A deal with the Environmental Protection Agency eased the path toward a bankruptcy exit for Philadelphia Energy Solutions but did little to ensure the future of the troubled oil refinery operating close to the heart of a major East Coast city, WSJ Pro Bankruptcy reported. Philadelphia Energy filed for bankruptcy protection Jan. 21, blaming the cost of compliance with renewable fuels standards for its financial distress. A settlement with the EPA earlier this month chops the refinery’s compliance obligations nearly in half, at least as to the liabilities that stack up before the oil refinery leaves chapter 11 protection. The EPA settlement aroused controversy, with renewable fuels advocates protesting that creating an exception for Philadelphia Energy sets a dangerous precedent. Other merchant refiners live with renewable fuel requirements and “in fact are doing pretty darn well,” said Bob Dinneen, chief executive of the Renewable Fuels Association, a trade group for the ethanol industry. Dinneen and other critics contend that renewable fuels standards did not drag Philadelphia Energy into bankruptcy, and relief from the standards won’t be enough to keep it from returning. Philadelphia Energy Chief Executive Gregory Gatta said that the EPA settlement puts the company on a “stable path” toward emerging from bankruptcy. However, he acknowledged, the EPA settlement is a short-term, one-time solution to a continuing compliance burden. “This is only a partial and temporary reprieve,” Gatta said. Read more.
In related news, the U.S. Justice Department said refiner Philadelphia Energy Solutions’ bankruptcy plan does not adequately protect creditors, the department said in a federal court filing that was made public yesterday, Reuters reported. The 44-page objection, filed on Tuesday by the DOJ comes just days before a pivotal Monday confirmation hearing in U.S. Bankruptcy Court in Delaware. The department said that the plan could leave a long list of unsecured creditors partially or completely unpaid even as they are prohibited from voting on the proposal. The plan also fails to detail how much unsecured creditors are owed and when they will get paid, it said. Read more.