July 21, 2012:

PBF Energy has postponed a $1 billion Delaware City Refinery expansion project, and has instead launched a $50 million to $60 million venture that could shift the majority of its crude oil deliveries to rail cars instead of tanker ships.  Company spokeswoman Lisa Lindsey said PBF’s planned rail unloading complex could handle up to 100,000 barrels per day, an amount that is more than half the 191,000 barrel per day capacity of the plant’s first-stage crude refining unit.  In the past, virtually all of Delaware City’s operations were supplied by tankerloads of low-cost imported oil arriving on the Delaware River. Recently, however, company officials began looking to even lower-cost, high-sulfur supplies from Canada’s oil sand fields and the oil shale regions of the Midwest. “This came as a complete surprise, a total shock,” said Mark Martell, a member of the refinery’s Community Advisory Panel, president of Delaware Audubon and a resident of Emerald Ridge, just northwest of the refinery. Martell said local PBF officials mentioned the 100,000-barrel rail plan during an advisory panel meeting this week, after they were asked about dockside pollution emissions and increased rail tank car activity along local track and road-level crossings near Emerald Ridge and the Estates of Red Lion.

The company’s quiet confirmation ended months of speculation over PBF’s seemingly delayed submission of environmental permit applications for new “Clean Fuels” units to produce ultra-low sulfur heating and diesel oil at Delaware City. The units would have required three years and a million hours of construction work to complete, with 50 new jobs added once operations began. “I can confirm that we are delaying future commitments” to the Clean Fuels venture, Lindsey said. “We will instead be investing in strategic capital investments – shorter term projects that will further strengthen our financial performance at the facility, which we must do because we have to initially generate a significant portion of the funds retired for the longer term Clean Fuels project,” Lindsey said.  During PBF’s announcement of the Clean Fuels project in January, company officials said quick action on permits was an “imperative,” with work expected to get under way while states in the Northeast put new heating-oil sulfur limits into effect.

Officials with Gov. Jack Markell’s administration described the company’s changing plans as “encouraging,” noting that PBF already had met spending and job-creation targets set in a $45 million package of aid from various levels of government for its refinery purchase in 2010. “They made a lot of investments that are improving their performance,” said Department of Natural Resources and Environmental Control Secretary Collin P. O’Mara. “I think that getting an additional source of domestic supply for competitiveness reasons just became a higher priority. We’re ready to proceed with their [Clean Fuels] permit whenever they’re ready.” Philip Weiss, an energy analyst with Argus Research, said Friday that ConocoPhillips’ Bayway, N.J., refinery also had begun taking large amounts of crude oil by rail from North Dakota’s Bakken fields, and other refiners also are seeking access to domestic crudes.

“If you’re on the East Coast, you’re at a disadvantage because you don’t have the ability to get crude from Canada or the Bakken by pipeline,” Weiss said, noting that some Midwest producers had made huge investments in rail loading hubs to get shale oil to more Eastern refiners. Norfolk Southern owns track serving the refinery and is involved in the project, according to company spokesman Dave Pidgeon. No other details were available on Friday, however. The largest crude oil tank cars carry about 30,000 gallons, with a 100,000 barrel volume requiring about 140 tank cars. “I’m sure the railroad is thrilled to death, but at the same time, the community has some concerns,” Martell said. “Right now, they run those cars at night, but if they’re expanding, they could be running them during the day, and there could be traffic problems.” PBF purchased Delaware City as a shutdown plant for $220 million in a state-brokered deal with Valero, which had planned to raze the site after losing up to $1 million daily on operations. The deal put hundreds back to work at a time when every refinery along the Delaware River was struggling to stay open.

Martell said that environmental groups are watching DNREC’s oversight of the plant closely, including the agency’s progress toward a requirement for reduced pumping of cooling water from the Delaware River and better protection for fish and other aquatic life now threatened by plant intakes.

By DelawareOnline