May 8, 2018 / 2:35 PM / 13 days ago

U.S. refiners reap big rewards from EPA biofuel waivers

NEW YORK (Reuters) - The U.S. Environmental Protection Agency’s expanded use of waivers to free small refineries from the nation’s biofuels law has saved the industry as a whole hundreds of millions of dollars, according to a Reuters review of public filings.

Dozens of refineries have received the financial hardship waivers from EPA in recent months, meaning they no longer have to earn or purchase blending credits known as RINs. They can also sell any RINs they have on hand into the market, which helps other refiners by cutting market prices.

Savings for the refining industry represent a win for President Donald Trump, whose administration has been under pressure from Valero Energy Corp, PBF Energy, and others to overhaul the U.S. Renewable Fuel Standard (RFS) to cut compliance costs.

But the increase in waivers has incensed the U.S. corn lobby, which claims Trump’s EPA is undermining demand for biofuels such as corn-based ethanol. The RFS was intended to help U.S. farmers by requiring refiners to add more biofuels into gasoline and diesel supplies.

The EPA has said it has handed out more than two dozen waivers in recent months to refineries that have demonstrated complying with the RFS would cause them “disproportionate economic hardship.”

That is a big increase, according to former officials who said the EPA has tended to grant fewer than 10 discretionary waivers a year since the program began in 2013.

Expansion of the waiver program is due in part to a federal court decision last year that said the EPA had been too stingy with exemptions. But ethanol groups and their legislative backers have complained EPA has gone too far expanding a program that was never meant to benefit deep-pocketed oil companies. One group recently asked a federal judge to determine whether the program expansion was legal.

Andeavor, which sources told Reuters has secured waivers for some of its refineries, said on Monday it saved $100 million in biofuels compliance costs for 2016 and 2017. A company spokesman declined to comment when asked if the savings were related to waivers.

CVR Refining, controlled by billionaire Trump ally Carl Icahn, reported a rare $23 million profit in the biofuels credit market in the first quarter. Sources told Reuters its Oklahoma facility was recently granted an exemption.

The company also said in a recent earnings call that it expects its cost of complying with RFS requirements in 2018 to fall to $80 million from a previous estimate of $200 million, and from roughly $249 million in 2017.

Delek U.S. Holdings reported compliance savings of $79 million, while HollyFrontier said it saved $71 million. Those companies confirmed they received waivers from EPA.

EPA does not disclose the recipients of waivers, saying the information is business sensitive.

Refiners that did not get waivers are also posting savings as RIN prices have dropped more than 70 percent since late last year to five-year lows around 30 cents apiece, according to traders.

PBF Energy and Valero do not have refineries small enough to qualify for waivers, but they still are forecasting huge savings in compliance costs.

Valero, the largest U.S. refiner, said it now expects $550 million on compliance credits this year. That is down sharply from its April forecast of up to $850 million and far lower than the $942 million spent on compliance credits last year, according to filings.

PBF Energy expects to spend $100 million this year, half of what it spent in 2017, CEO Tom Nimbley told investors last week.

“Small refinery waivers granted by the EPA have had the effect of lowering RINs prices, and thereby reducing a significant headwind for our business,” Nimbley said.

Additional reporting by Ayenat Mersie; Editing by Richard Valdmanis and David Gregorio

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