| March 10
March 10 Oil refiners shelled out a record over
$2 billion to meet U.S. biofuels requirements in 2016, a 70
percent surge that helps fuel a growing debate over who should
shoulder the costs for meeting environmental regulations.
A Reuters review of regulatory filings from ten refiners,
including Valero Energy Corp and CVR Energy Inc,
showed that they paid $2.22 billion last year for compliance
credits that companies use to prove they are meeting annual
government requirements for volumes of biofuels to be blended
with gasoline and diesel.
That was 68 percent more than in 2015 and well above the
previous record of $1.3 billion reached in 2013, when prices for
paper credits, which trade in an opaque market, spiked to
historic levels. Oil companies including refiners can either
blend biofuels or buy the compliance credits, known as Renewable
Identification Numbers (RINs), from those that have.
Refiners without blending operations have been chafing for
some time over the rising costs to meet the U.S. Renewable Fuel
Standard (RFS) requirements. They have been pushing for that
burden to be shifted downstream from refiners to those closer to
the gas pump.
That charge has been led by Valero and more vocally by Carl
Icahn, the billionaire investor and majority stakeholder in CVR,
who has attempted to reach a deal with a major biofuels industry
group to agree to shift that burden, known as "point of
Icahn's role has drawn criticism from ethanol producers and
other biofuel industry representatives because he is serving as
a special advisor on regulations to President Donald Trump, a
friend who he supported in his 2016 campaign.
Icahn has been accused of using his influence to favor a
change that has direct financial benefit to him given his
ownership in CVR. That stock has soared since the election,
rising 63 percent since Nov. 8, though shares were down Friday
for a seventh straight day. Icahn says refiners are at risk of
buckling under the increasing costs.
A shift would mean lower costs for the merchant refiners and
a more mixed impact on integrated companies like Marathon
Petroleum, which would lose the revenue generated from
selling RINs to refiners. Marathon, Tesoro Corp and
others invested in blending operations in order to meet the
annual biofuels requirements.
Valero, which has argued in favor of changes, spent $749
million on RINs last year, 70 percent hike from 2015, according
to regulatory filings.
Critics of the change say that oil refiners regain the added
costs in the price of gasoline they sell. The RFS was designed
to help boost use of biofuels, including ethanol.
"RINs are the currency by which (these companies) can meet
their obligations. As RIN prices go higher, the incentive to use
the fuels goes up," said Andrew Lipow, President of Lipow Oil
Associates LLC in Houston.
One company that would be negatively affected by a shift,
Casey's General Stores Inc, which operates gas stations
in the U.S. Midwest, earned $31 million last year by selling
57.1 million in renewable fuel credits, or RINs.
Calumet Specialty Products Partners LP also
reported gains, earned $5.5 million on RINs in 2016. That
compared with a year-ago cost of $38.8 million for the
The price of RINs has fallen sharply in recent months since
Trump appointed Scott Pruitt, the former Oklahoma attorney
general and RFS critic to lead the Environmental Protection
Agency (EPA). The plunge extended last week on news of possible
changes to the policy.
Renewable fuel credits were trading above 80 cents apiece
ahead of the presidential election and were about 39 cents
apiece on Thursday, traders said.
(Additional reporting by Chris Prentice in New York and Nithin
Prasad in Bengaluru; Editing by Marguerita Choy)