Texas seeks federal biofuels waiver: Update

Adds comment from EPA, pricing insight.

The Environmental Protection Agency (EPA) should exempt more than a quarter of US refining capacity from federal biofuel blending mandates, Texas governor Greg Abbott requested late last week.

The governor sought a formal waiver of the Renewable Fuel Standard (RFS) for the 5.1mn b/d of his state's refining capacity. Higher compliance costs put refiners, small retailers and their associated labor forces at risk, Abbott wrote in his request to the EPA.

"The time is ripe for EPA to grant substantive relief from the unique, adverse impacts the RFS program is having on the state of Texas," Abbott wrote. "The extreme, detrimental impacts on large portions of the refining sector have now placed unacceptable burdens on the Texas economy and the economy and security of the nation as a whole."

The agency would review the requests, a spokesman said today.

EPA last week said it found no evidence of severe economic harm from the annual mandates setting minimum volumes of renewable fuels that refiners, importers and certain other companies must ensure enter the US transportation fuel supply each year. The agency set 2018 mandates that increased in total volume but were slightly lower, on a blending percentage basis, compared to 2017.

Argusassessed costs of compliance with the program last week, the annual deadline for those minimum volumes, settled 7pc lower than the average price the same week last year. Costs have averaged 4pc higher than year-ago levels in the fourth quarter and roughly flat for the year so far. The Argus basket of compliance costs was about 63pc higher in the year so far compared to the same period of 2015.

EPA last month wrote that refiners have touted gross costs that ignore corresponding higher prices for petroleum blendstocks. The industry has recouped compliance costs, the agency said.

Abbott joins Pennsylvania governor Tom Wolf in seeking waivers from the program. Wolf sought assistance from President Donald Trump in October and formally requested an EPA waiver in early November.

The agency made no decision on a potential waiver to account for a biodiesel supply disrupted by an ongoing trade case that could increase prices for the blendstock. But the agency found no evidence of overall hardship existing in 2017 and expected similar conditions in 2018.