Del. wants in on RFS waivers

Source: Marc Heller, E&E News reporter • Posted: Friday, February 2, 2018

The fight over federal ethanol mandates has spread to Delaware.

The First State recently became the third state to ask U.S. EPA for a waiver from the renewable fuel standard.

Gov. John Carney (D) joined Texas and Pennsylvania in asking for a reduction in required volumes of ethanol, saying the high cost of renewable fuel credits for refineries could cause the state severe economic harm.

Advocates for biofuels said Carney has the situation backward and that renewable fuels benefit the state by supporting jobs in that industry, giving farmers a market for corn and other feedstocks and lowering the price of gasoline at the pump.

“The 2018 mandates will undoubtedly ‘severely harm’ the State of Delaware, the entire mid-Atlantic region and the national economy because of the extremely significant and unreasonable compliance costs associated with RINs that will be placed on petroleum refineries,” Carney said in a letter to EPA Administrator Scott Pruitt, referring to renewable identification numbers, the formal name for the credits.

Refineries buy RINs from other companies to show compliance with the RFS because many refineries don’t have facilities to blend ethanol into gasoline. Delaware has one refinery, PBF Energy Inc.’s Delaware City refinery, which Carney said has 560 full-time employees and also employs between 250 and 300 contractors.

In his letter, Carney cited renewable fuel credit prices that have recently risen from the mid-30-cent range per gallon to about $1 per gallon, which he said would “lead to devastating job losses in Delaware and throughout the region.”

Prices for RINs rose above 90 cents in November 2017 and have since fallen to around 65 cents; they briefly dipped below 30 cents in March last year, according to the Oil Price Information Service.

Delaware’s requests follow similar ones from Texas and Pennsylvania, and it comes on the heels of Philadelphia Energy Solutions Inc.’s announcement earlier this month that it’s filing for bankruptcy protection, citing high costs of renewable fuel credits (E&E Daily, Jan. 23).

The Renewable Fuels Association said Delaware cannot illustrate the “severe economic harm” required for an EPA waiver.

“Gov. Carney’s waiver request doesn’t come close to meeting this threshold,” said RFA President and CEO Bob Dinneen in a statement. “Quite the contrary, the RFS is delivering an economic benefit to Delaware’s economy by providing thousands of jobs in the renewable fuel industry and agriculture, offering consumers a choice at the pump and lowering the cost of fuel.”

Pruitt has said he’s sympathetic to refiners’ complaints about high RIN costs, while maintaining that he doesn’t want to dismantle the RFS — a position in line with President Trump’s repeated vows to keep ethanol mandates going.

Pruitt echoed that position in an interview on Fox News today, saying on “Varney & Co.,” “There’s something called a RIN program that you may be aware of that’s an accounting mechanism and refineries have to pay for those RINs. That’s what has largely driven this problem.”

The issue isn’t confined to Philadelphia Energy Solutions, Pruitt said. “We need RIN reform, it’s something I’ve talked to Congress about. We have to take steps to address this, and I think there are many that understand that.”

So far, efforts to revamp the RFS or tweak the renewable credits system haven’t advanced in Congress. Sen. John Cornyn (R-Texas) is leading those talks, but proposals to cap RIN prices, for instance, have fallen flat with ethanol advocates. Both sides agree, however, that a more transparent market, possibly under regulation by the Commodity Futures Trading Commission, could be an improvement.

Ethanol advocates say companies such as Philadelphia Energy Solutions suffered from an outdated business model rather than government policy. An energy industry consultant told E&E News today that although tweaks to the RFS may gain momentum in Congress, some bigger companies have a dim view of waiver requests on behalf of merchant refineries, which risk “turning this thing into the Hunger Games, which is bad for consumers.”