Okla. senator says refiners are closing due to high RFS credit prices — and industry hits back

Source: Amanda Peterka, E&E reporter • Posted: Thursday, June 13, 2013

In claims being disputed by the ethanol industry, an Oklahoma Republican is blaming federal renewable fuel policies for driving refineries to shut their doors.

Sen. Tom Coburn yesterday said that two refineries in his state were in danger of closing within the year because of the high prices associated with renewable fuel standard credits. The senator said the refiners were losing millions of dollars because of the requirements.

“We’ve got a regulation out there that’s actually going to kill our ability to provide gasoline to the country,” Coburn said.

Under the renewable fuel standard, refiners receive a credit when they blend a gallon of conventional ethanol into petroleum-based gasoline. They are then free to buy and sell those credits to help meet their annual renewable fuel requirements

Prices for credits, known as renewable identification numbers, have skyrocketed since early this year, going from a few cents to more than a dollar and then settling in the 60-cent range. Analysts blame the high prices on refiners panicking about reaching the 10 percent “blend wall,” or the technically feasible amount of ethanol that can be blended into today’s gasoline, and buying up all available credits.

Coburn said that the small refineries in his state have been forced to purchase credits at the high prices and warned that the trend will be seen throughout the country.

“What’s getting ready to happen in our country is all our refiners are going to go broke,” Coburn said.

He urged EPA to adjust its current renewable fuel standard, which requires refiners to blend more than 10 percent ethanol into the nation’s fuel supply (Greenwire, March 18).

Coburn addressed the concerns to President Obama’s pick to lead the Office of Information and Regulatory Affairs, Howard Shelanski, at his confirmation hearing yesterday and asked the nominee to look into the issue should he be confirmed.

Shelanski, who would oversee reviews of the costs and benefits of all regulations coming from government agencies if confirmed, said that he thought the issue was a “vitally important one.”

This is not the first time that refiners have blamed the renewable fuel standard for closures; last year, for example, PBF Energy Chairman Thomas O’Malley told lawmakers that the RFS was stealing the market away from refineries by requiring ethanol to replace up to 10 percent of gasoline (Greenwire, May 2, 2012).

Bob Dinneen, president and CEO of the Renewable Fuels Association, yesterday called Coburn’s statements “laughable” and a “hyperbole designed to create a lot of angst about the RFS.”

“It’s laughable that [Coburn’s] bemoaning the fact the refiners are going broke,” Dinneen said. “The oil and gas industry is probably the most profitable industry on the planet right now. I’m not sure why he’s crying crocodile tears for them.”

Dinneen and other ethanol industry advocates say that refiners simply need to blend more ethanol into their fuel and make investments to roll out E15, or gasoline containing 15 percent ethanol, to get past all the issues with the “blend wall.”

“The issue is this: If refiners are having to buy credits, it’s because they don’t want to blend more ethanol into gasoline,” Dinneen said. “And there’s an easy solution to the problem: Blend more ethanol.”

Concerns over the renewable fuel standard have gained traction in recent months, and lawmakers on the House Energy and Commerce Committee, which has jurisdiction over the standard, plan to hold a series of hearings later this summer.

Rep. Ed Whitfield (R-Ky.), chairman of the committee’s Energy and Power Subcommittee, said he expected the first hearing to come “within the next three weeks or so” and that he was interested in hearing from stakeholders around the country on the standard’s merits

“We want everybody to talk,” Whitfield said yesterday. “I’m not much concerned about who comes from the government side; I’m more interested in the people out in the country who are being affected by it. We want to listen to all of those groups.”