Ethanol Blog

Biofuels Groups Oppose Proposed RFS Settlement with Refiner

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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Two biofuels groups told the U.S. Department of Justice on Monday they are opposed to a proposed settlement by the U.S. Environmental Protection Agency to relieve an East Coast refiner from most of its renewable identification number, or RINs, obligations in the Renewable Fuel Standard.

Philadelphia Energy Solutions, which recently filed for Chapter 11 bankruptcy protection based on its reported inability to afford RINs costs, received an olive branch from the agency in court to relieve the company's obligations for January 2016 to April 2018.

In comments to DOJ on Monday, Renewable Fuels Association President and Chief Executive Officer Bob Dinneen said the settlement should be rejected "because the terms are patently unfair, unreasonable, and inconsistent with the purposes of the RFS program."

The RFA said the settlement would "unjustifiably" waive the "vast majority -- three-quarters -- of PES' RVOs for the compliance period."

The RFA leveled a number of other concerns about the settlement, including:

-It "offers expansive releases of liability to PES' parent entities, which should be held legally responsible for RFS compliance.

-"Allows PES to take 64.6 million RINs that should have been used to satisfy the 2016-2017 RFS obligations and instead carry them forward to satisfy future 2018 RVO obligations; and

-"Signals the government is willing to overlook when obligated parties misuse the bankruptcy process at the expense of other obligated parties."

The RFA said in a news release that the "true causes" of the company's financial woes include a "rerouting of lower-cost domestic crude oil supplies to Gulf coast refineries, antiquated technology, mismanagement, and lifting of the crude oil export ban."

In its official comments to the DOJ, the RFA said, "By allowing PES to retire only 138 million RINs for its pre-effective date obligation of more than 500 RINs, DOJ and EPA have effectively waived approximately three-quarters of PES's RVOs for this period. Exacerbating its noncompliance, PES reportedly had been also selling roughly 40 million RINs in the fall of 2017, even as the March 2018 RVO compliance deadline approached. This is a classic case of a regulated entity being allowed to have its cake and sell it, too, while PES seeks to escape from its financial responsibilities under the RFS program, it embraces that same program for the limited purpose of profiting from it.

"Although PES attempts to pin blame on the RFS program, it stands alone as the only entity using the bankruptcy court to seek regulatory amnesty from an obligation that affects every refiner equally."

The RFA said in its public comments it wants the DOJ to modify the agreement to account for any contributions of PES' parent companies; to provide liability releases only for entities contributing to PES' RINs obligations; and to require PES to use all of its current RINs to include the 64.6 million RINs the agreement would allow PES to carry forward, to be used toward its 2016 and 2017 RFS obligations.

Also on Monday, the Biotechnology Innovation Organization filed comments with the DOJ.

In a news release Brent Erickson, executive vice president of BIO's industrial and environmental section, said the refiner's claims about RINs to the bankruptcy court was "specious at best.

"The record shows that the refiner ignored its RFS compliance obligations and sold renewable fuel credits for profit, in order to pay unearned dividends to its Wall Street shareholders," he said in a news release. "This proposed settlement agreement undermines the goals of the RFS by allowing the refiner to profit by escaping its obligations under the law."

Read RFA's official comments here: http://bit.ly/…

Read BIO's comments here: http://bit.ly/…

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

Follow me on Twitter @toddneeleyDTN

(TN)

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