Blending Ethanol to Gasoline is Expensive for Refineries

Biden considers giving refiners relief from U.S. biofuel laws

From an Article by Jarrett Renshaw & Stephanie Kelly, Reuters News Service, June 11, 2021

IMAGE — Gasoline Station in Mason City, Iowa, Selling E-15 With 15% Ethanol

NEW YORK — President Joe Biden’s administration, under pressure from labor unions and U.S. senators including from his home state of Delaware, is considering ways to provide relief to U.S. oil refiners from biofuel blending mandates.

The issue pits two of the administration’s important political constituencies against each other: blue-collar refinery workers and farmers who depend on biofuel mandates to prop up a massive market for corn.

It could prompt an about-face for the administration, which had been rolling back former President Donald Trump’s dramatic expansion of waivers for U.S. refiners from the Renewable Fuel Standard. The law requires them to blend billions of gallons of ethanol and other biofuels into their fuel each year or buy credits from those that do.

The credits, known as RINs, are currently at their highest price in the program’s 13-year history, and refiners have said the policy threatens to bankrupt fuel makers already slammed by sinking demand during the pandemic.

Biofuel advocates counter that fuel makers should have invested in biofuel blending facilities years ago and can pass through added costs for buying credits. Renewable fuel credits traded down 15% on Friday morning after the news. Credits traded at $1.70 each, down from $2.00 on Thursday, traders said. Prices later traded at $1.85 each.

Democratic senators Chris Coons and Tom Carper of Delaware have held at least two discussions in recent weeks with Michael Regan, head of the U.S. Environmental Protection Agency, to discuss providing relief for refiners, according to the three sources. Coons and Carper were seeking to help the state’s lone refinery, a plant in Delaware City with a capacity of about 180,000 barrels per day. Their requests added to a chorus of pleas from other states hosting refineries, including Pennsylvania, Texas and Louisiana.

In the meetings, Regan and the senators discussed options like a nationwide general waiver exempting the refining industry from some obligations, lowering the amount of renewable fuel refiners must blend in the future, creating a price cap on compliance credits, and issuing an emergency declaration, two of the sources said.

Nick Conger, an EPA spokesperson, confirmed Regan had met with the senators but did not comment further on the discussions or confirm whether the agency was looking at ways to provide relief to refiners.

Seth Harris, deputy assistant to the president on labor and economic issues, has met with union representatives to hear their grievances about biofuel mandates.

Merchant refiners like PBF Energy which operates the Delaware City plant, say biofuel laws could shut down plants and kill thousands of union jobs. The company recently shut most of its refinery in New Jersey, the latest in a series of shutdowns along the U.S. East Coast. The region, which faces higher refining costs because of its distance from U.S. oil fields, has seen fuel production capacity drop about 40% since 2000.

Federal data shows that only eight refineries remain out of the 17 that were operating on the U.S. East Coast in 2000. At least one company has already bet the administration will end up helping refiners. Reuters previously reported that Delta Air Lines Inc had stopped buying RINs, leaving its refinery in Pennsylvania with a $346 million liability at the end of the first quarter.

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See also: ExxonMobil announces $240M investment in Baton Rouge refinery, From KATC News, Acadia, LA, June 09, 2021

ExxonMobil has announced a plan to invest more than $240 million in capital improvements at their refinery in Baton Rouge. The suite of projects will improve processing capability, increase flexibility for meeting market demand, advance overall site competitiveness and install technology for an expected 10 percent reduction of volatile organic compound emissions, according to the state.