The largest oil refinery on the East Coast has filed for bankruptcy. Philadelphia Energy Solutions LLC is the owner of the biggest oil refinery that serves the New York Harbor diesel and gasoline market. The company filed for Chapter 11 bankruptcy protection on Sunday, January 21. The bankruptcy petition listed its debt between $1 billion and $10 billion. The company will seek to restructure its debt and continue with operations.
Behind the Scenes of Philadelphia Energy Solutions
In 2012, private equity firm Carlyle Group and Sunoco Inc. saved Philadelphia Energy Solutions from financial distress. It received government aid and tax breaks that ended up saving thousands of jobs. In 2014 and 2015, Philadelphia Energy Solutions had strong profits, but by the end of 2015 oil prices plummeted. The fallout hit oil and gas producers. As a result, of these producers (such as Linn Energy Inc and Breitburn Energy Partners LLC) filed for bankruptcy.
Why Did They File for Chapter 11?
According to a memo by Chief Executive Greg Gatta, the large amount of money it had paid to comply with the United States government’s renewable fuel standard is one reason for the decision to file a Chapter 11 case.
There is a bio-fuel law called the Renewable Fuels Standard, which is administered by the Environmental Protection Agency. Specificially, the Renewable Fuels Standard requires refiners to either blend bio-fuels into the U.S.’s fuel supply yearly or buy credits from those who do.
Many U.S. independent oil refiners do not have the infrastructure to blend bio-fuel into gasoline. Consequently, refiners have been hit hard by the mounting costs for the credits they have to buy in order to meet Environmental Protection Agency quotas for bio-diesel and ethanol. In November, the Trump Administration rejected a proposition by fuel makers to relieve oil refiners for the EPA obligations.
Since 2012, Philadelphia Energy Solutions has spent more than $800 million on credits to comply with the regulations. In turn, this makes it the company’s biggest expense after the purchase of crude oil and costing more than its payroll.
If circumstances have caused your personal finances to get out of control, financial relief through bankruptcy is an option. We are here to help you. Contact one of the Bond & Botes offices to set up a free consultation today.