“We want to make this a destination,” Rinaldi said.
Rinaldi is working for Carlyle Group, the Washington-based private equity firm that earlier this year acquired about a two-thirds interest in this imperiled oil refinery, whose history dates to 1866. The day after Labor Day 2011, Sunoco had announced it would shut down the plant as part of a strategy to exit its refining business, where the company had lost about $800 million over three years.
What did Carlyle see? Opportunity, said Rinaldi, and a chance to turn it around by tapping energy resources that even a year earlier weren’t readily available: cheap Pennsylvania shale gas and growing supplies of North Dakota shale oil. The private equity firm’s commitment to invest and pursue those supplies has saved about 850 jobs at the south Philadelphia refinery and transform it into a hub of rejuvenated industry.
“So far everybody’s happy,” said Jim Savage, president of the United Steelworkers local 10-1. “The alternative was the death penalty.”
The rescue of the refinery is a political tale as well as a business one. For weeks, the USW’s Savage knocked on the doors of members of Congress. The local congressman, Rep. Bob Brady (D-Pa.), lobbied Sunoco executives and the White House to save jobs.
In the middle of the presidential campaign, his call did not fall on deaf ears. White House economic adviser Gene Sperling urged Sunoco to find a way to keep the plant open and prevent a big loss of gasoline supplies for the northeast. The Environmental Protection Agency made a deal that will allow Carlyle to expand the plant without having to go through the demanding, public and time-consuming process known as new source review.
Several months later, the dealmakers seem happy. The joint venture recently asked a contractor to train 84 new workers. On Dec. 8, the USW celebrated at Philadelphia’s IATSE ballroom with dinner and dancing to the music of a local band, the Urban Guerrilla Orchestra. The group also gave Brady the first Bob Brady Working Class Hero Award.
“Just as Rocky Balboa is known as a mythical Philadelphia hero for fighting against all odds, Bob Brady is a true hero for fighting to preserve jobs, lives and livelihoods,” said Carlyle managing director David Marchick in a letter read at the event.
Falling behind in the shale revolution
New trends in the oil business had threatened to shut down Sunoco’s 330,000-barrel-a-day-Philadelphia refinery. Sunoco relied heavily on relatively expensive light sweet crude oil — which is low in sulfur and relatively easy to refine into gasoline and heating oil.