Delta Air Lines is buying the idled ConocoPhillips refinery in Trainer, PA and is expected to shift the majority of its production to jet fuel. Pennsylvania's state government is contributing $30 million to subsidize the deal.
It's the second major move involving a Pennsylvania refinery in as many days. Yesterday we shared the news that Energy Transfer Partners in Dallas acquired Sunoco and its (335,000 bpd) Philadelphia refinery.
The news that these refineries will remain in operation may be good news for the steelworkers who work there, and certainly keeping the Sunoco refinery in Philadelphia operating should help meet regional demand for gasoline. But whether Delta's purchase of this refinery is a positive note for consumers remains to be determined. Delta's acquisition of the refinery, primarily to lower the cost of jet fuel, makes sense for the airline as it anticipates shaving $300 million annually off its fuel bill.
The Trainer, PA refinery has production capacity of 185,000 barrels per day and, according to Bloomberg News, Delta will spend $100 million to convert the refinery to maximize the production of jet fuel. Delta alone consumed 3.86 billion gallons last year.
BP will supply crude oil to be refined at the Trainer refinery and Delta says it will exchange gasoline and other refined products for more jet fuel through multi-year agreements with BP and ConocoPhillips.
Delta says the deal will help ensure jet-fuel availability at important Delta hubs, including JFK International Airport and LaGuardia airports. Will Delta be able to operate a refinery profitably? That remains to be seen.
Pennsylvania's investment came with the stipulation that Delta keeps at least 402 full-time workers for 5 years from the state of occupancy. But, if over time the refinery's production of gasoline becomes negligible, then what will the state of Pennsylvania's investment have accomplished?