Biofuel Groups Ask US to Scrap Proposed RINs-Relief Deal With PES 

Source: By Patrick Newkumet, OPIS • Posted: Thursday, May 28, 2020

Three biofuel industry trade groups are calling on the U.S. government to scrap a proposed settlement agreement that would excuse bankrupt refiner Philadelphia Energy Solutions (PES) from satisfying most of a reduced Renewable Fuel Standard (RFS) compliance obligation it agreed to under a 2018 deal with EPA. 

In joint comments submitted to the U.S. Department of Justice (DOJ), the Renewable Fuels Association (RFA), Growth Energy and the National Biodiesel Board (NBB) said the proposed deal would permit PES to “escape the vast majority of its obligations” under the RFS. 

DOJ on behalf of EPA filed the proposed deal with the U.S. Bankruptcy Court in Delaware on May 1 and opened the agreement to a 15-day public comment period that concluded on Thursday. 

Under the draft deal, PES would be required to buy and retire within 90 days of the agreement’s effective date nearly 162 million Renewable Identification Number (RIN) credits verified under EPA’s Quality Assurance Program. The purchases, however, would be subject to a $10 million cap, down from $35 million under the 2018 agreement. 

PES filed for Chapter 11 bankruptcy protection in the beginning of 2018. EPA soon after proposed a deal to the refiner that excused a portion of its RFS obligation from 2016 through the first quarter of 2018. 

PES shut its 335,000-b/d refinery and again filed for bankruptcy last year after a fire destroyed parts of the complex last June. 

In their comments, the biofuel organizations called the almost $25 million reduction in RIN compliance costs “inappropriate, improper, and inadequate.” 

“The settlement agreement is an unnecessary concession to PES that sets a dangerous precedent that will encourage other refiners to neglect their RFS obligations and then seek to reduce them through a settlement,” the groups told DOJ. 

The groups said EPA should not further discount PES’ RFS liabilities, adding that the 2018 consent decree relieved the refiner of more than 70% of its RFS compliance obligations from 2016 through 2017. In the documents filed with the court on May 1, EPA said PES failed to meet its RIN retirement obligation under the 2018 agreement that required it to retire about 154 million RINs over the first six months of 2019. 

“Despite the explosion and pending bankruptcy, PES continued to produce gasoline and diesel fuel from crude oil, triggering additional RINs retirement obligations under the 2018 consent decree and … RFS regulations,” the groups said. 

RFA President and CEO Geoff Cooper in a statement said his organization “opposes the proposed PES settlement because it allows the company to manipulate the bankruptcy process to evade their regulatory obligations under the RFS program.” 

David Fialkov, vice president of government relations for the travel plaza and truckstop industry group NATSO, said in an interview on Wednesday that PES has been given a “get out of jail free card” throughout the course of its bankruptcy filings. 

The refiner, he said, has “misdirected blame for their own poor decision-making over the years and blamed it on the RFS and RIN costs, when that has virtually nothing to do with why it was not a successful operation and ultimately went bankrupt.” 

Fialkov shared the opinion of the three industry groups that PES improperly blamed RFS compliance costs for some of its financial woes, noting that the agency itself has found that refiners’ RIN costs are largely included in the price they charge for fuel. 

“EPA has said time and time again: ‘obligated parties recover RIN costs.’ Yet it seems like any time that PES comes up, DOJ and EPA seem to forget that,” 

Fialkov said. 

Under a plan approved by the bankruptcy court in February, PES agreed to sell its refinery site to a real estate developer Hilco for $240 million, ending any chance that the refinery would be restarted. That deal is expected to receive court approval this week. 

–Reporting by Patrick Newkumet, pnewkumet@opisnet.com; Editing by Jeff Barber, jbarber@opisnet.com 

Copyright, Oil Price Information Service 

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