January 22, 2018 / 9:24 PM / a year ago

UPDATE 1-Valero leaves U.S. ethanol trade group due to cost cutting

(Adds details on renewable fuels policy)

By Michael Hirtzer

CHICAGO, Jan 22 (Reuters) - Valero Energy Corp, America's largest oil refiner, has left the Renewable Fuels Association due to cost cutting, just over a year after becoming the powerful ethanol lobbying group's biggest member, the company said in a statement.

Valero had joined the RFA in November 2016 as part of an unsuccessful influence campaign to win support for reforms to the nation's biofuels policy - which it says costs it hundreds of millions of dollars a year - according to a Reuters investigation.

The biofuels law, called the Renewable Fuel Standard, requires oil refiners to blend increasing volumes of biofuels such as corn-based ethanol into the nation's fuel each year, or buy paper credits from companies that do.

The regulation was introduced by former President George W. Bush to help farmers and reduce petroleum imports. But as the program has grown, refiners that lack sufficient blending infrastructure have complained of rising costs.

Valero in 2016 spent $750 million buying fuel credits to comply with the program administered by the U.S. Environmental Protection Agency, according to its financial statements.

Valero had wanted to tweak the RFS program by shifting the responsibility for fuel blending away from refiners and further down the supply chain to storage terminals. Last February, months after Valero joined the RFA, the association announced it had dropped its opposition to that proposal, triggering a backlash from much of the biofuels industry, which was opposed to the change.

The proposal, however, was ultimately rejected by the EPA in October, under pressure from Midwest lawmakers and the corn lobby.

Valero spokeswoman Lillian Riojas in the statement said the reason the company did not renew its RFA membership was cost cutting. "As one of the nation's largest producers of renewable fuels, we expect to continue to work with RFA on the issues that impact our renewables business," she added.

Bob Dinneen, president of the RFA, confirmed Valero was no longer a member of the group. (Additional reporting by Chris Prentice in New York; editing by Richard Valdmanis and Cynthia Osterman)

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