Oil refiners and biofuels: 2012 to feature fight over RFS, cooperation on RIN fraud

February 7, 2012 |

Delivering Now: the theme for NBB at its 2012 annual meeting

Biodiesel sets course for 2012: protecting the RFS, cracking down on RIN fraud.

“I have as much chance of buying a unicorn as a gallon of cellulosic ethanol in the commercial market,” says AFPM chief, setting stage for RFS fight.

In Florida, the National Biodiesel Conference — biodiesel’s grandest show — opened with exuberance over 2011 results, and resolve to meet the industry’s two major issues in 2012, defense of the Renewable Fuel Standard, and a crack-down on phony biodiesel credits sold to obligated parties by con artists posing as legitimate biodiesel producers.

“The RFS works,” glowed National Biodiesel Board CEO Joe Jobe, in marking the industry’s first billion-gallon production year in 2011, as industry benefitted from a now-expired $1.00 per gallon biodiesel tax credit, and from the billion gallon mandate called for under the Renewable Fuel Standard.

In an uplifting opening address to the delegates gathered in Orlando for the industry conclave, Jobe added that the biodiesel was one of the brighter spots in the US economy in 2011, adding 25,000 jobs throughout the year as production revived under the influence of the RFS.

All of the above energy policy

Jobe noted President Obama’s call for an “all of the above” energy policy, and said that such a policy clearly meant diversifying supply to insulate the US from energy shocks and price volatility., He said that the biodiesel industry supported an increase in domestic oil production, and said that increasing domestic biodiesel production would also help the country meet its energy goal.

“American has been on wrong end of the biggest wealth transfer in history: imported oil. Is it any wonder that after oil price shock after oil price shock, and war after war to keep the sea lanes for oil open, that the country is broke?”

Jobe noted the opposition to biodiesel coming from a coalition of forces who are generally opposed to government mandates, whose position is that alternative fuels must stand on their own and compete for consumers in a free market.

Defending the RFS

“It’s a fantasy to think that global energy prices are based on a free market; they are controlled and manipulated by a cartel,” Jobe said. “If, as the head of a trade association, attempted to control fuel prices by manipulation, here in the US I would go to jail.”

Jobe said that investors and customers of biodiesel needed protection against predatory, manipulated, global oil pricing, and the Renewable Fuel Standard offered that protection.

“The RFS is vulnerable this year on Capitol Hill; a top NBB priority is to defend it.”

Crackdown on fraudulent RINs

At the same time, Jobe called for a crackdown on fraudulent RINs. RINs are the renewable fuel credits associated with each gallon of fuel, but under EPA rules and federal law, RINs can be “stripped” from the actual gallons of production and freely traded. There are sound reasons to do so: for example, to provide income for biodiesel customers who are not obligated parties in RFS (e.g., mining companies using biodiesel as a cleaner generator fuel), and to provide an added means of compliance for obligated parties (e.g., refiners who lack biodiesel blending infrastructure).

In developing rules for RIN registration, and trading, the EPA adopted a “buyer beware” stance, encouraging industry to make sure that RINs they were buying represented actual, registered gallons of production. But, this year, the EPA has served two notices of violation to obligated parties for presenting RINs that were sold to them by fraudsters.

Just now, the EPA has thrown out another 48.1 million fake biodiesel credits, this time sold by Absolute Fuels in Texas. It follows on last year’s scandal when Clean Green Fuels of Maryland had 32.3 million credits declared invalid. Neither company had produced biodiesel equivalent to the credits they pretended to have sold.

The refining industry is up in arms. The EPA has demanded that they pay fines for submitting fake RINs, and also buy new, real ones; and, the agency said that the obligated parties would have to recover the money paid out for fraudulent RINs by their own legal action against the sellers.

The resulting uproar from oil refiners has won support in Congress for calls to amend or repeal the RFS. In response, NBB’s Jobe said that the biodiesel industry would immediately establish a RIN integrity task force. “It threatens our industry’s reputation integrity, too,” Jobe said of RIN fraud. “But let’s be clear, fraudulent RINs are not sold by the biodiesel industry, they are sold by criminals.”

Joining Jobe on stage in the opening session at the NBB conference were a collection of oil refining, marketing and oil heat industry executives. All agreed on the need for a harsh crackdown on RIN fraud.

On the subject of the RFS and further support of biodiesel through, for example, the extension of the biodiesel tax credit, the panel split.

Oil heat associations offer support for the RFS

Michael Ferrante of the Massachusetts Oilheat Council and John Maniscalco of the New York Oil Heating Association expressed support for RFS. “We have embraced the biodiesel mandate, said Ferrante. “We recognize that diversifying supply in in our long-term interest, and there’s simply not enough push for all our members to act on biodiesel, if the only force pushing change is consumer choice.  Change is needed, and push is needed.”

There was less support for action on tax credits. Dan gilligan, head of the Petroleum Marketers Association of America. said, “The Washington well is dry. There’s no DC consensus on energy policy, and we are expecting no tax credit passed in 2012.”

Oil refiners slam RFS

Charles Drevna, head of the former National Petrochemical & Refiners Association (which has just changed its name to the American Fuel & Petrochemical Manufacturers, or AFPM), agreed on RINs, but was adamant that the RFS was flawed and needed to be addressed by Congress.

“I’m sort of surprised to be here,” Dreva observed, drily. “I feel like cattle rancher at a vegetarian conference. But we have substantial problems with RFS.”

“I have as much chance of buying a unicorn as a gallon of cellulosic ethanol in the commercial market.”

“The RFS is an anachronism. It was born at a a time when we thought the US was going to be energy poor. In fact, the US is energy rich. Now, our industry is asked to reduce our own market share by blending all these other fuels – our members would have more money to do things like reduce CO2 emissions, if we were giving away 10 percent of our market underRFS, and in 10 years giving away some 23, 24 percent of it. And, putting fuels like ethanol into cars that lower mileage, at a time when we want better mileage out of cars.”

On cellulosic biofuels, Drevna was apoplectic. “I have as much chance of buying a unicorn as a gallon of cellulosic ethanol in the commercial market right now. Yet we are mandated to buy them, and are paying fines if we don;t have them. Why are we paying fines for not buying something that doesn’t exist?”

Drevna indicated, however, that his association’s attention is focused on the problems of ethanol. “If it were just your fine industry, we could probably find a way to work together. But you are all locked up together in the RFS.”

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