The refining industry is fighting back against a costly Environmental Protection Agency ethanol mandate.
The EPA requires that refiners blend 18.15 billion gallons of renewable fuels into the fuel supply, which applies to all but one politically connected refinery. But the other refineries are filing waiver requests to lower blending requirements below 10 percent of the fuel supply for 2014.
“The [renewable fuel standard] RFS is broken beyond repair, and we are calling on the EPA to use its waiver authority to provide a stop gap measure for this unworkable mandate,” charged Bob Greco, downstream group director at the American Petroleum Institute (API).
API joined the American Fuel & Petrochemical Manufacturers (AFPM) in filing a joint waiver with the EPA requesting that the agency exercise its authority to reduce the blending burden by 3.35 billion gallons in 2014 in order to avoid the impending “blend wall” — the fear that blending more than 10 percent ethanol into the fuel supply because it can damage car engines.
“The negative impacts of the RFS will be extreme and will undoubtedly hurt consumers,” said Charles Drevna, president of AFPM. “If EPA does not act, the inability to blend the statutory-mandated amount of ethanol could lead to domestic fuel supply shortages and ultimately cause severe economic harm to consumers and the economy.”
The EPA recently announced required blending levels for 2013 and 2014, and while the EPA allowed some flexibility in meeting this year’s 16.55 billion blending requirement, refiners criticized the agency for missing an opportunity to address the “blend wall” issue in 2013.
Refiners were also irked by the fact that the EPA chose to exempt only one out of the 143 refineries in the country. The EPA withheld the identity of the refinery, but the Wall Street Journal revealed that it was Alon USA Energy’s Krotz Springs facility in Louisiana.
Krotz Springs does meet the requirements for the EPA’s economic hardship exemption for small refineries — those that refine less than 155,000 barrels of crude per day. Alon was alone chosen among four refiners that applied.
However, it seems as though political clout was also helpful to Krotz Springs.
“Lobbying disclosure records show Alon paid $60,000 in the second quarter of 2013 to the Manatt, Phelps & Phillips firm,” The Journal reports. “This was the same quarter when Alon filed for its exemption. The records show that Manatt lobbied in the House and in the Senate for Alon on the sole issue of ‘renewable fuel standards’ … The records also did not turn up similar lobbying efforts by other refineries applying for an exemption.”
Louisiana Sens. Republican David Vitter and Democrat Mary Landrieu, along with Republican Reps. Charles Boustany and Rodney Alexander, sent a letter to President Barack Obama supporting an exemption for Krotz Springs. A spokesman for Vitter told the Journal that their office was not approached by the refinery for support.
Vitter has also supported full repeal of the EPA’s ethanol mandate.
“Industry analysts meanwhile note that Alon has a financial tie up with J. Aron, the commodities-trading arm of Goldman Sachs,” The Journal added. “That bank has more than a few of its ex-executives in key Obama administration positions, and it has retained ex-Obama officials like former White House counsel Gregory Craig to do work for it.”
“There’s no question [Krotz Springs] is a disadvantaged refinery,” Tom Kloza, chief oil analyst at Gasbuddy.com, told the Journal. “But there are other merchant refineries that are disadvantaged. And within the industry there is a healthy sense of cynicism about this [exemption], given the Goldman Sachs-J.Aron relationship.”
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