Delaware governor seeks fuel blending waiver: Update

Updates with additional context.

Federal fuel blending requirements pose a severe economic harm to Delaware and should be reduced, the state's governor said in a letter to the Environmental Protection Agency (EPA).

Governor John Carney (D) requested EPA waive or reduce fuel blending obligations under the Renewable Fuel Standard (RFS) for PBF Energy, which operates a 190,000 b/d refinery in Delaware City, Delaware.

The refinery incurred $90mn in costs under the program last year, Carney said in the 30 January letter. PBF did not respond to multiple requests for comment.

EPA did not immediately comment on the letter but in the past required evidence of economic harm to the broader US economy as a condition for the waivers.

Pennsylvania governor Tom Wolf (R) requested a similar economic harm finding in November. Carney's request referenced this month's bankruptcy filing by Philadelphia Energy Solutions (PES), which cited costs for renewable identification numbers (RINs) needed to prove compliance with the mandates.

"We need a Renewable Fuel Standard policy that truly balances both the needs of our economy and our environment," Carney said in the letter. "It is important that we work to reduce the United States' dependence on foreign oil by crafting policies that work to both stabilize the RIN market and ensure that independent refineries here in Delaware and the Mid-Atlantic continue to remain strong."

Carney's office did not respond to questions on the letter.

Midcontinent pipeline construction and the resumption of US crude exports in 2015 have returned all US Atlantic coast refineries to dependence upon foreign crude. Rising prices for light, sweet Bakken production curbed discounts that allowed profitable movements of the crude by rail to the east coast and into terminals owned by PBF and PES.

RFS requires refiners, importers and other companies to each year ensure minimum volumes of renewables blend into the fuels they add to the US transportation supply. Companies that do not directly blend these fuels must acquire RINs demonstrating that blending from competitors or other companies.

Refiners including PBF have for years criticized the program and sought its reduction or repeal. But the industry has split over whether refiners and importers bear the cost alone or have passed the price on to consumers.

EPA has said the costs do pass through. The agency has over the life of the program set tough requirements affecting more than one state to approve a waiver, and in November rebuffed arguments that the program had financially strained the refining industry.

But agency administrator Scott Pruitt yesterday said in a nationally broadcast television interview that Congress needs to update the program .

PBF meanwhile waits for a state-level decision on a project designed in part to mitigate its exposure to the blending mandates.

A state superior court judge earlier this month determined a Delaware industrial board erred when it approved a PBF project to distribute ethanol railed to the refinery's rail terminal for blending in the New York Harbor market. The state's Coastal Zone Industrial Board failed to consider increased pollution or risk associated with barge movements of the ethanol.

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