01.03.2017, 15:44
The Trump administration is considering changes to US biofuels policy
OREANDA-NEWS The Trump administration is considering changes to US biofuels policy that would ease compliance costs for US refiners while supporting other incentives for domestic renewable fuels, according to sources familiar with the proposal.
The recommendation would adopt changes supported by Valero, the largest US independent refiner and third-largest ethanol producer, and merchant refiners including CVR Energy, a smaller midcontinent refining operator owned by Carl Icahn, regulatory adviser to President Donald Trump. The administration could also support changing regulations that limit the sale of higher-ethanol blends during peak summer driving months and push for changes to tax credits for the biodiesel industry, according to sources familiar with the proposal.
News of a possible deal roiled the industry and prompted denouncements of murky agreements determining the future of US fuels.
"I think there is a good path forward for us, I really do," said Emily Skor, chief executive of biofuels trade group Growth Energy. "But that path forward does not include backroom deal making."
A White House spokeswoman today denied the administration was developing an executive order on ethanol policy but did not comment on whether other directives were being considered.
An order would not be necessary for changes under the authority of the Environmental Protection Agency. The agency could open up a new rulemaking process based on public comments on the proposed changes it finished taking last week, or could include changes in a settlement of existing litigation against the fuel program.
Renewable Fuels Association (RFA) chief executive Bob Dinneen stood by a statement issued earlier today describing an unnamed Trump administration official stating that a pending executive order would move the point of obligation under the Renewable Fuel Standard (RFS).
"Despite our continued opposition to the move, we were told the executive order was not negotiable," Dinneen said in the statement.
The Renewable Fuel Standard (RFS) requires refiners, importers and other companies adding to the domestic fuel supply ensure rising volumes of renewable fuels blend into that transportation pool. Companies use credits called renewable identification numbers (RINs) generated when renewable fuels blend with fossil fuels to prove each year those volumes were met.
Merchant refiners produce gasoline and diesel but participate much less in selling those fuels to drivers. Such refiners purchase RINs from those companies today to meet compliance. Costs have climbed along with concerns that blending requirements have outstripped the industry's ability to physically deliver those fuels to drivers.
Valero spent roughly $750mn in 2016 to comply with the program, according to the company.
CVR Energy, a refiner with less than a tenth of Valero's crude processing capacity, spent $206mn during the year. CVR Energy today declined to comment on the rumored deal.
Merchant refiners have pushed for the responsibility to meet those volumes move closer to the retail level. The change would reduce the need to trade RINs and make companies closer to the retail level responsible for ensuring rising volumes of renewable fuels enter the domestic fuel supply each year. That adjustment would save refining jobs and make retailers more responsive to the rising mandate levels, supporters have said.
"By improving the efficiency of the RFS, the alignment will reduce unnecessary costs and burdens of the program, particularly on the parties that are least financially capable of bearing such burdens," Valero senior vice president Richard Walsh said in comments to the EPA filed last week.
Integrated refiners, biofuel groups and large retailers see the proposal as a reward to companies' failure to adapt. Removing refiner incentive to produce the blendstocks needed to make finished, high-biofuel blends would make increasing the percentage of renewable fuels in US fuel tanks more expensive.
"This may be the perfect strategy if the proponents for such a move wish to shed their (obligation) and socialize it across other obligated parties," BP chief operating officer Douglas Sparkman said in a comment urging EPA to reject the idea last week. "It does nothing to ease implementation of the RFS, nor does it assist the industry in overcoming the constraints on the RFS program imposed by the blendwall."
Such a shakeup of US biofuel mandates would likely take months to execute and almost immediately meet challenges in court. Obligated companies may keep RINs for up to two years before submitting them for compliance.
"One would think this type of thing calls for an even more lengthy grace period to give time for balance sheets to wind down," National Association of Truck Stop Operators vice president of government relations David Fialkov said.
The recommendation would adopt changes supported by Valero, the largest US independent refiner and third-largest ethanol producer, and merchant refiners including CVR Energy, a smaller midcontinent refining operator owned by Carl Icahn, regulatory adviser to President Donald Trump. The administration could also support changing regulations that limit the sale of higher-ethanol blends during peak summer driving months and push for changes to tax credits for the biodiesel industry, according to sources familiar with the proposal.
News of a possible deal roiled the industry and prompted denouncements of murky agreements determining the future of US fuels.
"I think there is a good path forward for us, I really do," said Emily Skor, chief executive of biofuels trade group Growth Energy. "But that path forward does not include backroom deal making."
A White House spokeswoman today denied the administration was developing an executive order on ethanol policy but did not comment on whether other directives were being considered.
An order would not be necessary for changes under the authority of the Environmental Protection Agency. The agency could open up a new rulemaking process based on public comments on the proposed changes it finished taking last week, or could include changes in a settlement of existing litigation against the fuel program.
Renewable Fuels Association (RFA) chief executive Bob Dinneen stood by a statement issued earlier today describing an unnamed Trump administration official stating that a pending executive order would move the point of obligation under the Renewable Fuel Standard (RFS).
"Despite our continued opposition to the move, we were told the executive order was not negotiable," Dinneen said in the statement.
The Renewable Fuel Standard (RFS) requires refiners, importers and other companies adding to the domestic fuel supply ensure rising volumes of renewable fuels blend into that transportation pool. Companies use credits called renewable identification numbers (RINs) generated when renewable fuels blend with fossil fuels to prove each year those volumes were met.
Merchant refiners produce gasoline and diesel but participate much less in selling those fuels to drivers. Such refiners purchase RINs from those companies today to meet compliance. Costs have climbed along with concerns that blending requirements have outstripped the industry's ability to physically deliver those fuels to drivers.
Valero spent roughly $750mn in 2016 to comply with the program, according to the company.
CVR Energy, a refiner with less than a tenth of Valero's crude processing capacity, spent $206mn during the year. CVR Energy today declined to comment on the rumored deal.
Merchant refiners have pushed for the responsibility to meet those volumes move closer to the retail level. The change would reduce the need to trade RINs and make companies closer to the retail level responsible for ensuring rising volumes of renewable fuels enter the domestic fuel supply each year. That adjustment would save refining jobs and make retailers more responsive to the rising mandate levels, supporters have said.
"By improving the efficiency of the RFS, the alignment will reduce unnecessary costs and burdens of the program, particularly on the parties that are least financially capable of bearing such burdens," Valero senior vice president Richard Walsh said in comments to the EPA filed last week.
Integrated refiners, biofuel groups and large retailers see the proposal as a reward to companies' failure to adapt. Removing refiner incentive to produce the blendstocks needed to make finished, high-biofuel blends would make increasing the percentage of renewable fuels in US fuel tanks more expensive.
"This may be the perfect strategy if the proponents for such a move wish to shed their (obligation) and socialize it across other obligated parties," BP chief operating officer Douglas Sparkman said in a comment urging EPA to reject the idea last week. "It does nothing to ease implementation of the RFS, nor does it assist the industry in overcoming the constraints on the RFS program imposed by the blendwall."
Such a shakeup of US biofuel mandates would likely take months to execute and almost immediately meet challenges in court. Obligated companies may keep RINs for up to two years before submitting them for compliance.
"One would think this type of thing calls for an even more lengthy grace period to give time for balance sheets to wind down," National Association of Truck Stop Operators vice president of government relations David Fialkov said.
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