Biofuel producers are not happy with EPA chief’s call for policy reform

The U.S. Environmental Protection Agency (EPA) has expressed its intention to reform the U.S. biofuel policy following the bankruptcy of the biggest oil refiner on the East Coast, reported Reuters. When Philadelphia Energy Solutions filed for bankruptcy in January, the Pennsylvania-based oil refiner cited the exorbitant cost of complying with the U.S. Renewable Fuel Standard (RFS) as the reason it incurred a whopping $185 million of debt.

The George W. Bush administration established the RFS to help American farmers and cut down on petroleum imports. It required oil refiners to blend 15 billion gallons of biofuels into their diesel and gasoline products every year. To prove to the EPA that they are meeting the RFS requirements, refiners needed to acquire Renewable Identification Numbers (RIN) through earnings or purchases. The RFS has been a boon for biofuels companies — and a bane for refiners like PES. In trying to comply with the law, PES ended up massively in debt, all of which are in RINs. (Related: Qantas biofuel-powered airliner required 150 acres of farm land to grow the fuel for a single flight.)

EPA chief Scott Pruitt shared the same sentiment. During an interview with Fox News, he attributed PES’ bankruptcy to the RFS and its stringent demands for RINs. He also noted that RINs have risen in costs during the past few years.

“We need RIN reform,” Pruitt said. “It is something I’ve talked to Congress about.”

The EPA head expressed his intentions of throttling back the annual biofuel blending volume to more manageable levels. By reducing the amount of biofuel a refiner is forced to acquire and mix into its products, the demand for RINs would go down and so would its price.

“Our job should be to take the market and production levels and set volume obligations that are consistent with objective factors – not set inflated or blue-sky types of numbers that create this inflationary pressure on RINs,” Pruitt told Fox News.

An act of Congress is required before the RFS can be overhauled per Pruitt’s vision. Republican Senator John Cornyn of Texas is currently trying to build consensus for such a bill that will lighten the load on refiners struggling to meet their RIN requirements. The challenge is to overcome opposition from senators of the Corn Belt states who support biofuels. Some have dubbed the battle as ‘Big Oil vs. Big Corn’.

Biofuel proponents return fire

According to Emily Skor, CEO of biofuels producer Growth Energy, the stance of the EPA head is “in direct contradiction to President Trump’s repeated and consistent promises to support the RFS, American farmers, and American energy security.”

“[A] backhanded swipe at rural jobs,” described Brooke Coleman, Executive Director of the Advanced Biofuels Business Council.

Biofuel proponents were not moved by PES’s claim that the RFS caused its bankruptcy. According to them, the only one PES could blame for its current woes was itself.

“Like other refiners, PES could have eliminated its RINs-related costs by making investments in blending more renewable fuels,” said Bob Dinneen, President and CEO of the Renewable Fuels Association. “Instead, PES is blaming RINs for its financial woes.”

PES is not the only company that encountered trouble with the RFS. Texas-based Valero Energy Corp, CVR Refining of Kansas and other refiners have raised concerns about RIN-related expenses.

It’s tougher for East Coast refiners, though. They lean on crude imports from West Africa and other markets, so their profit margins are leaner.

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