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Fuel blending mandates working as intended: Grassley

02 Feb 2018 15:11 GMT
Fuel blending mandates working as intended: Grassley

Houston, 2 February (Argus) — Federal fuel blending mandates are working as intended, Sen Chuck Grassley (R-Iowa) said in the wake of a refinery bankruptcy and repeated statements by the head of the Environmental Protection Agency that the program needs change.

Congressional talks exploring potential changes to the Renewable Fuel Standard (RFS) — which requires that refiners, importers and other companies ensure minimum volumes of renewables enter the US transportation fuel supply — have "heated up" in the wake of a Pennsylvania refiner blaming the program for its bankruptcy, according to the refining industry. Legislators involved have not cited the bankruptcy directly in recent talks.

Environmental Protection Agency administrator Scott Pruitt twice this week — although not during a Senate hearing discussing the program — said Congress needed to address the cost of credits used to comply with the program, called renewable identification numbers (RINs).

Grassley supported driving down the cost of the credits by increasing blending and requiring refiners to cede more market share to the fuel, he said in a statement late yesterday. But the program was not broken, he added.

"It is worth exploring ways to lower RIN prices without undermining the integrity of the RFS, which is working as Congress intended," Grassley said. "But it is important to recognize that RIN prices have very little to do with the success of refineries, as numerous studies have shown."

Philadelphia Energy Solutions last month sought bankruptcy court approval to shed obligations under RFS estimated to cost $350mn as it seeks a new majority owner.

The refinery, which has faced rising competition and feedstock costs since 2015 and nearly closed in 2012, blamed most of its financial troubles on the program.

Pennsylvania and Delaware governors have requested EPA waive the program for severe economic harm.

PBF Energy, which operates a 190,000 b/d refinery in Delaware City, Delaware, declined to comment on whether program costs threatened to shut that facility ahead of a 15 February earnings call.

RIN prices do affect refinery bottom lines, the company said this week.

"The Trump administration and Congress must take action to address the crushing burden of RINs on merchant refiners so that other refiners are not forced into the circumstances PES is facing," the company said.