U.S. Renewable Fuel Standard is not working: Marathon CEO

Source: By David Gaffen and Erwin Seba, Reuters • Posted: Wednesday, March 13, 2019

HOUSTON (Reuters) – The U.S. Renewable Fuel Standard (RFS) laws are not working and there is an “opportunity for a reset” of the standard in Washington, Marathon Petroleum Corp Chief Executive Gary Heminger said on Tuesday.

The RFS requires refineries to blend fuels with ethanol to reduce pollution, or pay for credits to subsidize those that do that blending.

Heminger, who leads the largest U.S. crude oil refiner, said that the standard has caused very volatile prices for those credits, and that it needs reform.

The Trump Administration has attempted to reform the standard, but has maintained much of the existing framework of the law due to support from corn producers in Iowa and other farming states.

Heminger said U.S. refiners already rely on ethanol to boost octane in gasoline.

“We need the octane,” he said. “Ethanol is a great source of octane. Ethanol shouldn’t be mandated.”

Speaking at the CERAWeek conference in Houston, Heminger said the switch to ultra-low sulfur diesel fuel for ships scheduled for Jan. 1, 2020 would not be a shock to the global oil refining industry.

Heminger said he expected U.S. refiners would begin building an inventory of the new maritime diesel fuel by the middle of 2019 to prepare for the change in marine fuel mandated by the International Maritime Organization (IMO).

“We’re compliant,” Heminger said of the U.S. refining industry. “The global refining industry is ready to meet demand” for IMO.

The IMO 2020 fuel will drop sulfur content from no more than 3.5 percent to no more than 0.5 percent.

Marathon became the largest U.S. refiner in October when it merged with Andeavor creating a company with 3 million barrels per day of crude oil processing capacity.

“I would expect there would be some consolidation in the industry, Heminger said.

The biggest question is what will happen to the three refineries owned by Citgo Petroleum Corp, a subsidiary of Venezuela’s troubled national oil company, Petroleos de Venezuela SA (PDVSA), he said.

Marathon has no interest in acquiring the Citgo refineries, Heminger said.

The company does expect to successfully conclude contract talks with workers at its Galveston Bay Refinery in Texas City, Texas, which was the site of a bitter five-month strike in 2015.

“That’s a great workforce” he said.

Reporting by David Gaffen and Erwin Seba; editing by Marguerita Choy