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Philadelphia bankruptcy not rushing legislators

25 Jan 2018 22:03 GMT
Philadelphia bankruptcy not rushing legislators

Houston, 25 January (Argus) — Legislators offered no new urgency on potential changes to renewable fuel blending mandates in the wake of an east coast refining bankruptcy this week.

Senator John Cornyn (R-Texas) and Representatives John Shimkus (R-Illinois) and Bill Flores (R-Texas) continued to talk to the agriculture and oil industries to find common ground on changes to the Renewable Fuel Standard, aides said. But none of the legislators addressed questions on how — if at all — Philadelphia Energy Solution's bankruptcy filing blaming the program for its financial woes changed the conversation.

"We are working on a solution to balance the challenges that exist under current RFS statutes for all stakeholders, and most importantly, to ensure that our nation's transportation fuel policies work best for consumers," Shimkus and Flores said in a statement.

Sources familiar with the negotiations expected legislation by mid-February. But it was not yet clear which ideas would make the initial language of the bill.

Iowa Senators Joni Ernst and Chuck Grassley, Republicans who have led the defense of the requirements, did not respond to repeated requests for comment about the bankruptcy filing, the potential of the discussions or the future of the Renewable Fuel Standard (RFS).

Philadelphia Energy Solutions early this week said its 330,000 b/d refinery in Philadelphia, Pennsylvania, will continue to operate under bankruptcy protection as it seeks to restructure debts and find new majority ownership. The joint venture said an estimated $350mn in costs associated with fuel blending mandates for 2016 and 2017 presented its greatest obstacle.

Renegotiated crude supply agreements secured feedstock to 4 March, according to bankruptcy filings. Nigerian light, sweet crude imports have dominated its slate for the past two years, after arbitrage to rail cheap midcontinent crude to a PES-built rail terminal vanished with new pipeline capacity and a new age of US crude exports.

PES asked a federal bankruptcy judge to separate those costs to create a lien-free entity more attractive for sale. Allowing the company walk away from that cost could quickly undermine the mandates, opponents have warned.

RFS requires refiners, importers and other companies adding to the US transportation fuel supply to each year ensure minimum volumes of renewable fuels enter that pool. Companies that blend the renewable and conventional fuels generate renewable identification numbers (RINs) for each ethanol equivalent gallon. Obligated companies must gather these RINs through their own blending operations or by purchasing the credits to prove their annual compliance. Merchant refiners such as PES generally lack sufficient blending capacity to satisfy their own requirements.

Critics of the mandates quickly cited the filing this week as evidence of the need to change the law. But only US Senator Pat Toomey, representing the district where the refinery is located, cited the announcement as a reason for change to a "counterproductive, job-killing, EPA-imposed" regulation."