The U.S.’s largest East Coast oil refiner suggested Sunday that costs associated with the government’s biofuels mandate were partially responsible for the company’s bankruptcy.
Philadelphia Energy Solutions cited low oil prices and high cost of complying with the Renewable Fuel Standard (RFS) for the need to Chapter 11 bankruptcy, which comes six years after Energy Transfer Partners LP’s Sunoco rescued the company from financial distress.
The company secured access to $260 million in new financing, and said it expected the bankruptcy filing to have no immediate impact on its employees, according to a report from Reuters that was based on an internal memo from Philadelphia Energy Solutions. A spokeswoman for the company has not responded to reporters’ requests for comment.
Philadelphia Energy Solutions has plowed more than $800 million since 2012 on credits to comply with the law, which is administered by the Environmental Protection Agency (EPA) and requires refiners to blend biofuels into the nation’s fuel supply every year. The mandate is the company’s biggest expense, according to the memo.
East Coast refiners have taken a bigger hit than other refineries across the country because of a reliance on crude imports from West Africa. They are also further away from the oil fields of Texas and North Dakota.
Philadelphia Energy Solutions, for its part, had strong profits in 2014 and 2015 because of improved infrastructure. But things went south in 2015 as oil prices plummeted amid a glutted market, and the RFS has not helped matters.
The mandate has created turmoil within the GOP. Republican lawmakers successfully held up President Donald Trump’s EPA nominees last year after reports suggested the agency was considering reducing biofuels.
Iowa Sen. Chuck Grassley, for instance, opposed the nominations last year of Michael Dourson, who was picked to run the EPA’s Office of Chemical Safety and Pollution Prevention, and Bill Wehrum, a former EPA official that Trump tabbed to run the agency’s air office.
Trump, like most of his Republican opponents, campaigned during the presidential election on maintaining the standard to appease Iowa farmers who depend on the high-priced corn-based fuel.
EPA Chief Scott Pruitt was at the time scouring for ways to drive down RIN prices to help the fossil fuel industry, according to oil industry sources who have spoken with the EPA. The agency wanted to allow exports of ethanol to count toward the total biofuel volume obligations for the year, a policy that would likely drive down prices, Reuters reported at the time.
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