Valero closing Del. refinery; 550 to lose jobs

Valero Energy Corp., the largest U.S. refiner, announced today that it will permanently close its Delaware City, Del., plant because of losses brought on by the poor economy.

The shutdown is expected to affect about 550 employees.

"A safe and orderly shutdown of the refinery will commence immediately," the San Antonio, Texas-based company said in a statement, adding that employees were told today of the move.

A company spokesman said there was no target date for ceasing all operations there.

The company said it expects to save $450 million in operating expenses next year by shutting the refinery.

The announcement comes six weeks after Valero announced that it would cut 100 jobs, or 18 percent of its workforce, at its Paulsboro refinery through retirement incentives.

"The decision to permanently close the Delaware City refinery was a very difficult one," Bill Klesse, Valero chairman and chief executive officer, said in the company statement. "We have spent the last year diligently trying to avoid this situation, and I have worked closely with [Delaware] Gov. Markell in an effort to find a different outcome."

Klesse said that the company tried to improve financial performance by closing the gasifier and coking operations earlier in the fall, but that these moves weren't enough.

He said that the company had been unsuccessful in finding a buyer.

"At this point, we have exhausted all viable options," Klesse said.

He said the company expected its $450 million reduction in operating expenses to include $125 million of noncash costs.

In the fourth quarter of 2009, the company expects a pretax charge of about $1.7 billion to $1.8 billion, or $2.00 to $2.15 a share after taxes, related primarily to asset impairment, employee severance and other shutdown costs. The company estimates the cash portion of the pretax charge will be in the range of $125 million to $150 million.

Gov. Markell said today that state agencies would act quickly to assist workers affected by the closing of the Valero refinery and that the state would make every effort to ensure the environmental health and safety of the site to protect the thousands of Delaware families who live near the facility.

"The company's decision to close the refinery leaves us with several problems to solve. We need to help those hundreds of dedicated workers put their time and talents to work in a way that helps them and their families," Markell said. "To protect the health and safety of everyone who lives near the facility, we need to ensure accountability for the environmental issues that come from closing a refinery, and we will."

Markell instructed Delaware's Department of Labor and the Department of Health and Social Services to activate the same rapid response teams they used when the General Motors plant closed earlier this year. The teams will work with the employees to ensure they receive any public services available to them, including job retraining.

The state Department of Natural Resources and Environmental Control is continuing to work to identify environmental issues in and around the facility and will work with Valero to catalog problems that the company has the responsibility to solve.

Valero's announcement of job cuts in Paulsboro on Oct. 8 followed by two days a statement by Sunoco Inc. that it would indefinitely idle its Eagle Point refinery in West Deptford, which employs 400 full-time workers and hires hundreds of independent contractors.

In that same week, Gloucester County was dealt another blow when the U.S. Postal Service said it would close its distribution facility in Logan Township by March. That plant has about 650 employees, plus seasonal workers.

Valero had said in September that idling two units at the Delaware City refinery would cost about 150 jobs. Valero has 16 refineries in the United States, Canada, and Aruba.

Valero acquired the Delaware City refinery in 2005, when it acquired Premcor Inc., which bought it from Motiva Enterprises L.L.C. in 2004.