Pennsylvania governor seeks biofuel mandates waiver
Houston, 23 October (Argus) — Pennsylvania governor Tom Wolf (D) asked President Donald Trump to waive biofuel mandates the governor said threaten to close refineries in his state.
Costs to acquire renewable identification numbers (RINs) refiners and importers need to demonstrate mandatory volumes of renewable fuels enter the domestic transportation supply imperil almost 2,000 jobs and threaten to drive up northeastern US fuel prices, the governor said in a 20 October letter to the president.
Wolf sought relief "for northeast refiners" a day after Environmental Protection Agency (EPA) administrator Scott Pruitt assured agriculture-focused midwestern US senators the agency would not reduce blending requirements, increase RIN supply or adopt other changes sought by US merchant refiners.
"I am concerned that high RIN prices and the volatile market may lead to the closure of one or more of these merchant refiners, which would be devastating to the regional economy," Wolf wrote.
EPA and the White House had no immediate comment.
"We have been in touch with the administration on this but have yet to receive any commitment either way," Wolf's spokesman said today.
The Renewable Fuel Standard (RFS) requires refiners, importers and other obligated companies to each year ensure federally-set minimum volumes of renewable fuels blend into the domestic transportation supply. Companies that blend finished fuels collect RINs needed to prove compliance. Integrated refiners can largely satisfy their needs, but US merchant refiners and importers that do not operate sufficient blending capacity purchase RINs from other companies.
Those refiners have for years pressed for changes to the program. Trump's EPA seemed to listen, contemplating reductions to the mandate based on an ongoing trade case, on the prevelance of imports and the slow development of certain advanced biofuels.
But Pruitt stunned the refining industry last week with a pledge to reject those ideas, point by point, after weeks of pressure from biofuel groups and political allies.
Most of Pennsylvania's congressional delegation had asked Pruitt for changes to the program. About 515,000 b/d of refining capacity operates in Philadelphia, including the region's single largest facility, Philadelphia Energy Solutions' 330,000 b/d refinery. Delta Air Lines operates a 185,000 b/d refinery in Trainer, just outside the city, through its Monroe Energy subsidiary.
Both companies acquired those sites in 2012. Previous owners Sunoco and ConocoPhillips were ready to shut the facilities at the time after losing hundreds of millions of dollars importing expensive light, sweet crude and competing with US Gulf coast and imported products. Pennsylvania's state and congressional leaders helped attract incentives for new owners to keep the plants open.
A boom of light, sweet US production soon after the sale gave Pennsylvania refiners a burst of competitiveness. But growing pipeline capacity connecting that production to larger markets lifted crude prices and reeled that US Atlantic coast lifeline back out of the reach.
New pipelines have meanwhile crept across the Pennsylvania border with Ohio, opening a third front of cheaper products entering traditional Atlantic coast territory.
Delta views Monroe as a hedge on the airline's massive jet fuel demand. Monroe executives have lobbied for changes to the RFS and described the program as a burden. But the airline stood by the refinery as it lost hundreds of millions of dollars — the facility will offset at least $100mn in jet fuel expense this year, Delta said. A company spokesman said today it was not at risk of closing.
Philadelphia Energy Solutions (PES) has a more traditional focus on profit. The private company has not discussed its earnings, but last week S&P Global Ratings reduced the firm's corporate credit rating to CCC- — near junk status — on belief the company risked default if it could not reach new arrangements with creditors.
"The RFS has imposed exorbitant and unsustainable costs to PES and other independent merchant refiners," the company said in response to questions on Pruitt's decision. PES urged EPA to reconsider the decision.
The EPA in 2012 rejected severe harm waiver requests from governors in ten states. Drought ravaged the corn crop that year, raising fears of higher food costs and the feedstock available to produce ethanol.
The agency that year determined that a one-year waiver would do little to reduce the volume of ethanol blending needed to supply fuel, and that sufficient RINs were available relative to the requirements of the time. The EPA in July of this year proposed total renewable fuel blending requirements almost 17pc higher than those set for 2013 after rejecting the waivers.