Another Billionaire Bailout?
by Brooke Coleman (Bloomberg/Advanced Biofuels Business Council) … (Carl) Icahn’s ask is pretty simple. He wants the EPA to change the rules midstream to relieve his petroleum refining assets of their obligations.
The RFS, for its part, requires petroleum companies like Icahn’s CVR Refining to blend more renewable fuel, reducing dependence on foreign oil. The result has been cleaner and cheaper American-made fuel choices for consumers at the pump.
It’s safe to say the oil industry doesn’t like the program. But, incredibly, the RFS actually establishes a clear path for oil companies to profit from RFS implementation.
Every gallon of RFS-eligible renewable fuel produced has a single credit attached to it, called a RIN. Companies like CVR must retire RINs with the EPA to show RFS compliance, procured either by purchasing renewable fuel with an attached RIN or by buying RINs on the open market. But because every gallon of renewable fuel secured has a RIN attached, oil companies buying and blending more renewable fuel have RIN surpluses to sell at a profit to companies short on RINs.
If the oil industry as a whole refuses to blend more renewable fuel, RIN prices rise on increased demand.
Western Refining and PBF Energy, for example, made investments in downstream biofuel blending capacity to capture higher RIN values years ago. Just last month, Valero’s CEO Joe Gorder told investors that the “obvious operating strategy” for reducing RIN costs “is to find ways to blend more [biofuels].” It appears Valero has done exactly that by acquiringterminal services just this week that will give the refiner more capacity to store and blend biofuels.
While Icahn seems to have ignored the law, other refiners prepared for it or moved quickly when RIN prices predictably rose. READ MORE