Closed refinery may get new life
Philadelphia site sees big interest after bankruptcy
PHILADELPHIA — It’s not often that 1,300 acres of industrial land become available on the edge of a major city center, especially not with good road, rail and water links to the outside world. But the shutdown and bankruptcy of a major refinery have put the site and its infrastructure into play.
More than a dozen entities are interested in buying all or part of the South Philadelphia Refinery, which was shut down in June after an explosion caused an extensive fire. Before its closing, the refinery produced more gasoline, diesel, jet fuel and other refined products than any other refinery on the East Coast.
The large size of the parcel, its location in the heart of the Northeast and its proximity to transportation make it an attractive proposition to energy companies that want to restart all or part of the refinery, or combine its previous output with biofuels or renewable energy such as solar.
“For this mass of ground to become available is extraordinary,” said J. Eustace Wolfington, the senior managing director in the Philadelphia
office of Newmark Knight Frank, a real estate firm.
But the refinery’s future is clouded in part by questions over viability. Its current owner, Philadelphia Energy Solutions, filed for bankruptcy protection twice in less than two years, citing the rising cost of crude oil and the high expense of buying biofuel credits to meet federal requirements. In its latest filing in July, the company blamed its woes on damage caused by the explosion.
The plant’s ability to survive was also called into question in September by an industry report from the consulting firm IHS Markit, which projected declining demand for gasoline and other refined products over the next 30 years because of increased fuel efficiency and greater use of electric vehicles.
Refineries, especially those on the East Coast, are expected to respond to the projections by cutting production by two-thirds by 2050, IHS said in the report, which examined the future of the refinery for the city of Philadelphia.
Still, a refinery could be reopened on the site, IHS said, or the plant could be overhauled to make biofuels, renewable energy, petrochemicals or heavy manufacturing. The size and location of the site could also make it suitable for a new logistics and warehousing center, the report suggested.
Other refineries have been repurposed, it noted, including the Imperial Oil Refinery in Nova Scotia, which became a port terminal after closing in 2013, and a Shell Haven refinery in Britain that closed in 1999 and was converted to a container port with distribution facilities.
Demand for the site may be limited by heavy contamination from some 150 years of refining, which left behind a cocktail of hazardous chemicals such as benzene and toluene. Contaminants are being cleaned up by a contractor for Sunoco, an oil company that owned the site until 2012, overseen by state and federal environmental regulators.
Potential buyers may consider the site’s vulnerability to a possible rise in the sea level, given that it is bordered by a tidal section of the Schuylkill. The river has already flooded some sections of the complex and is expected to inundate it further in coming decades.
Another challenge is the densely populated sections of South Philadelphia, where residents, many of them impoverished, blame decades of air pollution from the refinery for high rates of asthma and other illnesses.
Still, Wolfington of Newmark Knight Frank said the site offered a rare opportunity for redevelopment.
“The site’s gold. It’s right on the Schuylkill River, you have incredible infrastructure for rail and waterway freight, you have great highway access and plenty of natural resources,” he said. “So it could be industrial, retail, residential, office. The real estate possibilities are endless.”
The environmental issues are “not insurmountable,” Wolfington added. As an example, he pointed to the nearby Philadelphia Navy Yard, a formerly contaminated site covering about the same amount of land as the refinery. That site has been successfully redeveloped as a mixed-use business hub and now has about 170 tenants occupying around 7.5 million square feet.
Not everyone agrees on the site’s reuse possibilities.
Its contamination would make a mixed-use development implausible, said Kevin C. Gillen, a real estate economist and senior research fellow at Drexel University’s Lindy Institute for Urban Innovation in Philadelphia. Instead, he said, its size and location make it more suitable as a logistics center.
“Cheap land, lots of it, access to plenty of infrastructure and a significant circumscribing of alternative uses all pretty much point in one direction,” he said.