Layoffs planned for Philadelphia refinery

Philadelphia Energy Solutions, operator of the largest oil refinery on the East Coast, said that its finances were "significantly stressed" and that it was looking to cut workers, reduce benefits, and delay capital projects.

Company pension contributions will be frozen, health-care benefits will be cut, and buyouts will be offered to salaried employees, chief executive officer Philip Rinaldi said in an email to workers Wednesday obtained by Bloomberg. The refinery employed 1,140 workers as of January 2015, 60 percent of them unionized, according to an SEC filing.

The company, owned by Carlyle Group LP and Energy Transfer Partners LP, said about $250 million in costs for government-backed ethanol blending credits this year and low fuel prices along with high East Coast inventories were forcing it to reduce spending in all areas.

Maintenance planned at the 335,000-barrel-a-day Philadelphia refinery will move to 2017. Independent refiners are facing a surge in renewable fuel credit prices, billionaire investor Carl Icahn said in an Aug. 9 letter to the Environmental Protection Agency. The surge in prices of the credits, known as RINs, may bankrupt some refiners because the marketplace is "rigged," Icahn wrote. Icahn holds an 82 percent stake in the refiner CVR Energy Inc.

"It is draining our capital resources," Rinaldi said in the email. The company is looking "for solutions to enhance our operating economics and liquidity position."

Cherice Corley, a spokeswoman for the Philadelphia-based Philadelphia Energy Solutions, said in an email Thursday that the company would not discuss business matters with the media.

Refiners and importers need to meet biofuel quotas set by the government, either through blending fuel with ethanol or buying Renewable Identification Numbers, or RINs. Companies that don't operate retail gasoline stations are unable to generate the credits by blending biofuels with the petroleum-based fuels they produce. Integrated refiners can generate the credits organically.

East Coast gasoline stockpiles of the motor fuel are at a record seasonal high, according to the latest weekly data from the Energy Information Administration, the U.S. Energy Department's statistical arm.

"East Coast refining margins are under pressure due to seasonally high inventory levels of gasoline," Andy Lipow, president of Lipow Oil Associates in Houston, said in an interview.

RINs aren't the real problem for the Philadelphia refinery, Robert Campbell, head of oil products research for London-based Energy Aspects, said.

"East Coast refiners are not particularly competitive in this low-margin environment for refining because there is no advantaged crude for them anymore," Campbell said. "U.S. production is down and there is more infrastructure to move the stuff from the Bakken to the Gulf Coast instead of the East Coast."

Philadelphia Energy Solutions is a joint venture of the Carlyle Group and Sunoco, a unit of Energy Transfer Partners LP.

Source: Philly.com