EPA rejects bid to free refiners from key RFS requirement

Source: Marc Heller, E&E News reporter • Posted: Friday, November 11, 2016

U.S. EPA rejected oil industry requests today for freeing refiners and importers from renewable fuel standard requirements, saying the program’s point of obligation shouldn’t be switched to companies that blend the fuel.

In a proposed decision, the agency said it would also open the issue to a 60-day public comment period, which would end just as the Trump administration prepares to take office.

“EPA does not believe there is a sufficient basis to support changing the point of obligation at this time,” the agency said. “We believe that the parties requesting this change significantly underestimate the scope and impacts of the changes that would result from the number and nature of additional parties that would become obligated parties if the point of obligation were changed.”

Trade groups representing ethanol companies and producers praised EPA, while oil and gas company Valero Energy Corp. focused on the opportunity to submit comments and said changing the point of obligation would make for a fairer market in renewable fuel credits. In time, the company said, EPA “will have no choice but to move the point of obligation.”

In a statement that didn’t acknowledge EPA’s opposition to making the change, Valero said, “The current point of obligation is simply in the wrong place — a point that causes intense speculation and fraud in the market for tradeable credits called renewable identification numbers (RINs). High RINs prices create competitive disadvantages for small retail businesses and creates strain on independent refiners that could result in gasoline price spikes for consumers.”

The American Petroleum Institute, representing oil and gas companies, said it supported EPA’s move, while urging a broader revamping of the RFS that would slow the growth of biofuels.

“Requiring businesses to blend increasing amounts of ethanol into gasoline, which consumers have demonstrated they don’t particularly want or need, is the central flaw of the RFS mandate that must be addressed,” said Frank Macchiarola, API’s downstream group director.

In its announcement, EPA said moving the point of obligation would increase the number of responsible parties, making the program less efficient, and might lead to a reduction in total renewable fuel volumes, which goes against the objective of the renewable fuels law.

However, the agency said, opening the question to public comment would allow a more full consideration of regulatory changes that could help the program.

Ethanol advocates said the program works well as written, although they have separately complained that EPA sets fuel volumes below levels mandated by Congress.

“On a station-by-station level, we know it works,” said Ron Lamberty, senior vice president of the American Coalition for Ethanol. While some companies are uncomfortable with the requirements of increased biofuels, he said, “I think that’s kind of the point.”

The Renewable Fuels Association said in a statement by President and CEO Bob Dinneen that it supports the public comment period, “as any discussion related to changing the structure of the RFS should be open, transparent, and informed by sound analysis.”