EPA Spares Philly Refiner in Bankruptcy Settlement

March 13, 2018

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by Kelsey Tamborrino (Politico's Morning Energy) EPA will allow bankrupt refinery Philadelphia Energy Solutions to meet only a portion of its outstanding obligation under the Renewable Fuel Standard as part of a settlement filed with the Bankruptcy Court in Delaware Monday. PES has blamed its financial failure on the RFS, and its bankruptcy spurred a series of meetings at the White House about how to resolve tensions between biofuel producers and some oil refiners over the program. In the future, PES will be expected to submit credits every six months, instead of annually. Reuters first broke the news of the settlement.

"EPA's action in the PES case just demonstrate the Agency's acknowledgement that RINs are the primary cause of PES' bankruptcy and the main impediment to its future viability," a refining source who is concerned about high compliance costs tells ME. The source added that the settlement does not change the need for substantial changes to the program in order to prevent PES from being "right back in the soup" next year.

Biofuels producers are irate. "We are evaluating the settlement and will comment on the proposal," Bob Dinneen, CEO of the Renewable Fuels Association, told ME in a statement. "But at first blush, this strikes us as rewarding bombast behavior and it sets an extraordinarily bad precedent." READ MORE

UPDATE 3-Bankrupt Philadelphia refiner settles biofuel obligation with EPA -court filing (Reuters)

EPA settlement with bankrupt Philadelphia refinery roils biofuels market (Reuters)

Let Ethanol Fend for Itself (Real Clear Energy)

EPA PROPOSAL REDUCES RFS REQUIREMENTS FOR OIL REFINER (Brownfield Ag News; includes AUDIO)

Refinery deal may slow talks on RFS changes (E&E News Greenwire)

PRO: Gasoline – not corn alcohol – belongs in our fuel tanks (Bradenton Herald/Tribune News Service)

CON: Keep the renewable fuel standard but reboot it by using bio-masses instead of corn (Bradenton Herald/Tribune News Service)

US biofuels industry claims PES are 'skirting the law' on RFS (Biofuels International)

EPA PROPOSES REDUCTION IN REQUIRED RIN CREDITS FOR PHILLY REFINERY (KTIC Radio)

U.S. Justice Dept files objection to Philadelphia refiner bankruptcy (Reuters)

REFINERS: MORE THAN EPA'S PES WAIVER IS NEEDED TO SURVIVE THE RFS (Morning Energy)

EPA deal with Philadelphia refiner would erase 2% of 2018 biofuel mandate: consultant (Platts)

PES lauds court decision approving DOJ’s RIN settlement deal (Biofuels Digest)

Excerpts from Reuters: The U.S. Environmental Protection Agency granted a bankrupt Philadelphia oil refining company a reprieve from complying with the nation’s renewable fuel laws, according to a settlement agreement filed on Monday.

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The settlement comes amid a fight between powerful corn and oil interests in Washington over the future of the RFS program. President Donald Trump has sought to bring the two sides together in recent weeks to come up with reforms that can lower the cost for refiners without hurting demand for biofuels, wading into an issue that divides two important constituencies.

The PES bankruptcy - and the potential loss of 1,100 jobs in a key electoral state - had fueled calls for change.

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The EPA said PES could comply with the program by turning over its available credits and would be excused from any shortfall, a huge win for the refiner. It said the deal would cover the company up until the point it exits bankruptcy.

After exiting bankruptcy, PES would have to comply with the law on a semi-annual basis as opposed to annually and submit itself to more EPA scrutiny. It would face penalties for non-compliance with the agreement.

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The deal will be open for public comment for 10 days before it is finalized, and biofuel groups are showing early opposition.

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The case is #18-10122 (KG), in the U.S. Bankruptcy Court for the District of Delaware. READ MORE

Excerpts from Reuters: “I am very troubled at the precedent this sets and there are discussions underway whether the EPA has the legal standing to grant the relief. We are exploring our options,” said Michael McAdams, head of the Advanced Biofuels Association.

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The EPA has signaled that it is willing to exempt a larger number of small refineries from the program, limiting the number of potential buyers and putting even more credits into the market.

Republican Senator Chuck Grassley, of Iowa, said the settlement raises a couple questions:“How are the RIN obligations being treated compared to the other obligations of PES? Does this set an unfair precedent for other refiners that continue to act in good faith to comply with the law?”

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“There’s no denying it - the EPA settled in a way that was beneficial to the bankruptcy and this particular firm. It sends a bad signal about what the EPA will accept in the future,” said Scott Irwin, agricultural economist at the University of Illinois.

PES has blamed its financial woes on the cost of buying the credits.. But other factors played a role in the bankruptcy, including the withdrawal of more than $590 million in dividend-style payments from the company by its investor owners.

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Prices for renewable fuel (D6) credits for 2018 were at 39 cents on Tuesday, little changed from a day earlier, having already lost 40 percent in the last two weeks. Prices for 2017 are selling at an unusual discount versus the 2018 prices in the wake of the PES settlement, traders said. READ MORE