Decision could hurt refineries by forcing them to blend ethanol

Bloomberg/Fuel Fix:

The oil industry and its Capitol Hill allies are pressing the Trump administration to defend its decision to exempt oil refineries from requirements they blend biofuels into gasoline and diesel.

The administration has until the end of next Monday to request the full 10th Circuit U.S. Court of Appeals rehear a decision that threatens to curtail the use of waivers.

Republican senators from states with large oil-refining interests, including Ted Cruz of Texas, John Barrasso of Wyoming and James Inhofe of Oklahoma have made entreaties to the White House or the Environmental Protection Agency in recent days, warning that if the decision is applied nationwide, it could strain refineries, hike gasoline prices and jeopardize jobs. The senators’ efforts were described by three people familiar with the matter who asked not to be named detailing private conversations.

At issue are requirements to use renewable fuels, such as corn-based ethanol and soy-based biodiesel. Although federal law authorizes the EPA to exempt small refineries facing an “economic hardship,” a January ruling by a three-judge panel of the 10th Circuit Court of Appeals throws into doubt the agency’s ability to broadly issue those waivers.

If the decision stands, it is believed only two small refineries would still be eligible for hardship relief, according to a letter 13 Republican senators, led by Barrasso, sent to President Donald Trump on Feb. 27. Since the Jan. 24 ruling, expectations the EPA will dramatically restrict waivers have driven a 152% surge in the cost of renewable identification numbers, the credits refiners use to prove they have complied with biofuel quotas.

The EPA has the legal option to apply the court decision to refineries only in the six states covered by the 10th Circuit, but top agency officials view that as unworkable, according to two people familiar with the matter. Administration officials including White House economic adviser Larry Kudlow had tentatively decided to apply the ruling nationwide. Oil industry allies are hoping Trump will personally intervene and order a shift in course.

Barrasso has spoken with EPA Administrator Andrew Wheeler and Kudlow, “urging them to appeal the 10th Circuit decision,” Sarah Durdaller, a spokeswoman for the senator, said by email. Representatives for Inhofe did not immediately respond to a request for comment.
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This is the result of a bad special interest law compounded by a bad court decision.  The law forcing the use of ethanol benefits only the agribusiness sector of the economy while forcing refineries to spend money on the junk fuel instead of investing in new equipment to take advantage of the light crude being produced in the fracking wells.  The result is that we are still having to import heavy crude instead of using domestic crude.  The original law was sold on the basis that it would reduce imports, but now it is having the opposite effect.

Ethanol reduces the efficiency of engines which means more fuel has to be burned.  It also destroys small engines.  Congress should repeal the requirement and let the marketplace decide whether it wants ethanol.