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Renewable fuel standards not stressing refiners: EPA

29 Nov 2017 16:13 GMT
Renewable fuel standards not stressing refiners: EPA

Houston, 29 November (Argus) — Basic competitive issues have pressured US independent refiners more than federal fuel blending mandates, the US Environmental Protection Agency (EPA) said this month.

The agency dismissed refiner arguments that Renewable Fuel Standard obligations had pressured refining profits. Pennsylvania governor Tom Wolf earlier this month sought an economic hardship waiver for refineries in his state.

An oversupply of fuel in recent years had strained some companies, rather than requirements to ensure minimum volumes of renewable fuels enter the US transportation supply, the agency said in a formal denial of petitions to change the program.

"We do not believe the challenges faced by some refiners in the current market are the result of their designation as obligated parties in the RFS program," the agency wrote last week.

EPA included the comments in a final, sweeping rejection of refining petitions to change to program the agency issued just before the US holiday weekend. Regulators formally ruled against petitions made last year to make blenders and other companies join refiners and importers in ensuring minimum volumes of renewable fuels enter the US transportation supply each year.

Obligated companies prove compliance by submitting renewable identification numbers collected for each ethanol-equivalent gallon of fuel blended into the US supply. Companies that blend fuel collect RINs directly, while merchant refiners that do not operate such wholesale businesses purchase the markers from other companies.

Valero, CVR Energy and Delta Air Lines subsidiary Monroe Energy, among others, have complained that RINs spending has outpaced costs for crude or personnel.

Northeastern refiners, in particular, argued that the program as structured put fuel supplies and thousands of jobs at risk.

Governors for Delaware and Pennsylvania have spoken against the program in a campaign with refining executives and union workers. Wolf said the program could put roughly 2,000 Pennsylvania jobs at risk and sought the EPA waiver and support from President Donald Trump.

Wolf's office said the governor had not received a response to the petition.

Last week's EPA filing does not represent a response to the governor's request, which the agency said today remained under review. But the EPA made clear in the filing that refiner petitions earlier in the year had not convinced the agency. Higher petroleum fuel blendstock prices offset RIN costs for most companies, the agency said.

"All obligated parties, including merchant refiners, are generally able to recover the cost of the RINs they need for compliance with the RFS obligations through the cost of gasoline and diesel fuel they produce," the agency wrote.

PBF Energy head of government relations Brendan Williams said the agency's response demonstrated broad misconceptions about the fuel market.

"Despite what they said on the point of obligation, there still seems to be a growing recognition that there is a problem with this program," Williams said. "It is not working for refiners and it is not working for ethanol."

Both industries now wait for EPA final blending volumes for next year and 2018, due tomorrow.