February 1, 2018 / 9:55 PM / 18 days ago

UPDATE 1-EPA chief riles ethanol advocates with call for biofuels policy reform

(Adds reaction from biofuels industry in lead paragraph and paragraphs 9-12)

WASHINGTON, Feb 1 (Reuters) - The head of the U.S. Environmental Protection Agency said on Thursday that the recent bankruptcy of a Pennsylvania oil refiner was evidence the nation’s biofuel policy needs an overhaul in comments that infuriated biofuels advocates.

Philadelphia Energy Solutions, the largest oil refiner on the East Coast, filed for bankruptcy last month. The company blamed the cost of complying with the U.S. Renewable Fuel Standard (RFS), a law requiring refiners to blend corn-based ethanol and other biofuels into their gasoline and diesel.

EPA chief Scott Pruitt said in an interview with Fox News that the bankruptcy largely stemmed from the RFS, and cited the program’s requirement that refiners earn or purchase biofuel blending credits called RINs to prove to the EPA that they were meeting their obligations.

“We need RIN reform,” Pruitt said, pointing out RIN prices had risen in recent years. “It is something I’ve talked to Congress about.”

He also said the EPA wanted to take a more conservative approach to setting annual biofuel blending volume requirements, an idea he has floated in the past and which has faced stiff resistance from the ethanol lobby.

“We set volume obligations every November,” he said. “Our job should be to take the market and production levels and set volume obligations that are consistent with objective factors – not set inflated or blue-sky types of numbers that create this inflationary pressure on RINs.”

Overhauling the RFS, which the George W. Bush administration started to help farmers and reduce U.S. petroleum imports, would require an act of Congress. John Cornyn, the No. 2 Senate Republican, is trying to build consensus for a bill that would alter the RFS to help refiners.

The RFS requires refiners to blend 15 billion gallons (57 billion liters) of ethanol into the nation’s fuel each year.

Pruitt’s comments angered proponents of the biofuels industry.

”Mr. Pruitt’s current stance is... in direct contradiction to President Trump’s repeated and consistent promises to support the RFS, American farmers, and American energy security,” said Emily Skor, CEO of biofuels producer Growth Energy.

Brooke Coleman, Executive Director of the Advanced Biofuels Business Council called his comments a “backhanded swipe at rural jobs.”

Biofuels advocates have dismissed PES’s claims that its bankruptcy is due to the RFS, saying the meltdown had to do with the refinery’s particular economics, and that other refiners have been able to pass along RIN costs to consumers.

PES owes the EPA about $185 million worth of RINs, though it is unclear how that debt will be settled in the bankruptcy proceeding. Other refiners, including Texas’ Valero Energy Corp , have also complained about high RIN costs. (Writing by Richard Valdmanis; Editing by Lisa Von Ahn)

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