Depending on who you ask, the impending closure of a major Philadelphia refinery will either increase U.S. vulnerability to a terrorist attack on its energy supply, or simply shift demand to other suppliers of petroleum products.
Senior officials from federal energy and homeland security departments debated the loss of U.S. refining capacity with industry representatives and politicians at a field hearing of a Congressional committee outside Philadelphia on Monday.
According to Brandon Wells, director of the Homeland Infrastructure Threat and Risk Analysis Center at the U.S. Department of Homeland Security, the planned shutdown of the Sunoco plant in July won’t undermine America’s energy security.
“The initial analysis shows that (closure) should not have homeland security impacts,” said
Wells told the hearing of the U.S. House of Representatives Homeland Security Subcommittee on Counterterrorism and Intelligence that markets currently served by the refinery would be supplied by other plants on the U.S. Gulf Coast via interstate pipelines or tankers, and by increased imports.
“The system is dynamic,” he said. “There will be more supply from other refineries.”
While the supply chain for some petroleum products is likely to be lengthened if the plant closes, the U.S. refinery system has sufficient flexibility to substitute over time for the product that would be initially lost to the market, Wells said.
But committee chairman Rep. Patrick Meehan argued that increased reliance on product imports from overseas reduces U.S. energy independence at a time when about half its crude oil needs are imported, and heightens the country’s vulnerability to a terrorist attack on its energy supply.
“The targeting of oil infrastructure has long been a part of the Al-Qaeda playbook,” Meehan told the hearing at Neumann University in Aston, Pa.
Sunoco said last September it will shut the Philadelphia refinery, which supplies about a quarter of the Northeast’s product needs, if no buyer can be found by July. In December, the company closed another refinery at nearby Marcus Hook, some three months after ConocoPhillips shuttered a refinery at Trainer, Pa.
Tough Blow to Northeast Product Market
Production lost by the Marcus Hook and Trainer shutdowns has been offset by PBF Energy’s Delaware City refinery but closure of the larger Philadelphia plant would have a bigger effect on the northeast product market, according the U.S. Energy Information Administration which issued a report on the closures in February.
Gasoline replacement volumes, possibly from the Gulf Coast, would “likely lead to higher prices,” EIA Acting Administrator Howard Gruenspecht told the hearing, and longer supply chains within the U.S. or from overseas, would also increase upward pressure on prices.
Closure of the Philadelphia plant would lead to a shortfall of 240,000 barrels a day of gasoline and 180,000 barrels of ultra low sulfur diesel, Gruenspecht said. Some of the gap could be made up by tankers from the Gulf Coast sailing under the Jones Act – which requires products moving between U.S. ports to be carried by U.S.-flagged tankers – but it’s unclear whether the Colonial Pipeline which carries product from Houston to New York harbor will be able to offset any shortage because it is currently “at or close to capacity,” Gruenspecht said.
Weakened Energy Security
Charles Drevna, president of the American Fuel and Petrochemical Manufacturers, a trade group, said the refinery closures reflect their dependence on imported light sweet crude which costs more than other grades, putting the Philadelphia-area plants at a competitive disadvantage to some other U.S. refineries, particularly those on the Gulf Coast.
U.S. Rep. John Carney, a Delaware Democrat, said increased dependence on foreign refineries would be counter to U.S. interests.
“Offshoring of refining capacity would make the U.S. less energy independent and more vulnerable to overseas attack,” he said.