Skip to main content
You have permission to edit this article.
Edit
Refinery bankruptcy renews ethanol debate

Refinery bankruptcy renews ethanol debate

  • 0
{{featured_button_text}}
021518ho-refinery-energy

Philadelphia Energy Solutions

DAVENPORT -- A Pennsylvania refinery's bankruptcy filing last month has renewed the fight over the Renewable Fuels Standard, the 13-year-old law that has been a boon to the farm economy.

Philadelphia Energy Solutions, which requested bankruptcy protection last month, said the "exorbitant cost" of renewable fuels credits contributed to its filing.

However, the renewable fuels industry has said this is an excuse to try to undercut the RFS, which requires about 19 billion gallons of renewable fuels to be blended into the nation's gasoline supply.

Refiners have complained about the mandate, and the cost of Renewable Identification Numbers, which prove compliance with the law.

Philadelphia Energy Solutions' bankruptcy filing has become the latest flashpoint.

The company employs 1,100 workers in the politically important state of Pennsylvania. And the company says the cost of RINs was its second biggest expense last year, at $218 million -- higher even than its workforce costs.

The situation has gotten the attention of EPA Administrator Scott Pruitt, who told Fox News last month "this is an example" of how the RFS sometimes can have a "difficult" impact on the economy.

The company said in its bankruptcy petition it did not have the funds to meet its RIN obligations, according to Reuters.

The renewable fuels industry, though, says the refinery's bankruptcy isn't because of the RFS but its own mismanagement.

U.S. Sen. Chuck Grassley's office issued a four-page memo last week saying the blame on the RFS is misplaced.

The memo cited other reasons for the bankruptcy, including no longer being able to get cheaper crude oil from the Bakken oil field and failing to make investments in equipment to blend biofuels itself, rather than purchase renewable credits.

The memo also noted the company sold RIN credits last year, raising the prospect it might be trying to drive down prices only to buy them back later.

Grassley's says independent studies show RINs don't affect refiner profitability because costs are passed on to consumers.

The refinery objected to the criticism this week. In a joint statement with the United Steelworkers union, Philadelphia Energy Solutions said it was responding to "false and misleading" statements made by the renewable industry and others.

In a fact sheet of its own, the company said blending infrastructure isn't the issue and the idea that refiners simply pass costs on to consumers is a myth.

The company said independent merchant refiners are penalized by the current system, while large retailers and integrated oil companies that own retail outlets have an advantage. The refiner said the only way it could compete would be to buy retail stations to sell its own blended fuel, which would cost billions of dollars.

"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," the statement said.

Monte Shaw, executive director of the Iowa Renewable Fuels Association said the larger issue is the oil industry has been looking for a sympathetic case to attack the RFS.

"They've always been trying to find a compelling front man or poster child for their arguments," he said this week.

This example, he says, is a flawed one, pointing to some of the same arguments Grassley's office made.

There are political implications to the current debate.

Pennsylvania swung to President Trump's column in the 2016 election and is likely to be important in any re-election bid.

In a letter to the president last month, Mark McManus, president of the United Association representing plumbers and pipefitters, reminded Trump of his promise during the 2016 campaign to protect manufacturing jobs.

"We urge you to keep that promise and take immediate action to control skyrocketing RIN costs," he wrote.

Agriculture interests have also impressed upon Trump to remember the promises he made during the presidential campaign in Iowa and beyond to support ethanol and other renewable fuels.

Last year, this argument helped to beat back the threat of lower renewable fuel volumes.

Still, there is pressure to reform the RIN market, such as Sen. Ted Cruz's hold on Bill Northey, the Iowa Secretary of Agriculture, who has been nominated to a post with the U.S. Department of Agriculture.

Grassley sought last week to again push Northey's nomination forward, but was stopped.

His office said relieving individual refiners of their obligations would be "legally questionable" and hurt refiners who are compliant.

0
0
1
0
0

Get Government & Politics updates in your inbox!

* I understand and agree that registration on or use of this site constitutes agreement to its user agreement and privacy policy.

Related to this story

Most Popular

Get up-to-the-minute news sent straight to your device.

Topics

News Alerts

Breaking News