U.S. EPA moves to deny refiner requests to change biofuels program

Source: By Chris Prentice, Reuters • Posted: Friday, November 11, 2016

The U.S. Environmental Protection Agency (EPA) said on Thursday it plans to deny several petitions from oil groups to change the country’s biofuels program, an issue that has deeply divided the petroleum industry.

The oil industry has spent millions lobbying against the Renewable Fuel Standard (RFS), a 2005 policy that establishes annual targets for the volume of biofuels that need to be blended with gasoline and diesel. Petroleum companies say it will take major overhauls to fueling station infrastructure and vehicle design before they can meet biofuel targets set by Congress.

The recent petitions by oil refiners to change the program segments have pitted them against integrated oil companies, which can make money from blending the fuels.

The EPA said it did not believe it should start the process, as multiple groups have requested, to make the regulatory change to the so-called “point of obligation” of the RFS program. The agency’s timeline makes it unlikely that it would decide on the change before the current administration leaves office.

Valero Energy Corp, the American Fuel and Petrochemical Manufacturers (AFPM), HollyFrontier and Monroe Energy have petitioned the EPA to consider changing the rule to reduce the onus on refiners that have little capacity to blend biofuels at their operations.

These merchant refiners have said they are being squeezed by annual government mandates that require increasing volumes of biofuels. To meet them, they have been forced to buy paper credits in an opaque market, spending hundreds of millions of dollars. This year, those costs are poised to reach a record.

The change the refiners are requesting “would not address the challenges associated” with boosting availability of advanced fuels and getting more ethanol into the fuel system, the EPA said in the statement.

Still, some petitioners expressed support for the EPA’s decision to open a 60-day public comment period.

“We are very pleased they decided to do this, whereas I would have been ecstatic if they granted it. We live to keep fighting on this issue,” said Chet Thompson, AFPM president.

EPA’s decision to open a docket is a sign the issue is “serious and merits full consideration,” a Valero spokeswoman said.

Still, a final decision will probably not be made until President-elect Donald Trump is in the White House. A Trump administration is more likely to consider the refiners’ requests, said Timothy Cheung, vice president at ClearView Energy Partners in Washington.

The EPA’s move on Thursday drew applause from biofuels advocacy groups Growth Energy and the Renewable Fuel Association, along with the National Association of Convenience Stores and Society of Independent Gasoline Marketers of America.

Tesoro Corp and Marathon Petroleum Corp, companies that have invested in biofuels blending capacity, expressed support for the EPA’s move toward denying the change. Tesoro’s vice president and counsel, Stephen Brown, said in a statement that comprehensive reform is the “more important task at hand.”

(Reporting by Chris Prentice; Additional reporting by David Shepardson in Washington; Editing by Simon Webb and David Gregorio)