By Jeff Montgomery
The Delaware City refinery marked an improbable return from the brink of demolition Friday, with its new owners announcing they may add $1 billion in new refining units.
PBF Holding Co. LLC chairman Thomas D. O'Malley said during a celebration of the plant's official restart that owners and investors are exploring investment in a complex sulfur-removal system that would expand the 210,000-barrel-per-day refinery's output of ultra-clean fuels.
"We're a very competitive facility. We're going to continue to invest in this facility," O'Malley said. "We have a huge project that we're considering -- and I have to convince Blackstone and First Reserve -- which will involve hundreds of millions of dollars, perhaps up to a billion dollars, in new facilities here that will really assure the future and will certainly make the building trades happy."
Blackstone and First Reserve are major global investment companies and partners in the venture that purchased the closed-down Delaware City plant from Valero Energy in June 2010.
Gov. Jack Markell confirmed later that he was aware that PBF was discussing a plant expansion.
No other details on the project, including how many new jobs could be created, were available Friday.
Although Delaware City began refining crude oil months ago, officials waited until all key systems were operating reliably before inviting Markell, members of Delaware's congressional delegation and labor and community groups to a formal restart ceremony.
The event followed a $400 million refinery-wide rehabilitation and came nearly two years after Valero announced a $1.4 billion write-off and decision to shutter and raze the plant, a move driven by months of $1 million-per-day losses and repeated problems and production cuts.
"It looked like the plant was going to be closed and looked like the steel was going to be sold for scrap," said Markell, whose administration courted refining companies worldwide.
Shortly after the shutdown, Markell's administration zeroed in on O'Malley -- who led Premcor when it owned Delaware City in 2004 and 2005 -- as a potential savior for the nearly 60-year-old refinery's hundreds of high-paying, blue-collar jobs.
O'Malley, who at the time was leading Europe's largest group of independent refineries as well as a new refinery investment partnership, eventually agreed to buy Delaware City from Valero at the hugely discounted price of $220 million. The deal was sweetened by a state agreement to lend the company $20 million under terms that would convert the money to an outright grant if employment and investments hit state targets.
The company also received $10 million to support pollution-control upgrades, new timetables for meeting emissions-reduction goals and support from New Castle County, led at the time by now-Sen. Chris Coons, D-Del.
Sen. Tom Carper, D-Del., also was deeply involved in the effort, lobbying a former Senate colleague on Valero's board to support a deal with PBF after the company initially balked.
Carper said later Friday that PBF, Blackstone and First Reserve are important figures in the nation's attempt to shift from fossil fuels to cleaner energy. Blackstone, he pointed out, was present at a congressional summit Thursday on offshore wind development; on Friday, they were on hand as key investors in the cleanup and rehabilitation of what once was one of the nation's most heavily polluting refineries.
"We're not going to be free of our dependence on oil and coal any time soon," Carper said. "But what is so critical is that we use them in a more environmentally responsible way."
Delaware City processes heavy, high-sulfur crude oil that can be purchased at prices often much lower than the lighter, "sweet" crudes handled by most of the other refineries along the Delaware River. All but the Delaware City and Paulsboro, N.J., refineries, both owned by PBF, are now on the market and facing a potential shutdown.
"This is a much more complex refinery, which can handle very heavy crude and thus has a tremendous financial advantage," O'Malley said after the speeches. "The other issue is, we have an investor in the form of Blackstone and First Reserve who are willing to take risks."
Energy Department records for July, the most-recent available, show that Delaware City has been processing lighter-than-usual crude oils in its early operations. O'Malley said that would shift to heavier and higher-sulfur feeds now that major sulfur-removal units are running.
O'Malley described the Delaware plant's resurrection as "an example of the success that can be achieved when all interested parties work together for a common goal." Workers did take longer than expected to restore the operation, he said, partly because the shutdown in late 2009 "was not done properly."
"You started up what I view as the most complex startup in my 35 or 40 years in this industry," said O'Malley, often credited with bringing the nation's independent refining industry into being. "You did it with almost no accidents. You started this up without damaging the environment. This, for us at PBF, was the single most important thing."
Seth Ross, a member of the Delaware Nature Society and a longtime member of the refinery's citizen advisory panel, said Friday that he was impressed at progress on the environmental front.
"There has been steady progress," Ross said. "The atmospheric emissions and solid wastes are way down from what they were in the old days."
Although the plant has cut cooling-water withdrawals from the Delaware River by nearly a third, environmental groups are likely to press the company to improve outdated cooling water-intake systems in the future, Ross said.
"We need the jobs," said Jim Wolfe, president of the Delaware State Chamber of Commerce. "These are good jobs. The governor and PBF are stepping up to the challenge. Nobody wanted this plant, and when you look at the kind of negotiations that went on to make this a viable facility, it really is a major step."
Markell later acknowledged that the event was bittersweet, coming on the heels of AstraZeneca's announcement of 400 job cuts this week, many in Delaware.
"This is a great day, but the point is, we've got to continue to have great days, because there are too many people in Delaware who are not working who want to work," Markell said. "This is the kind of economy we're in; you have a step forward, and it seems like you have a half a step back."