Valero Asks Obama Administration to Waive Ethanol Mandate Now

Costs to achieve target have "skyrocketed"

SAN ANTONIO -- Valero Energy Corp., the world's largest independent refining company, called on the Obama administration to waive the country's biofuel target immediately, saying the cost to reach it has skyrocketed, reported Bloomberg.

"We need the waiver now," Valero CEO Bill Klesse, said in a letter to Environmental Protection Agency (EPA) administrator Gina McCarthy on Tuesday. Valero is also the third-largest U.S. ethanol producer, after Archer-Daniels-Midland Co. (ADM) and Poet LLC.

Refiners are required by law to use 13.8 billion gallons of ethanol in 2013. Renewable Identification Numbers (RINs) are attached to each gallon of ethanol to track compliance. Once the additive is blended into gasoline, refiners can retain the certificate to show compliance or trade it to another party. RINs prices have risen more than eight-fold so far this year.

RINs have increased because of falling gasoline demand and higher biofuel consumption targets, Klesse said in the letter.

Gasoline demand will drop 0.5% next year, according to a forecast today from the Energy Information Administration (EIA), the U.S. Department of Energy's statistical arm. The Renewable Fuels Standard (RFS), set in 2007, calls for 14.4 billion gallons of ethanol to be used in 2014, up 4.3% from this year. The target increased 4.5% this year from 13.2 billion in 2012.

"You have the flexibility to waiver volumes which will lower the price of RINs now, will lower the cost to the consumer and make the marketplace fair," Kleese said.

Ethanol is typically blended in a formula of as much as 10% in gasoline. While the EPA has approved blends of 15%, refiners have not adopted the higher concentration, citing engine damage concerns.