Kenney: PES Refinery “Intends to Shut Down” as Blast Investigation Begins

Flames and smoke emerging from the Philadelphia Energy Solutions refining complex (AP Photo/Matt Rourke)

This is a developing story and may be updated.

The South Philadelphia oil refinery complex that shook the city with a series of explosions last week is expected to shut down for good — and soon.

Reuters first reported the refinery’s intent to close permanently on Wednesday morning; a few hours later, Mayor Jim Kenney confirmed those plans, stating that the company’s CEO and leadership team told him the refinery is likely to begin the process of closing within the next month.

“I’m extremely disappointed for the more than one thousand workers who will be immediately impacted by this closure, as well as other businesses that are dependent on the refinery operations,” Kenney said.

Here’s what we know so far about the closure plans and the investigation into the explosion and fire.

What we know about the shutdown

The fire at the refinery complex, which burned early Friday morning through Saturday afternoon, caused “substantial damage” to the facility, Reuters reported on Wednesday, quoting two unnamed sources familiar with the facility.

In a statement, Philadelphia Energy Solutions CEO Mark Smith said decision to shut down the refinery complex was a “difficult” one.

“While our team included some of the most talented people in the industry, the recent fire at the refinery complex has made it impossible for us to continue operations,” Smith said. “We are grateful that the fire resulted in only a few minor injuries. I want to thank our employees for their hard work and dedication and to thank the Philadelphia community for their support.”

The refinery could begin layoffs of the 700 union workers at the facility as soon as Wednesday, those sources told Reuters, with up to half of union staffers being forced out initially and the remaining workforce staying until the investigation into the explosions wraps up. However, the publication noted that plans to close could change. In his statement, Smith said PES will “position the refinery complex for a sale and restart.”

Ryan O’Callaghan, president of the United Steelworkers Local 10-1, told the Inquirer that the company’s decision to close and the resulting layoffs were a “disgrace.” The union is investigating whether the company’s insurance plan covered the unit destroyed in the fire as well as the business losses, according to the newspaper, in the hope that the unit could be rebuilt. Many PES workers struggled to control the fire after the explosion on Friday.

Closure could bring significant economic and environmental impacts to the city. PES is the largest refinery on the eastern seaboard and the 10th largest in the country, processing about 335,000 barrels of crude oil per day. The complex directly employs more than 1,000 workers and contracts with many others, according the Inquirer.

Kenney said on Wednesday that the city is “committed to supporting [PES workers and dependent businesses] during this difficult time in any way possible.”

The city is convening a group of city and “quasi-governmental” organizations to discuss economic and employment impacts, as well as ways the city can respond to the closure, he added, as well as “retooling the plans of the working group led by the City’s Managing Director and Fire Commissioner to focus efforts on determining the future of the refinery, assisting PES to transition the site safely, communicating with local residents, and supporting the employees impacted [by] PES’ decision.”

Peter DeCarlo, a professor in the College of Engineering at Drexel University, has studied air quality at and near PES for years. DeCarlo said he sees the closure as a “good thing for the environment and the people who live around the refinery.”

Environmental activists have opposed the facility for years, stressing that it’s the city’s single biggest air polluter even when it’s operating normally. In a statement on Wednesday, PennEnvironment said a decision to close the plant would be “certainly the right step.”

“We understand that there are hard decisions to make and that the loss of jobs will be difficult,” the organization said in a statement. “But it’s time to start the transition process and move Philadelphia to a clean energy future, while ensuring that the workers displaced by this closure are properly compensated and protected. The local community should also be given the opportunity to provide input on the future of the site.”

DeCarlo said the refinery’s closure doesn’t come without its own complications — a “150-year legacy of refining on that site is going to leave a lot of environmental problems behind for the land,” he said.

“We don’t know how the refinery was run for a huge amount of its life,” DeCarlo said. “The EPA was formed in 1970, but this site has been operational since the 1860s. So what are the records? What do we have to look out for in the soil and at the site of refinery?

“It could quite possibly be a Superfund site. There’s a question of, ‘What can safely be put on that site moving forward?’ I think [PES] is still on the hook for environmental remediation.”

What to expect of the investigation

An probe into the explosions and fire at PES launched on Monday. The investigation, which could take more than a year, will be conducted by four agencies: the Occupational Safety and Health Administration; the Bureau of Alcohol, Tobacco, Firearms and Explosives; the U.S. Chemical Safety and Hazard Investigation Board; and the PFD Fire Marshal’s Office.

Officials said at a press conference on Tuesday that they’ll look into the cause of the incident as well as any potential environmental and health effects of the fire and explosion. Also speaking on Tuesday, Kenney said officials don’t believe the incident has posed a threat to the health of the surrounding community — which largely consists of low-income black neighborhoods, where some residents have protested the refinery for years. The city is continuing to monitor air quality in the area.

The explosion and fire at the facility injured five employees. The city has not commented on the nature or extent of those injuries, except to say that they were treated on site and that no one was immediately transferred to a hospital or medical facility for care.

The total cost and damage to the facility is also unclear. Officials say the fuel sources were propane and butane, both fairly typical household products.

Charles Haas, head of Drexel’s department of Civil, Architectural & Environmental Engineering since 2002, said the investigation will likely seek to answer a number of environmental and business questions, including: “Were there any chemical impurities in the vat or vats that burned? What activities were happening on the site at the time of the explosions? What might have initiated the explosions? What safety devices were on site and did they perform as intended? What were the wind conditions and atmospheric conditions at the time of the explosion? Is there a record or log of near-miss incidents, or incidents that might have recently occurred had the company not taken immediate to forestall them?”

Officials said at Tuesday’s press conference said the investigation will also look into the company’s financial history and whether that history may or may not have affected its safety culture.

Philadelphia Energy Solutions, which was formed in 2012 as a result of a partnership between Sunoco and private equity company the Carlyle Group, has faced signficant financial struggles and debt in recent years. The entity declared bankruptcy in January 2018, emerging later in the year.

Its management team has reportedly undergone personnel changes in recent months. In May, the company told employees it would defer retirement fund payments to union members until 2020.