Philadelphia Energy Solutions, the largest oil refining complex on the East Coast and provider of one quarter of all the gasoline supplied to East Coast consumers, recently filed for Chapter 11 bankruptcy. The refinery plans to continue operations as usual and does not anticipate interrupting its ability to supply gasoline at its current levels.
The refinery cited the Renewable Fuels Standard, a component of the Energy Policy Act of 2005 that amended the Clean Air Act, was cited as one of the reasons for its financial struggles that led to the decision to reorganize. Often, new standards meant to protect the environment and the consumer come at a cost to private sector businesses, hitting smaller companies harder than they hit larger corporations.
What the Renewable Fuels Standard Requires
The Renewable Fuels Standard requires oil refineries to add ethanol to their gasoline. This is part of its larger initiative to reduce the amount of petroleum-based fuel used for transportation in the United States, helping the country and its industries move away from fossil fuels and toward biofuels and renewable fuels. Under this law, refineries that cannot mix a ethanol into their gasoline as mandated must purchase credits from companies that are in compliance.
Refineries like Philadelphia Energy Solutions are less equipped to blend their fuels than larger refiners because they have fewer, and often smaller, blending facilities. They also lack an advantage many of the bigger companies have - connection to their own gas stations. This is important because when ethanol is mixed into gasoline, the blended product only has a shelf life of about three months. Larger refiners like ExxonMobile own their own gas stations and can split up the blending process by sending unblended fuel to stations, then adding ethanol right before the product reaches the customer.
Not the First Time the Company Reorganized
The past decade has not been easy for Philadelphia Energy Solutions despite its position as the top producer on the East Coast. In 2012, it was purchased by Sunoco, Inc. and private equity firm The Carlyle Group and reorganized. Now, it is going through the reorganization process again, this time with $260 million in financing secured to pay back its creditors. Since its purchase in 2012, Philadelphia Energy Solutions has spent more than $800 million in blending credits to remain in compliance with the law.
Work with an Experienced Fox River Grove Bankruptcy Attorney
When you are considering filing for bankruptcy, first speak with an experienced bankruptcy lawyer about all the relevant facts of your case. You might find that bankruptcy is not the ideal choice for you and your company or you might learn new information about bankruptcy that changes how you look at the process. Contact our team of bankruptcy attorneys at Newland & Newland, LLP today to set up your initial consultation in our office. We serve clients in the Arlington Heights, Palatine, Rolling Meadows, Libertyville, Mundelein, Buffalo Grove, Schaumburg, Elk Grove, and Itasca areas.
(image courtesy of Markus Spiske)