Valero Says RFS Compliance Costs Are Soaring; Renewable Industry Snaps Back “Poor Capacity Planning”
by Jim Lane (Biofuels Digest) In Texas, Reuters is reporting that “Valero Energy expects to get hit with a half-billion-dollar bill in the second half of the year” and the news agency attributed the costs to “the rising cost of meeting government mandates to blend biofuels.”
The newsgroup reports that Valero’s cost to utilize mandated renewable fuels will rise to a figure of $750-$850 million. Valero made the remarks in filing its Q2 financial results.
“Valero knows full well,” a source told The Digest, “that they pay nothing for RIN credits when they buy ethanol and blend fuels. Those are delivered to them free of charge when they buy a gallon of fuel. In fact, Valero is one of the largest generator of RIN credits through its own ethanol production program. If they find themselves short on RINs, it’s because they did not add enough renewable fuel production capacity, buy enough fuel or stockpile enough RINs. Look for example at Valero’s E85 pricing in Iowa. They are selling E85 as of this week, at 76% above the price of their lowest-priced competitor. No wonder they are having trouble distributing ethanol and have to buy RINs for compliance.” READ MORE and MORE / MORE (Reuters) and MORE / MORE (Ethanol Producer Magazine) and MORE (Investing Daily) and MORE (Platts) and MORE / MORE (Bloomberg) and MORE (CSP Daily News) and MORE (Forbes)
Excerpt from Ethanol Producer Magazine: Other highlights of the second quarter Valero report included:
– Reported net income attributable to Valero stock holders was $814 million or $1.73 per share.
– Reported adjusted net income attributable to Valero shareholders was $503 million or $1.07 per share.
– $683 million in cash was returned to stockholders through dividends and stock breaks READ MORE
Excerpt from Forbes: Nevertheless, the overly-enriched beneficiaries of this asymmetrical arrangement are not, in fact, ethanol producers, as the author of the op-ed maintains. As one of the largest refiners and one of the largest ethanol producers, we at Valero are in a good position to know. The real beneficiaries are, rather, a small group of currently highly-profitable large convenience store retail chains with the necessary resources to blend fuels on their own without the burden of actually complying with the RFS and logistically-advantaged, historically-integrated oil companies. Here’s how this all works.
Those big retail chains are selling their RINs to refiners like Valero, and reaping a windfall profit in the bargain to the detriment of smaller retailers and consumers. The same is happening with the RIN-long integrated refiners which are some of the largest companies in the world.
Ethanol producers themselves do not enjoy windfall RIN profits in this arrangement, as the post suggests. READ MORE