Don’t Change the RFS Point of Obligation

Business News/Analysis, Federal Regulation, Infrastructure, Marketing/Markets and Sales, Opinions, Policy, Terminals Transport

December 23, 2016

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by Mark Griffin (Pro Petroleum/Real Clear Energy) … Moving the point of obligation eliminates our ability to compete and gives major refiners a significant unfair advantage over small businesses in small markets across the country. Liquidity and competition are what keep fuel prices low. If we obligate blenders and retail operators, liquidity would be squeezed out of the market, killing competition. We chose to make significant infrastructure investments in railroad logistics, terminal blending expansion and retail blending at the pump – enabling us to blend renewable fuels. Those investments have created lower cost fuel options for consumers and created jobs. If we are forced to buy from refiners, we lose the ability to buy fuel in the open market and compete with refiners on price. Once that happens, we will be forced to stop shipping to other terminals. Once pipeline shippers like us start leaving markets like we have in California – refiners will lose a major competitor and fuel prices will go up.

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Currently, there are approximately 200 obligated parties under the RFS. Mr. Icahn is proposing EPA increase those by about 500% – creating 1,000 new individual points of obligation. This means more transactions to track, more EPA staff to track those transactions and many more opportunities for error and outright fraud.

Even though they all have the same obligations under the law, and have for nearly 10 years, many refiners oppose changing the point of obligation. These are refineries that invested in the infrastructure necessary to comply with the RFS. These investments allow them to offset the costs associated with being an obligated party and get credit for blending renewable fuels at their terminal rack facilities.

Refineries like Mr. Icahn’s that divested their terminal rack and retail operations to become pure-play refiners are the only ones looking for a government bailout. These were business decisions informed by their view of the marketplace but many of these refiners only did so under pressure from investors like Mr. Icahn. This was poor advice to follow, but rewarding them would only perpetuate the “rigged-system” that Mr. Trump campaigned so hard against. READ MORE

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