The owner of the largest East Coast oil-refining complex is filing for bankruptcy and blaming an Environmental Protection Agency (EPA) biofuel mandate.
Philadelphia Energy Solutions, owner of two refineries, announced the news to employees Sunday in an internal memo obtained by Reuters.
The bankruptcy comes just six years after the company was financially rescued by the Carlyle Group, a private equity firm, and petroleum company Sunoco.
The internal memo told employees, which currently number 1,100, that in a new agreement with creditors the company secured $260 million in financing, adding the bankruptcy filings would have no immediate effect on workers. About $75 million of the new funding comes from Sunoco Logistics.
The memo was confirmed to Reuters by a spokeswoman for Philadelphia Energy Solutions.
The two refineries, operated by Philadelphia Energy Solutions, are equipped to convert about 335,000 barrels of crude oil per day into gasoline, jet fuel and diesel.
Money strains of having to adhere to the EPA's Renewable Fuels Standard are listed as partly to blame.
The Bush-era biofuel law mandates that either refiners blend biofuels made from ethanol into their fuel supply or they have to buy credits from companies that do.
Philadelphia Energy Solutions chose the latter route and since 2012 has spent more than $800 million on credits to keep up with the law. According to the memo, the credits were the company's second-largest expense next to the purchasing of crude oil.
"We will continue to work with the government to address the broken RFS system that is harming smaller, independent merchant refiners like PES. This is a win for the region, the Commonwealth of Pennsylvania and the City of Philadelphia,” said Greg Gatta, CEO PES in a statement on Monday.
The company's woes come amidst experts’ expectations that crude oil consumption and production in the U.S. will continue to grow. The U.S. Energy Information Administration forecasts that average crude oil production in 2018 will increase by about 1 million barrels per day from 2017 levels. If true, it would be the highest annual average on record.
Last week, Fatih Birol, executive director of the International Energy Agency, said he foresees the United States becoming the "undisputed leader" in oil and gas production for "years to come."