Closure of East Coast’s largest refinery to hit BNSF and CSX crude oil volumes

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This CSX Transportation crude-by-rail map shows the route the unit oil trains took from Chicago via Buffalo and Selkirk, N.Y., to reach the Philadelphia Energy Solutions refinery in Philadelphia.
CSX Transportation
PHILADELPHIA — The pending closure of the Philadelphia Energy Solutions refinery will put a dent in crude oil traffic on BNSF Railway and CSX Transportation.

The refinery, which suffered damage in a massive fire last week, is the largest on the East Coast. The refinery’s owners announced this week that the 153-year-old complex along the Schuylkill River would be shut down.

The Philadelphia refinery received unit trains of crude oil that originated on BNSF in the Bakken oil field of North Dakota and were interchanged with CSX in Chicago.

Petroleum and petroleum products traffic on CSX, the category that includes crude oil, was up nearly 14% this year through June 22, according to Association of American Railroads data. BNSF is the largest hauler of crude in the U.S.

The refinery, which dates to 1870 on a site that has been used to store refined products since 1866, was capable of receiving two 120-car unit trains per day. The 140,000 barrel capacity of two trains represented 40% of the refinery’s capacity of 335,000 barrels per day.

In 2013, Philadelphia Energy Solutions spent $186 million to build a rail terminal that includes 5.6 miles of track and a high-speed unloader. Pennsylvania contributed $25 million to the project.

At the time of the first crude-by-rail boom, the refinery was the largest single destination for oil produced in North Dakota.

The rail unloading terminal was built just a year after the refinery complex emerged from bankruptcy under new ownership, a partnership between The Carlyle Group and Sunoco.

Last August, Philadelphia Energy Solutions emerged from a financial restructuring after which Credit Suisse Asset Management and Bardin Hill became majority owners and took control of the business. The Carlyle Group, Energy Transfer Partners and other investors own a minority stake.

"The recent fire at the refinery complex has made it impossible for us to continue operations. We are grateful that the fire resulted in only a few minor injuries," Philadelphia Energy Solutions CEO Mark Smith said in a statement. "We are committed to an orderly process to safely wind down our operations."

Energy analysts were not surprised by the decision to close the refinery, which had slim profit margins and was not particularly sophisticated.
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