As a vice president of the United Steelworkers union, Thomas M. Conway was deeply involved in talks that led to the 2012 rescue of the Philadelphia Energy Solutions refinery. This year, as president of the 860,000-member international union, Conway had an inside view on failed efforts to rescue the South Philadelphia refinery out of bankruptcy.
From the union’s standpoint, the decision to sell the refinery to a buyer that has pledged to dismantle a plant that had employed more than 600 steelworkers was a “frustrating turn of events,” especially after efforts the union made since 2012 to keep the refinery operating. PES was the largest refinery on the East Coast.
“I wanted that refinery up and going and to put as many of those 600 jobs back in there as we possibly could,” said Conway. “That’s what we’ve been fighting for all those years.”
The role of Conway’s USW team inside the closed-door talks over the sale of PES to Chicago’s Hilco Redevelopment Partners came under fire following the U.S. Bankruptcy Court’s confirmation of the plan on Feb. 13. Some members of USW Local 10-1, which represented the unionized PES workers, called Conway a sellout on social media for dropping objections to the Hilco sale. Conway felt compelled to post a letter on the USW website defending the union’s role.
In an interview, Conway said it was “disingenuous” and “dishonest” to say USW abandoned the members. Faced with a decision by PES and its major creditors to dismiss a union-supported bid from rival Industrial Realty Group (IRG), the labor negotiators were left to salvage what they could out of the bankruptcy procedure, he said.
“People think this is all in the hands of the union," said Conway. "It’s just not true. I mean the debtor gets to determine who’s winning the auction. And IRG in the end never gets to a point where the owners of PES are accepting their bid.”
Conway said that the union was involved in talks until the last minute with IRG, whose plan included a promise to lease the refinery to Philip Rinaldi, the retired PES chief executive.
“I had an agreement with IRG and had been in constant contact with Rinaldi, and had been pushing the IRG bid as much as I could,” Conway said. “But in the end, there’s no bid if the debtor is saying this bid isn’t getting there.”
Conway said that IRG attached a number of conditions to its bid that were unacceptable to the sellers, who primarily wanted assurances a buyer could close a deal, since maintaining the refinery was draining its remaining cash reserves, even in a mothballed state.
“It was frustrating for me because I thought IRG and Rinaldi had this figured out and they were going in there with a bid that was going to succeed and make PES change their mind and turn from Hilco to IRG," he said. "And they never got that done.”
He said PES management did not object to a refinery restart.
“The PES management themselves, they were willing to start the refinery. I don’t know about the banks that owned it, or if they just wanted to get out from under it. It wasn’t like the management was thrilled with the Hilco idea. They were just faced with a better bid from Hilco.”
So Conway said the USW faced a decision: The union still represented 87 workers at the refinery, who are operating utility systems and providing security under a contract that will expire in September. The union also had outstanding grievances against PES, which it had raised in a formal objection to the court’s approval of the reorganization plan.
“I want to preserve as much of that work as I can for our bargaining unit,” he said. “Hilco is pushing to put in what they call a labor peace agreement, which essentially says, ‘We can put people out and you can organize them again if you want to.’”
So the union decided to settle its objections in exchange for a one-year extension of the contact — to September 2021 — that applies to any USW workers who remain employed. And it negotiated a $5 million severance payment for laid-off workers.
“It’s the only deal out there and I try and do the best I can to get the best I can out of the whole mess,” said Conway.
Conway had experience working with Hilco in 2012, when the company was in a partnership that successfully bid to acquire the bankrupt Sparrows Point steel mill near Baltimore. The Baltimore steelworkers, much like the Philadelphia refinery workers, maintained that their plant could still operate. But investors were unwilling to buy into that plan.
Hilco agreed to hold off on demolishing the steel mill, to give a potential buyer time to step forward. But in the end, the only buyer who emerged bought the old Sparrows Point blast furnace, and hauled it away.
“Hilco did what they said they were going to do,” Conway said. “They said to us, ‘We will hold off on this for a couple of months and we’ll see if someone materializes.’ I don’t think anybody had any Illusions about what that meant. They weren’t going to go out and market it for us — they were anxious to tear it down — while we could see if someone could come forward.”
The closure of the Sparrows Point mill left some steelworkers embittered, much like workers at the Philadelphia refinery. Conway said both were iconic businesses that had been operating for more than a century, and left behind a lot of history and emotions.
“All the years of legacy and parents and grandparents who worked in them and made a living, and then to have it go this way, it’s just frustrating," he said.
“These are good jobs and people were able to raise their families on it,” he said. "I’d like nothing better than a bidder who went in there and made the bid and were able to pull this off.”