That spells uncertainty for a handful of independent refiners that secured lucrative waivers from the Trump administration, and could fire up prices for the biofuel blending credits those facilities need to comply with the nation’s biofuel law.

“The potential ramifications are huge,” said James Stock, an economist and professor at Harvard University who has researched biofuel policy.

Under the U.S. Renewable Fuel Standard, oil refineries are required to blend billions of gallons of biofuels such as ethanol into their fuel or buy credits from those that do. The EPA can waive those obligations if they prove compliance would cause them financial distress.

The biofuel industry has been incensed by a near quadrupling of waivers granted by the Trump administration, saying it is undermining demand for corn-based ethanol. The oil industry argues the waivers are needed to protect refining jobs, and says the waivers do not affect actual ethanol usage.

The U.S. Court of Appeals for the 10th Circuit on Jan. 24 vacated three biofuel waivers the EPA granted in 2017 to two small refineries owned by HollyFrontier and one by CVR Energy, which is controlled by Trump ally and billionaire investor Carl Icahn.

Fuel prices

According to the court’s decision, the EPA overstepped its authority to grant the waivers because the refineries had not received exemptions in the previous year. The court said the RFS is worded in such a way that any exemption granted to a small refinery after 2010 must take the form of an “extension.”

It also noted research showing oil refineries are able to pass the costs of complying with the RFS to consumers by raising fuel prices, suggesting the waivers were not needed to help the oil refineries financially.

Officials at HollyFrontier and CVR were not immediately available to comment. EPA spokesman Michael Abboud said the agency is reviewing the decision.

A coalition of biofuel industry groups had challenged the three exemptions, bringing the suit. Those groups hope the court decision can eventually be applied to other waivers because the issues in question apply more broadly, said Geoff Cooper, president of the Renewable Fuels Association industry group.

According to EPA data, the agency granted seven biofuel waivers in 2015. That number rose to 35 in 2017 — meaning 28 waivers were given without having been given in a previous year. The EPA does not name the refineries that receive the waivers, arguing the information is confidential, but Reuters has reported that some have gone to small facilities owned by large companies such as Exxon Mobil and Chevron Corp.

Harvard’s Stock said the case threatens to hit small oil refineries hard if it means the waivers will be rescinded and they must comply with the RFS.

“All of a sudden there would be vast amounts of past obligations due, combined with the prospect of very limited (waivers) going forward,” he said.

Prices of blending compliance credits, known as Renewable Identification Numbers (RINs), are up about 20 per cent since the court decision, to one-month highs.

Ericka Perryman, a spokeswoman for the American Fuel and Petrochemical Manufacturers refining industry group, said AFPM was “carefully reviewing the opinion and potential implications.”

The post Ruling casts doubt on dozens of U.S. refinery biofuel waivers appeared first on Manitoba Co-operator.

The announcement follows weeks of lobbying by Midwestern lawmakers and representatives of the corn industry who wanted the agency to reject recent proposals from the oil industry to water down the U.S. biofuels mandates.

“Maintaining the renewable fuel standard at current levels ensures stability in the marketplace and follows through with my commitment to… upholding the rule of law,” EPA administrator Scott Pruitt said in a news release.

Pruitt is expected to travel to an invitation-only event in Iowa on Friday and highlight the administration’s commitment to the ethanol industry.

The U.S. Renewable Fuels Standard requires refiners to blend increasing amounts of biofuels into the nation’s fuel supply every year as a way to boost U.S. agriculture, slash energy imports and cut emissions.

The law, introduced more than a decade ago by then-President George W. Bush, has been a boon to the corn belt but has upset the oil industry, which sees biofuels as competition and which has been burdened with the costly responsibility of blending.

The 2018 targets require fuel companies to blend 19.29 billion gallons (73.02 billion litres) of renewable fuels into the nation’s fuel supply, up slightly from the 19.28 billion gallons required for 2017.

That will include 15 billion gallons of conventional biofuels like corn-based ethanol, in line with 2017, and 4.29 billion gallons of so-called advanced biofuels, up from 4.28 billion in 2017, the EPA said. Advanced or second-generation biofuels are made from lignocellulosic biomass or woody crops, agricultural residues or waste.

For 2019, the EPA set a target for biodiesel at 2.1 billion gallons, unchanged from 2018.

The targets adhere to the EPA’s proposal made in July for both conventional biofuels and biodiesel, but reverses a proposal by the agency to slightly reduce total advanced volumes to 4.24 billion gallons in 2018.

“King Corn”

After consultations with the oil industry, the EPA had opened the door to cuts to the biofuels volumes targets and was considering other ideas to ease the burden on refiners but eventually backed off under heavy pressure from Midwestern lawmakers.

Chet Thompson, president and CEO of American Fuel & Petrochemical Manufacturers which represents U.S. refining companies, said the EPA’s final decision showed it was “bowing the knee to King Corn.”

“We think this action is bad for U.S. manufacturing and American consumers,” he said.

A number of groups representing ethanol growers praised the targets, including the Renewable Fuels Association.

But not everyone representing the biofuels industry was happy. U.S. Senator Chuck Grassley of Iowa, a vocal supporter of the biofuels industry, said he would have liked to see an increase in biodiesel levels in 2019.

“The EPA’s announced renewable volume obligations fall short of the full potential of the U.S. biofuels industry,” he said.

Doug Whitehead, chief operating officer of the National Biodiesel Board, echoed the sentiment.

“EPA administrator Pruitt has disappointed the biodiesel industry for failing to respond to our repeated calls for growth,” he said. “These flat volumes will harm Americans across several job-creating sectors — be they farmers, grease collectors, crushers, biodiesel producers or truckers — as well as consumers.”

Oil refiners meet the targets by acquiring blending credits called RINs, either by earning them by blending themselves or by buying them from rivals. The must hand the RINs into the EPA once a year.

RINs prices were little changed on Thursday, traders said, as the EPA final volumes were in line with expectations.

Prices of the most heavily traded credits, known as a D6, were trading at US89 cents each after the announcement, relatively unchanged from Wednesday’s prices, traders said.

— Reporting for Reuters by Jarrett Renshaw and Richard Valdmanis.

The post U.S. EPA ups biofuel targets slightly appeared first on Manitoba Co-operator.

Obama’s plan – outlined during the campaign last year when oil prices hit a record $147 a barrel – calls for doubling U. S. alternative energy use within three years while easing reliance on foreign oil.

Oil prices have tumbled to around $40 a barrel, easing the urgency to solve America’s energy crisis. Analysts now say bigger government subsidies will be needed to lure private investment into less economical green fuel projects.

“Low oil prices are a very real danger because they do make alternative energy less commercially viable,” said Peter Beutel, president of Cameron Hanover.

“We need the government to subsidize solar, wind, ethanol, etc. to make them commercially viable enough to survive this price environment.”

The slowing economy has already started to take a toll on alternative energy projects that looked promising in 2008 when oil costs were soaring.

U. S. wind power capacity in 2008 grew by its fastest rate ever, but development slowed to a trickle late in 2008 as the credit crunch hit. Several ethanol plants have been closed as profits turned to losses with falling oil prices and volatile prices for corn, the main feedstock for U. S. ethanol.

“The problem is that financing has dried up, so the best thing that Washington can do – and this is being discussed as part of the stimulus debate – is to provide direct financing support,” said Pavel Molchanov, analyst for Raymond James and Associates.

Green energy advocates said steps taken so far as part of the economic stimulus package look promising.

The Senate Finance Committee recently approved $31 billion in tax credits and financial incentives to boost alternative energy supplies and promote conservation.

The plan includes most of the $20 billion in energy tax breaks cleared by the House Ways and Means Committee, plus more incentives to help alternative energy companies.

“If your company doesn’t qualify for the tax credit you would be eligible for a grant program,” said Molchanov. “Hopefully that will be in the final recovery package.”

Still, analysts worry the price drop could send Americans back to their wasteful tendencies, after high prices at the pump encouraged consumers to drive less and turn in their trucks and SUVs for more fuel-efficient vehicles.

“We’re already seeing some shift backward as a result of lower oil prices, with movement back toward SUVs and away from hybrids,” said Jim Ritterbusch, president of Ritterbusch & Associates.

“The push toward renewable fuels has been lessened.”

Other analysts argued that while the economics of alternative energy projects may be depressed by the drop in oil, lower crude prices will not last forever.

Crude demand – and prices – are expected to pick up once the economy starts to rebound.

“It’s bad now because prices are low but I don’t think there’s a forecaster who doesn’t think prices are going to go back up,” said Sarah Emerson, director of Energy Security Analysis Inc. (ESAI). “By the time all of this is implemented prices will be back up at $60 or $80 anyway.”

In addition, the drop in prices could give the Obama administration some breathing room to develop his energy plan.

“Lower oil prices are giving us a period of less urgency in which we can make a well-thought out transition from traditional energy to different forms of energy,” said Beutel.

“All the lower prices have done is take the loaded gun away from our temples and place it on the table in front of us. But the gun is still loaded.”

The post Oil Price Slump Makes Bioenergy A Harder Sell appeared first on Manitoba Co-operator.