EPA moves to deny refiner requests to change biofuels program

Merchant refiners say they are getting squeezed by government mandates that are increasing volumes of biofuels yearly.

Some oil groups looking to push biofuels program obligations downstream

By Chris Prentice

NEW YORK, Nov 10 (Reuters) – The U.S. Environmental Protection Agency (EPA) said on Thursday it plans to deny several petitions from oil groups to start the process toward changing the country’s biofuels program.

EPA said it did not believe it should initiate a full rule making, as requested by multiple groups, to change the so-called “point of obligation” of the Renewable Fuel Standard (RFS). The RFS is a 2005 policy that establishes annual targets for the volume of biofuels that need to be blended with gasoline and diesel in the United States.

Click here for video: CEO Mike Swihart explains how well automation reduces costs, boosts production for Permian Basin operators. Systems start at $3,000 fully installed by Production Lift Technologies of Midland, Texas.

Valero Energy Corp, the American Fuel and Petrochemical Manufacturers (AFPM), HollyFrontier and Monroe Energy have petitioned the EPA to consider pushing this obligation downstream, reducing the onus on refiners that have little to no capacity to blend biofuels at their operations.

These merchant refiners have said they are being squeezed by annual government mandates that require increasing volumes of biofuels. To meet them, they have been forced to buy paper credits in an opaque market, lifting costs.

The change the refiners are requesting “would not address the challenges associated” with boosting availability of advanced fuels and getting more ethanol into the fuel system, the EPA said in the statement.

Still, some petitioners expressed support for the EPA’s decision to open a 60-day public comment period.

“We are very pleased they decided to do this, whereas I would have been ecstatic if they granted it. We live to keep fighting on this issue,” said Chet Thompson, AFPM president.

EPA’s decision to open a docket is a sign the issue is “serious and merits full consideration,” a Valero spokeswoman said.

BIG OIL AT ODDS

The oil industry has spent millions lobbying against the controversial RFS program, saying targets set by Congress are unachievable without a major infrastructure and vehicle overhaul.

But changing the rules on which types of companies need to meet the requirements has pitted two segments of the oil industry against one another, independent refiners versus integrated oil companies that do not want the change.

Tesoro Corp expressed support for the EPA’s move toward denying the change. The company’s vice president and counsel, Stephen Brown, said in a statement that comprehensive reform is the “more important task at hand.”

The Renewable Fuel Association, National Association of Convenience Stores and Society of Independent Gasoline Marketers of America also applauded the EPA’s move on Thursday.

HollyFrontier and Monroe Energy did not respond immediately to request for comment.

(Reporting by Chris Prentice; Additional reporting by David Shepardson in Washington; Editing by Bernadette Baum and Jonathan Oatis)