Several key parties, including former owner Sunoco Inc., filed protests Monday of the proposed Philadelphia Energy Solutions bankruptcy reorganization, complicating a scheduled Thursday confirmation hearing that could include the sale of the refinery complex, shut down since a devastating June fire.
Sunoco, which owned the refinery before 2012 and is responsible for remediating the contaminated property, objected to the efforts of PES to remove restrictive covenants added to the property’s deed in 2012 that limit the ability of a potential buyer to reuse the property for a nonrefining use. Sunoco says that PES’s attempt to remove the language, which was added to protect Sunoco’s interests, “is in direct violation of Pennsylvania law and the Bankruptcy Code.”
Sunoco’s objections are just one of several protests filed by a deadline Monday to a proposed reorganization plan for PES, which agreed to sell its 1,300-acre refinery complex for $240 million to Hilco Redevelopment Partners, a Chicago company that reuses industrial properties.
“Hilco indicated to Sunoco that it intends to redevelop the land where the refinery is located for a use or uses unrelated to the refinery, which Sunoco contends may not be permitted by the covenants and restrictions contained in the deeds,” Sunoco said in its filing.
The deed restrictions, first reported by The Inquirer on Thursday, provide that the land can be used only for nonresidential commercial or industrial activity, and also limit disturbances of its soil — contaminated after 150 years of oil processing — to only uses related to refining, chemical production, or the energy industry.
Some parties that support the sale to Hilco suggest the deed restrictions could be removed by state environmental regulators, with PES’s concurrence. But Sunoco said the restrictive covenants are for the benefit of Sunoco because they protect its interests in the property, and its interests “would be extinguished without the restrictive covenants.”
The last-minute filings in the bankruptcy proceeding added a huge workload for the lawyers negotiating an exit plan for PES, which filed for bankruptcy in July after a devastating June 21 fire and explosion shut down the refinery, the largest oil-processing facility on the East Coast.
At least one party, the Committee of Unsecured Creditors, was expected to formally protest the award by a deadline Monday because it says a rival bidder, Industrial Realty Group, offered $25 million more than Hilco and plans to keep the site operating as a refinery.
U.S. Bankruptcy Judge Kevin Gross has scheduled a confirmation hearing on Thursday in Wilmington.
“There is complete uncertainty about any recovery for unsecured creditors and it appears that creditors will be at the mercy of other parties post-effective date,” the United Steelworkers said in its objections to the plan, which it said failed to protect the interest of the refinery’s unionized workforce. The refinery employed 1,100 people before its closure, including 640 Steelworkers.
Other parties filing objections before a Monday deadline included the U.S. Trustee, an arm of the Justice Department, which said the proposed reorganization plan does not comply with the Bankruptcy Code and should be rejected.
Point Breeze Renewable Energy LLC filed objections, saying the proposed sale of the refinery to Hilco casts doubt over its existing 2017 lease agreements with PES to build a renewable fuel plant on the refinery site. Point Breeze Renewable Energy is allied with Philadelphia Energy Industries, a refinery operator headed by former PES chief executive Philip Rinaldi, which is also linked to the Industrial Realty Group bid.
Several other parties, including creditors and an insurance company, complained that the proposed reorganization would leave major issues unresolved even after Thursday’s scheduled confirmation hearing.