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Views and opinions: Little-known EPA rule has a ripple effect on consumers

 

 

Isaac Newton’s third law states, “for every action, there is an equal and opposite reaction.” Sir Isaac must have never been in government, because a little-known rule in the Environmental Protection Agency is having a ripple effect across the nation, and is likely to hit consumers in their pocketbook. The EPA must now act to save thousands of jobs across the country and billions in consumer costs.

The Renewable Fuel Standard (RFS) is a program requiring fuel sold in the United States to contain a minimum amount of renewable fuels, such as ethanol. The program was originated in the Energy Policy Act of 2005 and expanded under the Energy Independence and Security Act of 2007. To track the renewable fuel mandate a renewable identification number (RIN) is assigned to each batch of biofuel. The RINs go towards the Renewable Volume Obligation (RVO), which are the targets for each refiner or importer of petroleum-based gasoline or diesel fuel.

The problem is the rules were written for refiners that have the capability to blend renewable fuels with regular fuel, like gas, diesel and jet fuel. Every time a renewable fuel is mixed with non-renewable, or fuel is imported already blended with renewables; the company gets a RINs credit from the government.

Unfortunately, many refiners do not have the capability to blend. These refiners must purchase separated RINs. Enter the Wall Street speculators.

The speculators are buying the RINs from the blending companies and driving up the price. In 2013, a 20-fold price increase in RINs was attributed to speculators stockpiling the phony currency. This was never the intent of the rule. The rule was designed to make sure renewable fuels were blended with non-renewable fuels; but as usual, Wall Street speculators started manipulating the market, after all, they did a great job with the housing market.

RINs have become a multibillion-dollar burden on refiners and a tax on U.S. consumers. The Oil and Gas Journal estimated U.S. refiners paid $2.2 billion for RIN credits in 2016.

The RINs scam has already forced the only refinery in Delaware to close its doors in 2009, sending hundreds of workers to the unemployment line.

Jeff Warmann, president of Monroe Energy, warned his refinery might be next. Monroe Energy is an independent energy company with a refinery outside Philadelphia. His company spent more than $200 million last year on RINs, “That’s more than we paid for the refinery,” he said.

Another Pennsylvania refiner being slammed by the RINs scam is Philadelphia Energy Solutions. The company runs the largest refinery on the U.S. Atlantic Coast, refining 310,000 barrels per day. The company now spends more on RINs than its total payroll.

Contrary to popular belief, refineries operate on razor-thin margins. Many refiners are on the verge of bankruptcy and are laying off hundreds of workers because of the simultaneous burden of the RINs scam and thin margins.

The fight has brought together strange bedfellows. Some of the most conservative senators are on the same side as northeastern union workers and liberal politicians. If Gov. John Carney of Delaware, former Pennsylvania Gov. Ed Rendell, the United Steel Workers President Leo Gerard, and Sen. Ted Cruz (R-Texas) can all get on the same page about an issue, you know the problem is important.

The refineries are not fighting the biofuel mandate; they are fighting the way in which the program is administered. Changing the EPA regulations that require the big fuel blenders and global energy companies that create the credits are also responsible for using the credits is the right thing to do.

The EPA established a competitive advantage for some while disadvantaging others. It is time for the EPA to rectify the situation for the sake of good-paying, blue collar jobs and the consumer’s pocketbook.

 

The views and opinions expressed in this column are those of the author and not necessarily those of Farm World.

11/30/2017