US ethanol group vows to block RFS reforms tied to refinery bankruptcy

Source: By Meghan Gordon, Platts • Posted: Thursday, February 15, 2018

Washington (Platts)–13 Feb 2018 1116 am EST/1616 GMT

The US ethanol industry should resist any attempt to weaken the federal biofuel mandate as calls to reform the policy grow ahead of its 2022 expiration and in the wake of a Philadelphia refinery’s bankruptcy, Bob Dinneen, president of the Renewable Fuels Association, said Tuesday.

Dinneen said refiner Philadelphia Energy Solutions is the current “poster child for the supposed economic harm” caused by the Renewable Fuel Standard, and yet he said its troubles have little to do with ethanol.

“The refinery has antiquated technology and is captive to more expensive Brent crude oil imports because the elimination of the oil export ban and the new Dakota Access Pipeline have cut off its supply of Bakken crude,” he said. “But it’s so much more expedient to blame ethanol.”

Dinneen made the comments in opening remarks at RFA’s annual conference in San Antonio.

The January 22 bankruptcy filing has amplified calls from RFS critics to reform the policy so as to ease the burden on oil refiners, which are required to either blend biofuel directly or buy Renewable Identification Numbers on the open market to fulfill their obligations.

RINs are tradable credits issued by the Environmental Protection Agency to track production and use of alternative transportation fuels. For corn-based ethanol, one gallon of ethanol yields one RIN.

‘Flawed’ RIN program

PES management and union leadership issued a statement Monday rebutting “false and misleading statements” made by RFA and others about the company. “PES consistently blends as much ethanol and other biofuels as its customers will allow,” said the statement by CEO Gregory Gatta and United Steelworkers International President Leo Gerard.

“We simply want to correct the flawed and indefensible RINs compliance mechanism that is destroying the independent merchant refining industry and the thousands of families sustained by it.”

Dinneen said those pushing for reforms to the RFS only seek to weaken the policy. He rejected proposals such as capping biofuels at 9.7% of the US transportation fuel pool, allowing exports to count toward an obligated party’s blending requirement and providing a blanket waiver to refineries with smaller throughput than 75,000 b/d.

RFA would only support reforms that increase the use of biofuels, recognizing their benefits at increasing octane and cutting carbon emissions, Dinneen said.

10-cent RIN cap

Senator Ted Cruz, Republican-Texas, who pushed for a White House meeting in December between both sides of the RFS debate, said the ethanol lobby was refusing to come to the table to discuss reforms.

Cruz has proposed capping RIN prices at 10 cents, but the idea has not gained traction.

Senator John Cornyn, Cruz’s fellow Texas Republican, is reportedly trying to build support in Congress for an RFS overhaul that would create D8 RINs, a new category of the credits that would represent ethanol volumes above the so-called blendwall, or 10% of the nation’s fuel supply.

Legislative language has not been released for either proposal, and both are expected to face resistance from farm-state lawmakers who want to preserve the existing program.

The RFS requires refiners and importers to blend 19.29 billion gallons of renewable fuel into the US transportation fuel supply in 2018, including an implied 15 billion gallons of conventional ethanol. The conventional level is unchanged from 2017.

The program sets rising targets through 2022, after which the Environmental Protection Agency will have broad discretion to set its own targets or scale back the requirement.