Oil refinery exec blasts biofuel mandate, draws rebuke from ethanol industry

Source: Amanda Peterka, E&E reporter • Posted: Thursday, May 3, 2012

The ethanol industry is slamming an oil-refining executive for claiming that federal renewable fuel mandates were a leading cause of refinery closures in the Northeast.

Renewable Fuels Association CEO Bob Dinneen called remarks by PBF Energy Chairman Thomas O’Malley an “outrageous” attempt to “tar and feather” ethanol and the renewable fuel standard. O’Malley spoke at a hearing last week on the potential closures of three Pennsylvania refineries in the House and Senate’s Joint Economic Committee.

“Mr. O’Malley’s testimony should be seen for what it truly is — yet another underhanded and deceiving shot across the bow from the oil industry at America’s farmers and ethanol producers,” Dinneen wrote yesterday to Sen. Bob Casey (D-Pa.) and Rep. Kevin Brady (R-Texas), the panel’s chairman and vice chairman, respectively.

The ethanol advocate also urged the lawmakers to invite biofuels representatives to future hearings where the impacts of the federal standard, which mandates yearly production of ethanol and advanced biofuels, would be discussed.

At the hearing Thursday, O’Malley told lawmakers the renewable fuel standard (RFS) was stealing the market away from refineries by requiring ethanol to replace up to 10 percent of gasoline. He also blamed U.S. EPA for what he described as “aberrant administration” of the 2007 law that created the standard.

PBF has three refineries, two of them in the Northeast and one in Ohio. O’Malley said the standard has put in doubt the future of those refineries and others along the East Coast.

“The reason for the closure of the refineries in Pennsylvania is that they didn’t make money,” O’Malley said. “And the reason that they didn’t make money is that you took away their market. You delivered the market to the farm industry.”

O’Malley had a sympathetic ear from Sen. Pat Toomey (R-Pa.), who showed a chart at the hearing that compared spiking gas prices and the increase of ethanol blended with gasoline over the past few years.

Dinneen blamed closures on the inability of most East Coast refineries to process heavier types of crude oil coming from Canada’s oil sands, Saudi Arabia, Venezuela and other countries overseas.

Citing information from the Energy Information Administration, Dinneen said refineries were also paying more per barrel of oil than their competitors elsewhere in the country because of formulas used to calculate prices for oil imports.

He also said consumer demand has dropped as Americans have bought more fuel-efficient vehicles.

“If the RFS were truly the cause of refinery difficulties in the Northeast, as Mr. O’Malley contends,” Dinneen said, “it would stand to reason that refineries in other regions — who must also comply with the requirements of the RFS — would be facing similar financial challenges.

“On the contrary, refinery capacity utilization rates in other regions are strong.”

O’Malley did not address refineries in other regions, but he warned that the potential Northeast refinery closures were just the tip of the iceberg.

“This is a total mess, and it really does need to be fixed,” O’Malley said, calling on Congress to get rid of the RFS.

“When you do level the playing field,” he said, “you’re going to find that that terrible old-fashioned gasoline that we’ve been putting in our cars for several years is the most efficient fuel.”