The largest oil refinery along the U.S. East Coast filed for bankruptcy protection on Sunday, blaming its downfall on "broken" environmental rules.
Philadelphia Energy Solutions said it went bankrupt because of "skyrocketing costs" to comply with the EPA's Renewable Fuel Standard. The rule, aimed at lowering pollution, requires refiners to either blend oil with renewable fuels or buy credits.
The company has received a $260 million lifeline from lenders and investors. Existing shareholders led by private-equity giant Carlyle Group (CG) have agreed to inject $65 million into the company. That's enough to keep its two refineries operational and its 1,100 employees paid.
Philadelphia Energy Solutions plays a vital role in how Americans get their fuel. The company's Point Breeze and Girard Point refineries turn up to 335,000 barrels of crude oil into gasoline and other fuels, making it the largest East Coast refiner.
But like other independent refineries, the company has been hurt by shrinking margins and regulation.
In a statement on Monday, Philadelphia Energy Solutions said the bankruptcy was caused by "continuing pressure on refining margins and soaring costs" to buy renewable fuel credits to meet the EPA rule.
CEO Greg Gatta said the company will "continue to work with the government to address the broken RFS system that is harming smaller, independent merchant refiners." Philadelphia Energy Solutions said that last year it spent about $218 million to meet the renewable fuel standard -- twice what it spent on payroll.
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The EPA declined to comment. President George W. Bush signed into law the renewable fuel program in 2005 as a way to reduce greenhouse gas emissions and reduce reliance on foreign oil.
The biofuels industry, which benefits from the renewable fuels rule, cast doubt on the refinery's claims.
"Blaming the RFS is a better story than admitting strategic mistakes related to crude oil markets, but it's a smokescreen," R. Brooke Coleman, executive director of the Advanced Biofuels Business Council, said in a statement.
Former Trump special adviser Carl Icahn has repeatedly blasted the EPA rules, telling CNN in December 2016 they are "natural stupidity." In August, Senator Tammy Duckworth urged the FBI in a letter to investigate whether Icahn violated federal anti-corruption laws, claiming Icahn personally benefited from his efforts to change the EPA rules.
Authorities are currently investigating Icahn's actions related to the renewable fuels standard, according to a filing by Icahn's firm.
Philadelphia Energy Solutions said it plans to complete its recapitalization in the first quarter of 2018 and to restructure more than $100 million of existing debt. The company said it plans to continue providing employee benefits and pay vendors in full.
The bankruptcy filing lists liabilities of up to $10 billion, including $1 billion apiece owed to railroad giants CSX (CSX) and BNSF, which is owned by Warren Buffett's Berkshire Hathaway (BRKA).
