Failed Refiner Had Bigger Problems than Ethanol

The reason an east coast refiner filed for bankruptcy appears to be much deeper than the Renewable Fuel Standard that Philadelphia Energy Solutions, known as PES, is blaming. Senator Ted Cruz spoke Wednesday claiming the RIN market was the downfall of the refiner, but bankruptcy documents perhaps suggest otherwise.

Filings show a rail facility built to accept crude oil for the facility often sat idle, even though the refiner was making quarterly payments to use the rail-yard. The refiner was paying $30 million per-quarter to the rail-yard owner, North Yard, which along with the refinery, is owned by the Carlyle Group.

Reuters reports the deal guaranteed lucrative payouts to Carlyle regardless of whether the refinery benefited from the arrangement. When oil market conditions made the rail shipments unprofitable, the refinery took heavy losses while investors continued to collect large distributions for two years, collecting at least $594 million from PES before it collapsed.

Refiners without the necessary blending facilities, such as PES, are required to purchase regulatory credits, known as RINs, from firms that do such blending. The refiner, however, failed to pay a large portion of that obligation, and still owes the Environmental Protection Agency about $350 million.