GAO: Delays in issuing annual RFS hurt refiners

Source: By Laura Barron-Lopez, The • Posted: Tuesday, April 15, 2014

A Government Accountability Office (GAO) report released Monday said when the Environmental Protection Agency’s (EPA) is late in issuing its annual Renewable Fuel Standards (RFS) it increases costs for refiners.

The RFS each year sets the amount of biofuels refiners must blend into the nation’s fuel supply. The standards have contributed to declining petroleum consumption while increasing costs, according to the report.The GAO report looked at three major changes that have affected the domestic petroleum, or gasoline, refining industry, a key one being the EPA’s renewable fuel mandate.

The RFS has contributed to increased costs for some refiners, specifically in the first half of 2013. Those costs have relatively declined for refiners since last year.

Still, the GAO said EPA should identify delays in issuing yearly renewable fuel levels and implement a plan to get them out on time.

Since 2009 the EPA has missed its deadline to issue regulations for the renewable fuel mandate, the report states. This year has been no exception. However, the EPA did retreat on the amount of ethanol it is requiring refiners to mix into the fuel supply for the first time since the standards were established in 2007.

There has been some indication from stakeholders that the EPA may flip-flop on this latest move.

Still, the GAO reports that late renewable fuel regulations add to industry uncertainty.

“A late [Renewable Fuel Standard] contributes to industry uncertainty, which can increase costs because industry cannot plan and budget effectively, according to some stakeholders,” the watchdog said.The report also identified the administration’s greenhouse gas standards for vehicles as a key factor behind a decrease in gasoline consumption.

Increased production of U.S. and Canadian crude oil have lowered the cost of oil for some refiners and also contribute to the markets recent changes.

The GAO notes that future consumption of petroleum products may increase through 2020 but will not return to past levels. If EPA continues to issue the fuel standards late costs may be incurred by refiners or passed onto consumer through higher gasoline prices.