A Philadelphia oil refinery went bankrupt due to management decisions that backfired rather than the federal biofuels mandate, which requires refiners to blend ethanol and biodiesel into the gasoline and diesel supply, says a memo written by energy policy staffers working for Iowa Sen. Chuck Grassley, a bulldog defender of corn ethanol. The bankruptcy filing has been cited as a reason for changing the Renewable Fuel Standard, the biofuels mandate.
Independent refiners say they spend millions of dollars to buy credits, known as RINs, to comply with the biofuel mandate if they cannot blend enough renewable fuel into their petroleum products. Texas Sen Ted Cruz is blocking a Senate vote on Bill Northey, nominated for the No. 3 post at USDA, as leverage for a change in the informal market for RINs. He has suggested the EPA sell RINs at 10 cents apiece. Midwesterners say that would destroy the ethanol market because RINs then would be far cheaper than biofuels, undercutting any incentive to blend them into gasoline.
“After reviewing the facts, I’m confident that the Renewable Fuel Standard isn’t harming refineries, that other factors are at work, and that the RFS law is working as Congress intended,” said Grassley. “Once these facts are known, there ought to be an end to the misleading rhetoric blaming the RFS.”
The staff workers sid Philadelphia Energy Solutions, the oil refiner, “finds itself in financial difficulty due primarily to changes in its available feedstocks and other management decisions. It does face a problem of having to acquire RINs to meet the looming RFS compliance deadline, but that is due in large measure to its reported decision last fall to sell off the RINs it had acquired, presumably in hopes of being able to buy them back at lower cost before the compliance deadline. Moreover, if PES had taken the sensible approach of other merchant refiners and invested in ethanol blending infrastructure or partnered with a blender, it appears it would have no need to purchase RINs at all.”
The ethanol industry says year-round sales of E15, a 15 percent blend of ethanol with gasoline, would make it easier to satisfy the RFS. The traditional blend is 10 percent and the oil industry says the fuel market is saturated with biofuels so there is no more market for them—the so-called blend wall. The trade group Renewable Fuels Association said 31 states exceeded the 10 percent ethanol level in fuel sales during 2016, according to Energy Department data.
To read the Grassley staff memo, click here.