US Refiners May Boost Renewables Spending if RFS Targets Not Lowered: Moody's

by Beth Evans (Platts) Ratings agency Moody's expects US refiners to increase investments in renewables blending and infrastructure if federal renewables targets are not lowered.

"In the absence of any EPA waivers to meeting the renewable fuel requirements, we expect refiners to increase their investments in blending logistics infrastructure, ethanol production facilities and renewable fuels technology," Moody's said in a report Wednesday.

It cited Valero Energy's investment of more than $300 million in Diamond Green, a 9,300 b/d biodiesel joint venture expected to be online before mid-2014. Moody's also said Valero expects to have its ethanol facilities operating at better utilization rates. A spokesman for the refiner, however, told Platts recently that meeting renewables targets was not why it was boosting output from its ethanol plants.

..."A dramatic rise in the cost of complying with federal renewable fuel requirements poses a headwind for the US refining and marketing (R&M) industry in 2013-2014 and possibly beyond," Moody's said.

It said rising gasoline exports, which do not fall under the Renewable Fuel Standard (RFS) mandates, "could be an increasing trend in the industry, constrained only by logistical and infrastructure limitations."

Gulf Coast refiners such as Valero, Marathon Petroleum and Phillips 66 could hike gasoline exports to Mexico and countries in South America to avoid RINs exposure, according to Moody's.

"But US refiners with extremely limited access to the coasts, such as HollyFrontier (Ba1 stable), CVR Refining (B1 stable) and PBF Holding (Ba3 stable) would have limited opportunity to export their gasoline as a way to avoid buying RINs," Moody's said. READ MORE