Ethanol, Environmental Mandates Blamed For PA Refinery Woes

Oil-industry experts told a congressional panel on April 26 that regulations requiring more ethanol in motor fuel and setting stricter federal emission standards have driven some refineries out of business.

A Joint Economic Committee hearing in Washington on the effect of the closure of Philadelphia area refineries turned into a broad-spectrum denunciation of federal environmental mandates. U.S. Sen. Robert Casey (D., PA), the committee’s Chairman, called the hearing in response to moves by ConocoPhillips and Sunoco Inc. to sell or shut down their Philadelphia area refineries.

Republican members of the Committee — Casey was the only Democrat who attended, and he missed a big part of the hearing to attend a floor vote — singled out Obama administration policies for blame. But Thomas D. O’Malley, Chairman of PBF Energy, which owns refineries in Paulsboro, NJ, and Delaware City, DE, spared no party in his colorful testimony.

O’Malley said laws approved during the Bush administration requiring fuel to contain ten percent corn ethanol had reduced the demand for fuel refined from oil, even though it costs less to make than ethanol.

"The reason for the closure of the refineries in Pennsylvania is that they didn’t make money, and the reason they didn’t make money is that you took away their market," he said. "You delivered the market to the farm industry."

Later, he said: "In essence, if you want to know why the refineries were closed down, I would kind of say, look in the mirror and we can find the guilty parties."

O’Malley’s characterization of various federal mandates as "nuts" or "insane" or "dumb" prompted U.S. Rep. Kevin Brady (R.,TX), the committee’s vice chairman, to jokingly tell the executive, "Don’t hold back."

Witnesses told the committee that the threatened closure of Philadelphia area refineries would lead to a reduction in competition, higher fuel prices, and possible shortages.

"I am focused on ensuring that changes in refining capacity in the Northeast have as little impact as possible on energy prices, on jobs in our communities, and on the economic recovery," Casey said.

Short-term fears about the refineries have subsided in recent weeks as fuel prices have begun to fall after more than three months of steady increases.

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