June 12, 2015

In blow to Big Oil, EPA says oil refiners recover RINs costs

Published in Reuters

Oil companies ultimately recover their costs of complying with the U.S. biofuels program, according to an Environmental Protection Agency (EPA) analysis that marks the regulator's clearest challenge yet to a key criticism of the policy.

The report, written in May but released this week to back up a recent proposal for use requirements, is significant for both its detail and its timing.

The conclusion was based on the first in-depth public analysis of the historic run-up in prices of Renewable Identification Number (RIN) credits in 2013 and its impact on oil companies and consumers and will likely stir the debate over the long-awaited quotas for biofuels use in the nation's motor fuel supply.

It also comes a week before a Senate committee will grill EPA senior official Janet McCabe about a proposal for biofuels use unveiled at the end of last month and the EPA's oversight of the renewable fuel standards (RSS) program.

Oil companies need the credits, which are generated any time fuel companies blend a gallon of ethanol into gasoline, to prove they are complying with government mandates for biofuels use.

The influential oil lobby has protested that the surge in RIN prices two years ago hurt profits and would be passed along to consumers.

In its report, the EPA said that the volatile ethanol RIN market does not cause higher retail fuel prices nor hurt consumers at the pump, ultimately supporting a key argument of biofuels supporters.

Further, oil refiners "generally recover these costs in the prices of their petroleum blendstocks," the EPA said.

The study bolsters the U.S. farm lobby's case for higher corn-based ethanol use, Geoff Cooper, an economist with the Renewable Fuel Association, which represents ethanol producers, said in a conference call on Thursday.

"That's something we've been arguing" for years, he said.

Refiners spent at least $1 billion last year on the credits, according to public filings analyzed by Reuters. In 2013, the bill was even higher at $1.35 billion after ethanol credit prices surged to as high as $1.45 each.

Ethanol RINs prices have plunged by a third to 45 cents each after the EPA proposed on May 29 cutting the ethanol requirements more than many expected.

Oil advocates questioned the analysis and said there could be a RINS shortage next year.

"If you can't get enough you can't sell fuel," said Brendan Williams of the American Fuel & Petrochemical Manufacturers.

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