Planned $120M renewable-energy plant at South Philly refinery site is not dead

A settlement has been approved in U.S. Bankruptcy Court in Delaware that resolves Point Breeze Renewable Energy’s objection to the sale of the Philadelphia Energy Solutions refinery complex on grounds that it had a lease for 23 acres there to build a $120 million biogas plant.

The renewable energy plant, to be developed by RNG Energy Solutions, signed an agreement with PES in 2017. A plan was presented to and praised by city officials in 2018, and the process of obtaining city and state permits had begun. As proposed, the plant would have the potential to turn 1,100 tons of commercial food waste from the Philadelphia region that otherwise would be burned or sent to landfills and incinerators into 22,000 to 24,000 gallons of renewable natural gas every day, using anaerobic digesters.

But PES had argued in bankruptcy court that the Point Breeze Renewable Energy agreement had not formally started by the time the refinery operator filed for Chapter 11 in July, and that therefore the lease was not in effect.

Last week, PES, Point Breeze Renewable Energy, and Hilco Redevelopment Partners agreed to terminate all previous contracts and rights held by Point Breeze in relation to the refinery site, clearing the way for Hilco and PES to close on the $240 million sale of the 1,300-acre property. Hilco had said it could not have entered into the purchase agreement or close the deal if Point Breeze had a right to occupancy.

James Potter, president of RNG Energy Solutions, said the settlement approved by the bankruptcy court does not kill the biogas project.

“Point Breeze Renewable Energy has executed an agreement with Hilco where the parties agreed to negotiate a new lease agreement after Hilco closes the purchase of the refinery,” he said.

Hilco has committed to negotiate a contract with his company after it closes on the purchase of the refinery, Potter said. That is set for May 21, he noted.

“We’re committed to getting the project done there. Hopefully, we get an agreement quickly,” Potter said.

The terms between Point Breeze Renewable Energy and Hilco are not part of the public record of the PES bankruptcy. Hilco did not respond to a request for further information.

Philadelphia Energy Solutions’ CEO Mark Smith had no comment on the settlement and did not confirm the sale date to Hilco will close. In a previous interview, he said it would occur by mid-May.

The biogas plant is currently in the process of getting permits from the city and the Pennsylvania Department of Environmental Protection. City officials have praised the project as a needed solution to accomplish its goals of diverting food waste from landfills and incinerators and reducing emissions.

According to RNG Energy Solutions, the project will capture 159 metric tons of greenhouse gases per day, or the equivalent of about 400,000 miles per day driven by an average car. In addition, RNG says, the project will create 450 direct and indirect construction jobs and 25 direct jobs during operations. The company says that the project’s renewable natural gas could be used to fuel local buses and trucks, and that the digester would also generate about 300 cubic yards of organic soil amendment similar to peat moss.

When the project was presented, environmentalists and neighbors were not sure about the impact it would have on the community.

If a new lease is signed between Hilco and Point Breeze, Potter said, the plan will be delayed and adjusted but will basically accomplish the same goals. Instead of getting energy from the refinery, the biogas plant will use energy from the grid and produce thermal energy on site. The location would move “a little bit,” from the northern edge of the site toward the west, Potter said, but it would still occupy 23 acres.

RNG Energy Solutions had previously signed an agreement with onetime PES chief executive Philip Rinaldi in an effort to purchase the refinery out of bankruptcy. The Rinaldi bid was not selected by PES and was tagged as unrealistic. Potter said that partnership is no longer in play.

“In hindsight, that refinery would have had a very difficult time in today’s environment,” Potter said.

Settlement on pending renewable fuel credits

Among other matters being tackled as the Philadelphia Energy Solutions bankruptcy winds down are the company’s ongoing issues with renewable fuel credits. The federal government and PES have reached an agreement to reduce the amount of renewable fuel credits owed under the Clean Air Act Renewable Fuel Standard program to $10 million, from $35 million.

Under the Renewable Fuel Standard program, refineries such as PES are required to blend renewable fuels such as ethanol into diesel fuel or gasoline, or obtain Renewable Identification Numbers, or RINs, to meet their renewable volume obligations. PES failed to buy 154 million RINs to meet its obligations from January to June 2019, as required under an agreement after the company emerged from bankruptcy in 2018. The refinery operator then failed to get additional credits for production of diesel fuel after the June 2019 explosion and fire that led to its current bankruptcy filing. Together, both sets of obligations total $35 million.

According to a court document filed Monday by the U.S. Department of Justice on behalf of the Environmental Protection Agency, the federal government and PES have negotiated a settlement agreement in which, within 90 days, the PES liquidating trust will purchase or retire 161,830,963 valid Quality Assurance Plan-verified RINs — a type of RIN that a registered independent third-party auditor has certified — or a sufficient number of them so that the total market price meets $10 million.

The parties “wish to resolve their disagreements,” the settlement says, to “among other things, provide for resolution of the Debtors’ RINs Retirement Obligations in full [and] … to provide for the retirement of RINs by the Liquidating Trust as provided herein.”

On Monday, PES asked the bankruptcy court for an order to approve the environmental settlement. Responses or objections can be filed by May 19, to be resolved at a hearing set for May 26 before U.S. Bankruptcy Judge Laurie Selber Silverstein.

The deal allows for a 15-day public comment period, after which the federal government will re-evaluate the settlement and advise the court whether it requests that the agreement be entered or not.

PES also settles dispute with former employees

According to another filing in U.S. Bankruptcy Court on Monday, former refinery employees and the creditors committee that represents them have agreed to reduce their claim from $2.5 million to $500,000.

On June 26, 2019, five days after last summer’s massive explosion and fire at the PES refinery, about 1,000 workers were notified that their employment would be terminated as of July 1. A letter sent to the workers said that “unfortunately it was not feasible for PES to provide earlier notice because the business circumstances that followed the fire and explosion were not reasonably foreseeable.”

On June 28, a federal lawsuit was filed on behalf of refinery employees laid off from their jobs without 60 days’ notice, as is required of employers of more than 100 workers under the Workers Adjustment and Retraining Notification Act. The suit sought to “recover back pay and benefits pursuant” to the WARN Act.

In February of this year, the bankruptcy court filing says, PES denied that the claim had any merit and said that, if litigated, the refinery workers “would be entitled to receive nothing.”

“However, as a result of good-faith, arms’-length negotiations,” the parties reached the agreement to bring consensual resolution to the dispute, the filing says.

The agreement is subject to bankruptcy court approval.