Delaware City refinery owner buys La. refinery

Delaware City Refinery owner PBF Energy said Thursday it has agreed to purchase a refinery outside of New Orleans for $322 million, adding a fourth operation to the company’s fleet and gaining a new Gulf Coast presence and export option.

The 189,000-barrel-per-day Chalmette operation brings the company’s crude refining capacity to 725,000 barrels per day, with the value of the Louisiana plant’s inventory to be added to the total price at the time of closing.

Cash and debt, but no sales of stock, are planned for the PBF purchase from ExxonMobil and Petróleos de Venezuela S.A. (PDVSA), owned by the Venezuelan government. PBF would cement its position as the nation’s fifth-largest independent refinery with the deal.

Company officials did not discuss how, or if, the acquisition would affect PBF’s other sites in Delaware, New Jersey and Ohio. But company Chief Executive Officer Tom Nimbley did mention “moving Canadian barrels” to the plant – something in line with PBF’s aggressive use of rail-delivered heavy crudes to Delaware, carried in by a closely held logistics subsidiary.

The move rankled some members of Delaware environmental groups now locked in a bitter debate over repeated delays in state action on a permit for the Delaware City Refinery’s cooling water intake and wastewater discharges.

Refinery critics have said the cooling water intakes, in particular, are outdated and needlessly capture and kill fish and other aquatic life.

David Carter, Delaware Audubon Society president, said the company’s straightforward purchase shows that PBF has enough money to update its cooling water system.

“Our big concern is, while it’s great for them to be profitable, it’s a little bit morally concerning that they haven’t invested in protecting the Delaware fishery and employing our labor force,” Carter said.

PBF officials recently reached a settlement with the state giving the company time to study cooling water alternatives, provided they install a better fish-screening system on intake pipes. The company has since warned that a water recycling cooling tower favored by environmental groups would take years to install and cost $300 million.

Chalmette Refinery, along the Mississippi river southeast of central New Orleans, is capable of processing both light and heavy crude. The deal includes access to a marine terminal, pipeline assets, truck-loading terminal and 7.5 million barrels of tank storage assets.

“The acquisition of the Chalmette Refinery, and its associated logistics assets, represents a significant step in the strategic growth of PBF Energy and PBF Logistics,” PBF Chief Executive Officer Tom Nimbley said in a written statement.

“Upon completion, we will have increased our refining capacity by 35 percent and added meaningful Gulf Coast assets to our businesses,” Nimbley said.

PBF also has refineries in Paulsboro, N.J., and Toledo, Ohio. Delaware City, slightly larger than Chalmette, was the first acquired by the company in 2010 for $220 million, with $45 million in state aid.

Both refinery price tags are only a fraction of their value prior to the recession. In 2009, Valero Energy closed Delaware City an announced plans to raze the site after writing $1.4 billion in plant value off its books.

Based on a price per barrel of refining capacity adjusted for plant complexity, Chalmette cost $160 per barrel, Delaware City about $200 and all four PBF refineries averaged $175 per barrel – well below the average of $452 per barrel over the past 12 years, Nimbley said.

PBF Executive Chairman Tom O’Malley said his company hopes to do better at the Louisiana plant than the joint venture selling it, and said PBF officials were surprised by its past performance, “in the sense that we certainly though there was more opportunity” at the site.

“Our experience in buying refineries from very large companies is that often the companies’ policies and, lets call it larger scale plans and general setup, requires some of these refineries to operate in a sub-optimal way,” O’Malley said.

Contact Jeff Montgomery at 463-3344 or jmontgomery@delawareonline.com.