, you know, you just switch from one company to the next company and you have the same problem,” she said.

Hemingway and her neighbors are worried that they don’t know the specifics of Hilco’s plans yet. Abernathy said Hilco agreed to have a public meeting after the sale is closed to present its ideas to the community. But Hemingway said they want to make sure residents will be involved in decisions about redevelopment — not just presented with a plan.

“I’m here, I’m going to still live here,” she said. “So I want to make sure that we’re going to have clean air.”

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