Lo­cal re­fin­ers need re­lief from RFS con­straints

Daily Times (Primos, PA) - - OPINION - By Tim Brink Times Guest Colum­nist

This month, Sen. Pat Toomey, R-Pa., sent a let­ter to the En­vi­ron­men­tal Pro­tec­tion Agency (EPA) Ad­min­is­tra­tor An­drew Wheeler ask­ing him to visit a lo­cal oil re­fin­ery to bet­ter un­der­stand how crit­i­cal re­fin­ers are to Penn­syl­va­nia’s econ­omy. The oil in­dus­try has a long his­tory of pro­vid­ing sta­ble jobs for Penn­syl­va­ni­ans, but re­cent pushes by large spe­cial­in­ter­est groups have threat­ened the sta­bil­ity of the in­dus­try, putting the eco­nomic health of the state and en­ergy se­cu­rity of the coun­try at risk.

About 13 years ago, Congress cre­ated the Re­new­able Fuel Stan­dard (RFS) to limit the na­tion’s de­pen­dence on for­eign oil. The RFS re­quires oil re­fin­ers to blend up to 10 per­cent of re­new­able fuel into trans­porta­tion fuel. In the United States, most re­finer­ies use corn ethanol to meet their obli­ga­tions un­der the RFS. To track re­fin­ers’ com­pli­ance with the pro­gram, the EPA is­sues Re­new­able Iden­ti­fi­ca­tion Num­bers (RINs) as cred­its for blend­ing ethanol into fuel.

When they drafted the pro­gram, Congress failed to con­sider that only the largest re­fin­ers have the equip­ment needed to blend ethanol with fuel. This left small and in­de­pen­dent oil re­fin­ers, many of which call Penn­syl­va­nia home, on the hook to pur­chase RINs from large re­fin­ers and oth­ers who are ca­pa­ble of blend­ing ethanol. As Toomey wrote, “The RFS picks win­ners and losers amongst sources of en­ergy and has named mer­chant re­fin­ers, par­tic­u­larly those in the Philadel­phia re­gion, the losers.”

To make mat­ters worse, Wall Street spec­u­la­tors med­dled in the RINs mar­ket­place by pur­chas­ing and then hoard­ing cred­its, cre­at­ing a short­age and driv­ing up the price of RINs to un­prece­dent­edly high lev­els. The brunt of the pain landed squarely on small, in­de­pen­dent oil re­fin­ers. Just a few months ago, one Penn­syl­va­nia re­finer, em­ploy­ing more than a thou­sand peo­ple and sup­port­ing count­less oth­ers in the process, filed for bank­ruptcy, cit­ing the RINs bur­den as a driv­ing force be­hind its fi­nan­cial fail­ure.

As a part of the RFS, the EPA has the abil­ity to grant waivers to re­fin­ers strug­gling to meet their blend­ing obli­ga­tions caused by Wall Street’s mar­ket ma­nip­u­la­tion. Ear­lier this year, when the EPA granted waivers to strug­gling re­finer­ies, the pow­er­ful ethanol lobby cried foul, claim­ing that the EPA was de­stroy­ing de­mand for ethanol even as ethanol pro­duc­ers told share­hold­ers there was no rea­son to change the out­look for 2018.

In their lat­est at­tempt to ma­nip­u­late the RFS, the ethanol lobby is push­ing EPA Ad­min­is­tra­tor Wheeler to ap­prove the year-round sale of E15, a blend of gaso­line con­tain­ing 15 per­cent re­new­able fuel. Most ve­hi­cles on the road are not de­signed to run on E15 and fuel blends with more than 10 per­cent ethanol would cause sig­nif­i­cant dam­age to gas sta­tion stor­age tanks not de­signed for a higher per­cent­age of bio­fuel. To store this blend of bio­fuel, gas sta­tion own­ers would need to di­vert cap­i­tal to retro­fit gas sta­tions to han­dle the E15 blend, a cost that would surely be passed to the con­sumer.

While par­ties on both sides of the is­sue can agree that RFS re­form is nec­es­sary, Congress must find a so­lu­tion that pro­tects the en­ergy se­cu­rity of the coun­try and pre­vents eco­nomic desta­bi­liza­tion due to lost jobs. Con­sid­er­ing Penn­syl­va­nia’s en­ergy-rich his­tory, find­ing a com­mon-sense so­lu­tion to the RFS is crit­i­cal to en­sur­ing the long-term sta­bil­ity of the state and our com­mu­ni­ties.

Tim Brink is ex­ec­u­tive vice pres­i­dent of the Me­chan­i­cal & Ser­vice Con­trac­tors As­so­ci­a­tion of Eastern Penn­syl­va­nia.

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