WASHINGTON -- The leader of the U.S. Environmental Protection Agency (EPA) has called for reforming the Renewable Fuel Standard (RFS) after the recent bankruptcy of a Pennsylvania refiner.
In January, Philadelphia Energy Solutions (PES), which owns two refineries on the East Coast, filed for bankruptcy, Reuters reported. PES blamed its financial woes partly on the high cost of complying with the RFS, which requires obligated parties such as refiners to meet biofuel blending quotas each year, or buy Renewable Identification Numbers (RINs), credits that demonstrate compliance. PES owes about $185 million worth of RINs to the EPA.
In a recent interview with Fox News, EPA Administrator Scott Pruitt pointed to PES’ bankruptcy as proof that the RFS needs to be changed to address rising RINs costs.
“We need RIN reform,” Pruitt said. “It is something I’ve talked to Congress about.” He also said the EPA should be more conservative in setting renewable volume obligations (RVOs), the biofuel blending quotas that obligated parties are expected to meet each year.
“We set volume obligations every November,” he told Fox News. “Our job should be to take the market and production levels and set volume obligations that are consistent with objective factors—not set inflated or blue-sky types of numbers that create this inflationary pressure on RINs.”
In the past few years, refiners including Valero Energy and CVR Refining, along with groups such as the American Fuel and Petrochemical Manufacturers (AFPM), have filed petitions asking the EPA to shift the point of obligation from refiners and importers downstream to anyone from fuel blenders to distributors. In November 2017, the EPA denied the petitions, arguing it would increase the complexity of the program.
However, the Trump administration has shown an openness to tweaking the RFS to relieve refiners’ compliance burdens. President Trump has met with a group of Republican legislators from oil-producing states, led by Sen. Ted Cruz, to discuss whether a deal can be made with ethanol supporters to make reforms to the program. Making changes to the RFS would require Congressional action, which has seemed unlikely due to fierce resistance from legislators representing corn-belt states.
In a column for The Hill, Bob Dinneen, president and CEO of the Renewable Fuels Association, argued that PES' choices were to blame for its financial issues.
“Like other refiners, PES could have eliminated its RINs-related costs by making investments in blending more renewable fuels,” Dinneen said. “Instead, PES is blaming RINs for its financial woes. “
Emily Skor, CEO of ethanol industry group Growth Energy, told Reuters that Pruitt’s recent comments were “in direct contradiction to President Trump’s repeated and consistent promises to support the RFS, American farmers and American energy security.”