October 4, 2021 [Bloomberg] – Hilco Global bought the Philadelphia Energy Solutions oil refinery out of bankruptcy with a vision that includes transforming the site into logistics facilities and research labs.
How to Tear Down an Oil Refinery in the Middle of Philadelphia
There are some 130 aging oil refineries in the U.S., most of which will need to be decommissioned if the country is to meet its climate goals.
After part of the Philadelphia Energy Solutions refinery exploded into flames one night in 2019, its owners filed for bankruptcy and put the 1,300-acre site up for sale. Hilco Global, a company with a track record of transforming fossil-fuel infrastructure like coal-fired power plants, bought the South Philadelphia facility out of bankruptcy with a grand new vision that includes logistics facilities and research labs.
But first the company has a daunting task: safely dismantling over 100 buildings, 3,000 tanks and 950 miles of dirty pipeline.
The Problem
Oil refining has taken place on the banks of the Schuylkill River since just after the Civil War. By the time the explosion scattered debris across the site and even over the river, the PES Oil Refinery was turning 330,000 barrels of crude day into gasoline, diesel and other petroleum products such as heating oil and jet fuel.
Right now, some parts of the PES Oil Refinery have the feel of a ghost town. Weeds sprout head-high among the pipelines, Canada geese strut down empty roads and small herds of deer bound past a silent railyard. But other parts are bustling with workers and big, yellow excavators as Hilco enters the second year of taking apart equipment and preparing the site for construction. The first tenants are supposed to move into the site in 2023.
The Stakes
Hilco paid about $225 million and will make a “multibillion dollar” investment just to take down the refinery and ready the site for building. That huge price tag comes from the difficulty of disassembling a sprawling industrial site, recycling or disposing of everything from asbestos to contaminated soil and raising the elevation above the 100-year floodplain so it’s more resilient to rising sea levels.
There are about 130 oil refineries in the U.S. and most are pretty old; the newest one that can handle over 100,000 barrels a day was built in 1977. President Joe Biden’s promise that the U.S. will reach net-zero carbon emissions by 2050 means that most of those refineries will have to shut. The PES decommissioning is just the first of many.
Hilco estimates the site will generate $41 million a year in tax revenue for the city each year and employ over 14,000 workers.
Why It’s Tricky
All the infrastructure that once refined crude oil from places such as West Africa and North Dakota has to be disconnected, sorted and moved. Huge boilers to make the steam that heated the oil, the tanks that held it and enough pipeline to stretch to Florida—all must be taken apart piece by piece like a sprawling Lego set some children left behind.
One thing that makes breaking down a refinery especially hard: the oil. Petroleum products left in pipes or tanks quickly cools, settles and hardens, becoming extremely hard to remove. “They didn’t leave us the good stuff,” says Roberto Perez, the energetic chief executive officer of HRP, Hilco’s redevelopment unit. “The bankrupt estate took all the gasoline and crude.”
Taking apart a refinery requires a complex order of operations. First, steam must be run through the pipelines, tanks and other equipment in order to soften and extract the hardened petroleum products. That means the boilers must be left standing, along with the overhead electric lines that power them, until the pipes are clean. And because cranes and excavators can’t operate in areas with live power lines, that work must wait until the lines can be taken down.
Pink Xs mark equipment around the site, designating anything that holds valuable metals like brass or stainless steel inside. The demolition company hired by Hilco piles rebar and pieces of disassembled tanks into piles for resale as scrap. The site also has 30,000 tons of asbestos, a hazardous material that must be stripped off the pipes.
Why There’s Hope
The PES refinery produced 16% of Philadelphia’s emissions, Perez says, and released the cancer-causing gas benzene at levels much higher than federal limits. The site’s redevelopment means it will no longer be releasing all that planet-warming carbon. Neighbors will breathe cleaner air.
“I see the smartest people in America creating and innovating,” says Perez, gesturing to empty plots of weedy grass. “I see a bike path on the river.”
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