Valero to ‘Keep Banging’ on EPA over RFS Compliance Obligation
Source: By Jeff Barber, OPIS • Posted: Thursday, July 28, 2016
In a conference call with financial analysts to discuss second-quarter financial results, company officials also said the higher RINs prices “created additional earnings headwinds” in the period. Valero earlier today said its Q2 biofuel blending costs — mostly tied to buying RINs — were $173 million, more than three times the $56 million it paid in the same period of 2015.
Valero in February sued the Environmental Protection Agency in the U.S. Court of Appeals for the District of Columbia Circuit over what it said was the agency’s failure to move the point of obligation under the RFS from refiners and importers to blenders at the wholesale rack when it issued three years’ worth of renewable volume obligations in November 2015.
And earlier this summer, the San Antonio, Texas-based refiner and ethanol producer petitioned EPA to begin a formal rulemaking to move the point of obligation.
Valero Chairman, President and CEO Joe Gorder told analysts that both actions are focused on convincing EPA to change the current structure of the system, which he described as “misaligned and infeasible.”
Maintaining the point of obligation at the refinery gate, Gorder added, has “allowed speculators to drive up RIN prices, which we’ve seen in the market, and encourages RIN fraud.”
“We’re doing everything possible to bring attention to this and we’re engaged in a lot of effort to educate other affected parties as well as EPA officials.
Ideally, we’d like to see EPA of its own accord engage in a rulemaking process,”
Gorder said, adding, however, that it would likely be a lengthy process.
Company officials said that while the litigation is proceeding, it is also unlikely to be resolved quickly.
In the meantime, Gorder said Valero is addressing the issue by trying to find ways to blend more biofuels, thus reducing the amount of RINs it has to buy, including the possibility of acquiring additional terminals, and by “continuing to build export markets to alleviate some of the burden of RINs.
“Other than that, we’re going to keep banging on the rock. The system we have today is broken, creating windfalls for some and hardship for others. Based on our conversations, there is an understanding of this issue and an understanding that the RFS isn’t doing what is was intended to do — increase the amount of biofuels” blended into fuel.
“This is an issue we are working very hard to deal with,” Gorder said, adding that the current system “puts an expense on merchant refiners that they shouldn’t be dealing with and creates an un-level playing field in the marketplace. And that’s never good.”