Hearing Would Examine Impact that Possible Refinery Closures Would Have on Energy Prices
Potential Refinery Closures Could Cost Up to 6,000 Jobs, Hurt Region’s Economy and Potentially Hike Energy Prices Up and Down the East Coast
Linwood PA- Today, U.S. Senator Bob Casey (D-PA) called for a Senate hearing that would examine the impact that potential refinery closures in southeastern Pennsylvania would have on energy prices. After meeting with refinery workers, Casey, who was joined by Representative Pat Meehan (R-PA), said that possible refinery closures in southeastern Pennsylvania could hike energy prices up and down the east coast.
In a letter for U.S. Senator Jeff Bingaman (D-NM), Chairman of the Senate Energy and Natural Resources Committee, Casey called for a hearing on potential refinery closures, saying “Further, I am particularly concerned that the shuttering of the refineries will cause home heating prices to skyrocket. The Northeast is by far the top home heating oil consumer, with nearly 85 percent of total home heating oil sales occurring in the region.”
“The Marcus Hook refineries employ nearly 3,000 Pennsylvanians, boosts the region’s economy and are a critical part of the nation’s homegrown energy producing capacity. Closing the refineries could spike energy prices across the east coast, we need a Senate hearing to examine this,” Casey said. “Our first priority has to be making sure that the refinery owners are doing everything they can to find a buyer that will keep these facilities open, and we must also examine the damaging consequences that a possible closure could have on energy prices across the country.”
The owners of three refineries in Philadelphia, Marcus Hook and Trainer, recently announced that they plan to sell, and if no buyers are found, shut down. If these refineries are forced to close, more than 2,600 people will lose their jobs. Another 5,000 to 6,000 workers - largely employees of contractors and suppliers - indirectly rely on these facilities for their paychecks and would be impacted by their closures. In addition, local townships and school districts would be hurt by the loss of tax revenue.
The three plants represent more than half of the refining capacity in the northeastern United States. Shuttering the plants could lead to economic hardship not only for the employees who would lose their jobs but also for those who might be impacted by rising heating oil prices. Additionally, a decrease in refining capacity will increase dependence on foreign sources of energy.
The full text of Casey’s letter to Chairman Bingaman can be seen below:
February 10, 2012
The Honorable Jeff Bingaman
Chairman
U.S. Senate Committee on Energy & Natural Resources
304 Dirksen Senate Building
Washington, DC 20510
Dear Chairman Bingaman:
I am writing to urge you to hold a hearing on an issue of the utmost importance to my constituents in Pennsylvania, the entire Northeast region and the Nation. Two companies have recently announced the sale of three refineries in the Philadelphia area; Sunoco announced plans to sell its refineries located in Philadelphia and Marcus Hook, while ConocoPhillips announced plans to sell its facility in Trainer. The Marcus Hook and Trainer facilities currently stand idle, awaiting a buyer.
If no buyer is found and these facilities were to permanently close, the loss of our refining capacity on the east coast will have a substantial ripple effect across the Nation’s economy. The U.S. Energy Information Administration reports that reduction in refining caused by the potential shuttering of the Philadelphia, Marcus Hook and Trainer facilities is likely to impact supplies of petroleum products and to create price volatility. Recent reports indicate that Hovensa LLC intends to shut down its refinery in the U.S. Virgin Islands, which will further reduce supplies on the east coast.
As a result of these decisions, energy costs across the board are likely to rise, resulting in potentially record setting prices at the pump. Specifically, closing the refineries will lead to a reduction in short-term supply, longer delivery times and potential transportation bottlenecks. The cost of certain transportation fuels will increase, driving up the cost of production for businesses and, in turn, the price of goods for consumers. I also understand the closure of these facilities could affect the supply and quality of jet fuel to Northeastern airports. This loss of capacity has the potential to impact consumers through higher airline ticket prices across the country. Each of these factors is likely to slow down the regional and National economies. Taken together, the negative impact on individual consumers and the economy could be devastating.
Further, I am particularly concerned that the shuttering of the refineries will cause home heating prices to skyrocket. The Northeast is by far the top home heating oil consumer, with nearly 85 percent of total home heating oil sales occurring in the region. Closure of these facilities will likely mean that the Northeast region will experience a decrease in supply of Ultra-Low Sulfur Diesel (ULSD), at a time when there will be an increase in demand for ULSD as both a transportation fuel and for home heating. A significant reduction in supply could lead to consumers being unable to access affordable home heating oil, or to families being forced to make terrible tradeoffs between heat and other vital needs.
As for alternative supplies to the region, there is limited spare pipeline capacity to increase shipments to the Northeast and even with planned expansions, pipeline capacity will still be insufficient to make up lost volume. Output capacity from the remaining Northeast refineries is currently not enough to replace all the volume. If we import more gasoline from foreign countries, we will be less energy independent. These facts have serious policy implications beyond the region and further highlight the importance of conducting a full examination.
Additionally, some recent reports have shown improved revenue margins on refined oil. For this reason, many of my constituents have questioned the companies’ claims about the profitability associated with these refineries. The companies have stated that they have carefully analyzed the projected revenue margins for each facility. However, they have not disclosed all relevant information so that a full accounting can be made.
I remain concerned about how the loss of three Pennsylvania refineries will affect the region’s economy, National energy prices and the workforce and their families. The closures will have a lasting impact not only on the region, but on the entire Nation. Philadelphia currently has a 10.8 percent unemployment rate, translating to more than 70,000 city residents looking for work. Similarly, Delaware County is facing an unemployment rate of 8 percent, with more than 22,000 county residents looking for employment opportunities. The companies’ decisions to shutter the refineries will place workers and their families in economic distress, while hindering the area’s efforts toward economic recovery.
For these reasons, I ask you to hold a hearing on these issues. Thank you for your attention to my concerns about this matter and I look forward to working with you on this issue in the future.
Sincerely,
Robert P. Casey, Jr.
United States Senator
cc: The Honorable Maria Cantwell, Chair, Subcommittee on Energy
