Chicago-based Hilco Redevelopment Partners buys PES refinery for $240 million

The Chicago-based real estate company was the winning bidder for the South Philly complex as part of Philadelphia Energy Solutions’ bankruptcy, according to documents filed.

Philadelphia Energy Solutions refinery in South Philadelphia. (Emma Lee/WHYY)

Philadelphia Energy Solutions refinery in South Philadelphia. (Emma Lee/WHYY)

Updated 8 a.m. Wednesday

A Chicago-based real estate developer will become the new owner of the South Philadelphia refinery complex, according to documents filed in U.S. Bankruptcy Court Tuesday.

With a bid of $240 million, Hilco Redevelopment Partners emerged from last Friday’s bankruptcy auction as the winner of the Philadelphia Energy Solutions complex, according to the filing with the court in Wilmington. The agreement of sale will be presented Feb. 6 to the court as part of the PES Chapter 11 proceedings.

PES and Hilco did not comment on reports of the agreement earlier Tuesday. The City of Philadelphia declined to comment at that time, citing a nondisclosure agreement.

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Ryan O’Callaghan, a spokesman for United Steelworkers Local 10-1, which represented some of the refinery employees, said he would not comment until the news was official.

Hilco Redevelopment Partners is a part of Hilco Global, based in Illinois. According to its website, the company “provides a single integrated solution to maximize the value of obsolete industrial sites by leveraging Hilco Global’s unique capabilities to efficiently remediate, recycle, and redevelop complex assets and liabilities.” Some of its remediation projects are in Baltimore, Boston and New Jersey.

According to a Reuters report earlier Tuesday, the sale reduces the possibility of a refinery opening at  the 1,300-acre PES site.

City criticized for not disclosing high levels of benzene

Contaminants resulting from decades-long refinery operations there have come under increased scrutiny since the June explosion and fire that severely damaged a portion of the refinery complex. The incident spurred Philadelphia Energy Solutions to shut down and ultimately file for bankruptcy.

Public health experts and environmentalists are criticizing the city’s decision not to disclose the high levels of cancer-causing benzene detected at the refinery’s boundaries last year.

Air monitors located at the fence line of the complex detected an annual average level (until September) of benzene that was more than five times higher than the federal limit. During a two-week period in July, one air station detected benzene levels 21 times higher than the Environmental Protection Agency’s “action level.”

“The public deserves to know when they’re being exposed to chemicals that pose an increased risk of cancer,” said physician Marilyn Howarth, director of community engagement with the Center of Excellence in Environmental Toxicology at the University of Pennsylvania.

Low levels of benzene, a widely used chemical, exist permanently in the air from cigarette smoke, gas stations, and vehicle and industrial emissions. Long-term exposure is linked to cancer, anemia and effects on bone marrow, according to the Centers for Disease Control and Prevention. Breathing high levels of the toxic substance can cause drowsiness, dizziness and unconsciousness. Inhalation of very high levels can result in death.

Howarth said the levels found at the boundaries of the refinery would not have an acute health effect on residents, but since high emissions were repeatedly detected, they could translate into “a huge increase in risk for cancer to area residents.”

The EPA threshold for benzene measurements at refinery boundaries is 9 micrograms per cubic meter of air (ug/m3), according to the Petroleum Refinery Sector Rule issued in December 2015. PES has 31 monitors around the refinery complex to satisfy this requirement. According to data revealed last week by NBC News, E&E News, and the Investigative Reporting Workshop, from January to September 2018 the PES monitors registered an annual average of 49 ug/m3.

James Garrow, a spokesman for the city’s Department of Public Health, told WHYY that the EPA informed the city that PES was exceeding the limit last May. According to the EPA’s rule, the action level is not an enforceable limit. But it gives refineries surpassing the limit 45 days to submit a report analysing the possible causes and establishing ways to fix them.

PES submitted that report on June 24, three days after the refinery fire and explosion. Both the city and EPA decided the benzene levels were not a threat to public health. Testing at a city air monitoring station at 24th and Ritner streets did not show high levels of the toxic chemical.

“The numbers that were reported in the PES report, and those at our own air monitoring station that is actually in the community, showed levels far below where the U.S. ATSDR says there would be a threat to public health,” said Garrow.

According to the Agency of Toxic Substances and Disease Registry, or ATSDR, a 5- to 10-minute exposure to high levels of benzene, between 10,000 to 20,000 parts per million, can result in death. Lower levels, from 3,000 to 700 ppm, can cause drowsiness, dizziness, rapid heart rate, headaches, tremors, confusion, and unconsciousness.

The U.S. Department of Labor’s Occupational Safety and Health Administration has set limits of 1 part benzene per million parts of workplace air (1 ppm) for eight-hour work shifts and 40-hour workweeks, which is equivalent to 3,194.7 micrograms/m3.

Joanna Hawkins, a spokeswoman for the Department of Labor, said there are many factors affecting an exposure assessment, such as location, type of sampling (direct reading or time-weighted average readings), length of time of sampling, temperature, and pressure.

“Without the information of the factors that affected the data results, one cannot simply compare air results such as the readings collected by PES to the OSHA regulatory level,” Hawkins said Tuesday.

EPA did not immediately respond to a request for comment.

On Friday, OSHA fined PES $132,600 in penalties for 10 serious violations related to requirements and procedures the company should have followed to address hazards associated with extremely toxic hydrofluoric acid and flammable hydrocarbons.

The city’s explanation for not disclosing the information did not sit well with Eric Schaeffer, a former EPA enforcement director and co-founder of the Environmental Integrity Project, a nonprofit watchdog organization that analyzed the EPA data used in the report by NBC News, E&E News and the Investigative Reporting Workshop. A single monitor is not capable of predicting levels in a whole neighborhood, he said.

“I don’t think there’s enough information from the city to support their statement that there just isn’t any risk or not enough of a risk, whatever that means,” Schaeffer said.

PES benzene levels at the fence line were the second-highest annual average of any refinery in the country in September, according to research by the Environmental Integrity Project. Which  means that whatever correction actions were taken by PES in May, when the EPA ordered the report, probably didn’t work.

“I think the public should know when you have concentrations of a carcinogen this high at the boundary of a plant that is right next to where a lot of people live,” Schaeffer said. “The whole point is to keep your benzene below 9 [micrograms per cubic meter of air.] These are annual exposure numbers, this isn’t a short-term spike, this is about what concentrations you’ve been exposed to over a year. And when you are seeing numbers like 40, that should worry you.”

Joe Minott is Philadelphia’s Clear Air Council director and one of seven members of the city’s Air Pollution Control Board, which advises the health department on air-quality issues.

“It’s not helpful for government agencies after the fact, when there’s been an exposé, to say, ‘Well, we didn’t release the information because we didn’t see it as a health threat.’ I don’t want them making that determination. I want the information to be made available, real time, with a community that’s trained to interpret it,” Minott said.

Minott said the whole point of fence line monitoring is to keep the community that’s next to the refinery fully informed. This incident, he said, raised questions about the way the city is monitoring the refinery and the way PES maintained the facility.

“The biggest problem with this refinery in general is that we know that PES did not run the refinery well, we know that they slashed their maintenance budget and that they were not careful in terms of how they handled hazardous materials,” he said.

Serious OSHA violations

After a six-month inspection, OSHA cited Philadelphia Energy Solutions in December for 10 serious safety and health violations. The investigation was prompted by the fire and explosion at the company’s Girard Point refinery in June, where highly toxic hydrofluoric acid and hydrocarbons leaked from an alkylation unit, starting the fire.

According to an October report by the U.S. Chemical Safety and Hazard Investigation Board, the incident was likely caused by an old and faulty pipe in Unit 433 that had not been inspected in 45 years.

“When employers fail to evaluate and address potential hazardous conditions associated with chemical processes, catastrophic events such as this can occur,” said OSHA Philadelphia area director Theresa Downs. “OSHA’s Process Safety Management standard requires that employers conduct regular inspections to ensure process equipment meets industry standards.”

The OSHA investigation found that PES did not compile written information such as corrosion studies, did not establish and implement written procedures related to hydrofluoric acid, did not correct deficiencies in HF spray mitigation pumps, failed to conduct piping inspections and tests in Unit 433, failed to correctly identify that a piping dead leg “included an 8-inch piping elbow that catastrophically failed on June 21, 2019,” and failed to address the consequences of failure of engineering controls such as the need for an independent active firewater protection system, among others.

A control room operator, Barbara McHugh, activated a system that removed most of the hydrofluoric acid from the unit, the Chemical Safety Board report said, preventing what could have been a major catastrophe affecting hundreds of Philadelphians. One of the explosions propelled a 38,000-pound vessel across the Schuylkill River.

O’Callaghan, of United Steelworkers Local 10-1, who represents former refinery employees, said he had not read all the citations.

“I’d be interested to see if PES challenges the OSHA citations. I believe their position will be that the followed industry standards, which say that 50% of piping circuit has to be inspected every so often,” said O’Callaghan. “Obviously knowing what I know now, I would have preferred that every inch of the pipe would have been inspected.”

PES had 15 business days from receipt of the citations to comply with or contest the findings. The citations were issued on Dec. 19.

PES did not respond to a request for comment. According to court documents, on Jan. 16 the company asked U.S. Bankruptcy Judge Kevin Gross to approve the hiring of the Klehr Harrison law firm to represent its employees in connection with several ongoing investigations by the Department of Justice, the EPA, the Pennsylvania Department of Environmental Protection, OSHA, the U.S. Chemical Safety Board, the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives, the Philadelphia Fire Marshal, the Philadelphia Police Department, “and several private insurance companies.”

“The Debtors believe that the cooperation, assistance, and participation of the Employees is critical to the timely completion of the Investigations, ultimately fostering the Debtors’ reorganization effort. In order to facilitate the Employees’ cooperation while assuring their legal rights are fully protected, and especially in light of the complexity of the Investigations, the Employees require representation by counsel,” PES stated.

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