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Leo W. Gerard

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A Job Creation Saga

Posted: 07/09/2012 9:40 am

The United Steelworkers would not take "shut" for an answer.

Steelworkers demonstrated, petitioned, held press conferences, conducted candlelight vigils, demanded studies, pestered lawmakers, organized meetings and ultimately helped save about 1,200 good-paying refinery jobs, create 1,000 construction jobs and produce 200 new permanent jobs.

Those jobs are at two of three Philadelphia refineries given death sentences last fall. The Steelworkers sought reprieves for all three. The score so far: two preserved, one more to save.

In a conference call last week to announce that a joint venture between Sunoco and The Carlyle Group would preserve and expand the largest of the three refineries, officials acknowledged the Steelworkers' efforts as crucial to the deal. It's hard for Fox-News-watching-Tea-Party-saluting-rabid-right-wingers to hear that a union is a job creator. Especially when those words come from the mouths of CEOs and private equity partners. But that's what they said. And that's what actually happened.

This saga started sadly last fall. ConocoPhillips and Sunoco announced they would close their three Eastern Pennsylvania refineries -- Marcus Hook, Philadelphia and Trainer. Processing expensive light, sweet crude oil, the three were losing money.

ConocoPhillips closed Trainer in September. Sunoco closed Marcus Hook in December. And Sunoco said it would shut the Philadelphia refinery if a buyer weren't found by July. That would be a total of 2,200 workers out of jobs at the three plants, 1,200 of them represented by the USW. The Steelworkers refused to accept that as inevitable.

The union launched what would become a massive campaign to save the three refineries. Steelworkers enlisted support from lawmakers who initially weren't paying attention. This included Pennsylvania Gov. Tom Corbett, whose mansion was the site of a USW candlelight vigil; congressional representatives, subjected to relentless USW phone calls, and the White House, whose top economic advisor heard Steelworker pleas.

The USW contention that loss of the refineries was too economically devastating to ignore got empirical support from the Pennsylvania Center for Workforce Information and Analysis. It calculated that if the three refineries closed, job losses could reach 36,000 and cities, school districts and the state could lose $560 million in tax revenues. The U.S. Department of Energy warned that the closures could cause gasoline and fuel oil shortfalls and price spikes.

Steelworkers posted yard signs, secured a Congressional hearing, organized massive rallies at Marcus Hook and in Washington, D.C., and searched for potential buyers.

The first breakthrough occurred in March. That's when Sunoco replaced Lynn Laverty Elsenhans, who had spent her time as CEO selling off Sunoco assets. The new CEO is Brian P. MacDonald the son of a coal miner whose hometown was devastated by deindustrialization. He proved much more amenable to working a deal to sustain the Philadelphia refinery.

The second big breakthrough came at the end of April when ConocoPhillips announced it would sell the Trainer refinery to a company controlled by Delta Airlines. By mid-June, Delta and ConocoPhillips successor company Phillips 66 finalized the sale that would give the airline a secure domestic jet fuel source. Steelworkers began returning to their jobs at Trainer shortly afterward.

In early July, the next big breakthrough was announced. Sunoco and The Carlyle Group agreed to a joint venture called Philadelphia Energy Solutions that would continue operating the Philadelphia refinery and expand it as well. Gov. Corbett provided $25 million in state aid to support the deal. And Steelworkers overwhelmingly approved a labor agreement with the new owners that gave them the flexibility that Carlyle said they needed.

In a conference call with reporters, David M. Marchick, managing director of The Carlyle Group, praised everyone, from Republican Corbett to officials in President Obama's office, for their help. He said the White House was relentless in making the deal work, including resolving environmental issues.

Marchick acknowledged the effort the Steelworkers put into redeeming the refinery, saying that without the USW:

This refinery would be closing and 850 people would be out of work.

The Steelworkers, he said,
called and wrote and pushed and prodded about the importance of this facility to the region.

Later, in an interview on Fox News, Jim Savage, president of the USW local at the Philadelphia refinery, noted that the Steelworkers and Carlyle have had a long, productive relationship. He said part of the reason is that Carlyle treats Steelworkers with respect and doesn't try to gouge them at the bargaining table.

Another important reason, he said, is that Carlyle is a serious investor in U.S. manufacturing:

Carlyle has a history of investing in businesses and growing them. They don't come in and load you up with a bunch of debt and leave with a pocket full of money and leave devastation in their wake, which some people do. If they had come to us with something like that, we would have had a different past couple of weeks or months. They came to us with a true vision to build and grow this refinery.

This saga has a happy ending. It defies stereotypes:

Industry can survive in the USA. Unions can thrive in the USA. Government can work. And private equity can do good things.

Marchick put it this way:

What we saw in this transaction is what made this country great - cooperation among business, government and labor, Democrats and Republicans.

Now let's revive Marcus Hook.

 

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