Bankruptcy Blame Placed at Renewable Fuel Regulations

Feb 9, 2018  | 4 min  | Ep4325

Iowa Secretary of Agriculture Bill Northey’s nomination to become USDA’s Under Secretary for Farm Production and Conservation has been in limbo for 5 months. Confirmation of the appointment has become a political bargaining chip as one oil-state Senator reaffirmed his push-back over ethanol. This week, the battle spilled onto the Senate floor. 

Two other offices down Pennsylvania Avenue were pulled into the finger-pointing over the predominately corn-based fuel. 

Renewable fuels were not the main cause for declaring bankruptcy by one of the largest refiners in the eastern United States, according to at least one farm-state senator and several academic researchers.

Pennsylvania-based Philadelphia Energy Solutions claimed last week the requirement to produce or acquire $830 million in Renewable Identification Number credits was a contributing factor in its financial troubles. RINs are what the Environmental Protection Agency calls the currency of the Renewable Fuel Standard. Producers are mandated to generate or buy a certain threshold of the homegrown product.

Iowa Senator Charles Grassley called PES’ claim misleading rhetoric aimed at discrediting the program.

Sen. Charles Grassley, R- Iowa: “If you look at the paper I put out, there are many, many reasons for the bankruptcy at PES and RIN is not one of them.”

The Iowa Republican Senator’s office say PES sold 40 million RINs in the fall of 2017, in an attempt to short the market, if the federal government would change policy, thus lowering RIN prices. The energy company planned to buy back those credits at a lower price to fulfil mandates and make a profit. Grassley’s office cited continued reluctance on PES’ part to invest in blending infrastructure, instead buying RINs on the open market.

Several independent studies also denounce PES’ claim, instead citing the reduction in access to Bakken crude. Producers in the North Dakota-centered shale region slowed operations as a collapse in oil prices coincided with the opening of the Dakota Access Pipeline connecting High Plains pumps to the U.S. Gulf Coast. Bakken producers also had more financially lucrative options as the U.S. government lifted a 40-year ban on exporting domestic oil. It became more profitable to export Bakken products and not put the highly volatile product on train cars bound for the East Coast.  

Texas Senator Ted Cruz wants to put a cap on RINs and Grassley says the strategy would ruin the ethanol industry. The Lone Star State Republican is holding up a nomination for Iowa’s Secretary of Agriculture Bill Northey’s nomination to a position inside USDA until the issue is resolved.

President Trump has long championed ethanol in his energy policy. According to Grassley, since Scott Pruitt’s confirmation hearing to be head of the EPA, the former Oklahoma attorney general has muddied waters on the RIN issue forcing the president to reiterate his support for renewable fuels in an earlier November showdown on the issue involving farm state elected officials and the White House.   

Sen. Charles Grassley, R – Iowa: “What you’ve heard latest from Pruitt, does not, about RINs, does not square with his own department put out November, 2017, that RINs is not a problem like people here in Washington are trying to make it out to be a problem.” 


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