The oil industry is split over the Renewable Fuel Standard program

Source: By Mark Drajem, Bloomberg • Posted: Monday, September 5, 2016

There once was a simpler time, filled with a hot new gadget called the iPhone, the British pound at a record high — and a debate over the Renewable Fuel Standard that pitted the oil industry against ethanol producers. But as fast as you can say Ratatouille, 2007 is gone and things are changing. Now the oil industry itself is split over the RFS, or more specifically how the EPA applies it.

It’s no mystery what’s inspiring the discord: money.

Refiner CVR Energy, in which billionaire investor Carl Icahn owns an 82 percent stake, has picked a very public fight with the Obama administration, ethanol producers and even the American Petroleum Institute over the RFS. We called CVR’s CEO Jack Lipinski yesterday, and he explained why his company is in such a bind over the ethanol mandate.

“All of the pipelines and infrastructure is owned by someone else,” he told us. “I have no way of blending it.” EPA should shift the obligation for the RFS from refiners to fuel blenders, who actually control how much ethanol is used, he said. At 70 cents a RIN, the price early in the year, it would cost CVR more than $150 million to buy credits for its ethanol obligation, he said.

API has weighed in, and opposes that change, with downstream director Frank Macchiarola dubbing it a “distraction form the real issue.” Lipinski argues that’s part of the problem, as the big, integrated companies are able to profit from the refiners’ bind.

This isn’t the first we’ve highlighted this issue. Icahn wrote EPA’s Gina McCarthy two weeks ago, arguing that the agency had created a “rigged” marketplace. Then last week, Brooke Coleman, executive director of the Advanced Biofuels Business Council, responded by saying that smart refiners can get into the blending business, or prepare for the costs of program by buying RINs. Why should EPA reward companies that refused to prepare for the RFS mandate while other companies invested billions of dollars into biofuel production based on the promise of that requirement? Coleman wrote in a piece we published last week.

Lipinski wrote a response to Coleman, which we received yesterday and are running in Up for Debate below.

Another point to consider

While reading Lipinski, however, it may be useful to think about the last point Coleman made: EPA regulations impose obligations on companies, and RINs — just like credits under a cap-and-trade program — are meant to make complying cost effective. Just as under the RFS, the Clean Power Plan imposes an off-sight requirement: power plant owners will need to find a way to get renewable energy or energy efficiency to offset their emissions.

“If regulators don’t want the program to work this way, they should throw out the entire Clean Air Act,” Coleman told us. “If they bail out on this program because an obligated party says it doesn’t want to change its behavior, then the whole thing falls apart.”r