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Refiner, Ethanol Industries Continue Battle on Small-Refinery Waivers

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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Ethanol and refining interests continue to press the Trump administration on the small-refinery waivers program. (DTN photo by Todd Neeley)

Refining interests are continuing a full-court press on President Donald Trump's administration to continue granting small-refinery waivers to the Renewable Fuel Standard and to maintain a policy that won't add costs to refiners.

On Monday, EPA Administrator Andrew Wheeler toured Monroe Energy's refinery in Trainer, Pennsylvania, where he indicated the EPA still is considering about 40 additional waiver requests for 2018 and would have a decision on those within the next month.

EPA and the USDA have been conducting a review of the waivers program, leading to a delay in a decision on the pending requests.

Although Wheeler joined Trump on a recent visit to Southwest Iowa Renewable Energy in Council Bluffs, Iowa, Wheeler was unable to join the president and ethanol industry officials on a tour of the ethanol plant.

In response to Wheeler's trip to Pennsylvania, the Renewable Fuels Association invited him to tour an ethanol plant.

RFA Chief Executive Officer and President Geoff Cooper extended an invitation on Friday in a letter to Wheeler, https://ethanolrfa.org/….

In a news release on Monday, Cooper said Wheeler would "certainly get an earful of myths and misinformation about the RFS, RINs and small-refinery exemptions" during the visit to the Pennsylvania refinery. RINs, or renewable identification numbers, can be bought and sold as a way to comply with the Renewable Fuel Standard.

The RFA said in a news release the Monroe facility, owned by Delta Air Lines, refines 185,000 barrels of crude oil per day.

"At this size, the facility does not meet the statutory definition of a 'small refinery' and thus may not petition EPA for a 'disproportionate economic hardship' exemption from the Renewable Fuel Standard," the RFA said. "In 2015, Monroe notched record operating income when RIN prices were three times higher than current levels. And earlier this month, parent company Delta announced record revenue of $12.5 billion in its second quarter."

Cooper wrote in the letter that, "Even though Monroe Energy is not a ‘small refinery,’ Delta officials will certainly argue that the company has benefited from the waivers because they resulted in a significant collapse in RIN prices. Of course, your agency's own analysis has concluded that the financial health of refineries is not affected by RIN prices, stating that, ‘obligated parties, including small entities, are generally recovering the cost of acquiring the credits necessary for compliance with the RFS standards through higher sales prices of the petroleum products they sell.’"

The Fueling American Jobs Coalition that represents a group of refiners and other interests, said in a statement on Monday, "As anyone who has visited a refinery firsthand can attest, the work conducted at these vast complexes demands a tremendous investment of financial and human resources. The output of refineries helps sustain our economy, and their workers help sustain entire communities.

"For these reasons, it is critical that the cost of complying with the Renewable Fuel Standard is kept at a reasonable level, particularly as reflected in the cost of renewable identification numbers (RINs). Attempts to drive up RINs costs serve only to enrich a handful of traders and middlemen; they do nothing to benefit America's refineries or farmers."

Earlier this month Wheeler received a letter from Texas Gov. Greg Abbott, who laid out reasons why waivers are important to his state's economy.

"The EPA must follow the law by continuing to grant SREs to applicants that demonstrate disproportionate economic hardship under the statute," Abbott said in the July 12 letter.

"A measured and effective SRE program is of great significance to the state of Texas. Texas has 30 refineries that produce over 5.7 million barrels daily -- roughly a third of U.S. capacity. Our oil and gas sector employs 350,000 people, 100,000 of whom work in refining and petrochemical production. In fiscal year 2018, the industry paid more than $14 billion in state and local taxes and state royalties. This revenue goes toward funding Texas schools, Medicaid and children's health insurance programs, child protective services, infrastructure and critical first-responders such as police and firefighters.

"Over 25% of Texas refineries potentially qualify as small refineries under the RFS. While comparatively small, these refineries can have a large impact on the communities in which they are located. One such refinery, in Big Spring, Texas, employs workers with an average annual salary of $97,000, in an area with a per capita income of less than $20,000 a year; it also spends millions of dollars for outside services that support local businesses."

Todd Neeley can be reached at todd.neeley@dtn.com

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Todd Neeley