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Philadelphia Energy Solutions Wrong to Blame Renewable Fuel Standard for Bankruptcy

  • Tuesday, 30 January 2018 10:08

The Hill

January 29, 2018

By Bob Dineen

Philadelphia Energy Solutions (PES) filed for bankruptcy last week, pointing fingers and laying blame squarely on the Renewable Fuel Standard (RFS), a federal program that requires refiners to blend increasing amounts of ethanol and other biofuels. That may make for a provocative headline, but the public and PES’ 1,100 employees deserve to know the truth: PES has no one else to blame but itself.

PES operates one of the nation’s oldest refineries, which is handicapped by hopelessly antiquated technology. This is not the first time the refinery has found itself in a precarious financial position. 

In 2012, the Carlyle Group and Sunoco rescued the refinery from bankruptcy, thanks to a taxpayer-funded rescue package. The following year, PES invested in new infrastructure to allow the importation of cheap oil from North Dakota. While PES was able to capitalize on that investment in 2014 and 2015, the collapse in oil prices and the end of the U.S. crude export ban in late 2015 hit the refiner hard and left it hostage to the higher-priced Brent crude index. Since that time, PES has been dealing with a substantial debt burden.

The RFS, which helps to provide consumer choice at the pump, assures refiners flexibility by offering credits, called Renewable Identification Numbers (RIN), to aid in compliance with the program. Wall Street analysts, academic researchers, EPA officials, and even some other oil refiners have said repeatedly that RINs don’t negatively affect refining margins. Like other refiners, PES could have eliminated its RINs-related costs by making investments in blending more renewable fuels. Instead, PES is blaming RINS for its financial woes. Last week, PES CEO Greg Gatta told Bloomberg, “Absent RINs, we’re competitive with anyone in the world.” If that were true, why is PES seeking unilateral amnesty from an obligation that impacts every refiner equally?

PES is really seeking a unique and unnecessary subsidy. The company says it will ignore its RFS obligation, while at the same time acknowledging it will sell the RIN credits it has accumulated. PES wants their cake and to sell it too!

The RFS, which began in 2005, is helping to break the oil industry’s near-monopoly at the pump, while cleaning the air, providing greater energy independence, boosting local economies and lowering consumer prices at the pump. PES’ actions are an insult to those in the industry that have complied with this very successful and important policy, as well as to consumers across the country who are demanding greater access to U.S.-produced, cleaner, cheaper renewable fuels. PES needs to stop obfuscating and take responsibility for the unfortunate mess it finds itself in today.

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