The meeting comes in the wake of a Pennsylvania-based refiner blaming regulation for its bankruptcy.
Four sources familiar with the matter at hand have disclosed, a meeting has been called early next week by U.S. President Donald Trump who will meet key senators and Cabinet officials to discuss potential changes to U.S. biofuel policy, which has come under pressure following a Pennsylvania-based refiner blaming regulation for its bankruptcy.
The meeting comes in the wake of the oil industry and corn lobby clashing over the future of the Renewable Fuel Standard (RFS) which requires refiners to cover the cost of mixing biofuels, including corn-based ethanol, into their fuel.
Trump scheduled meeting with these powerful lobbies, reflect the high political stakes of protecting jobs in a key electoral state.
Last month, Philadelphia Energy Solutions (PES), an oil refiner which employs more than 1 thousand people, declared bankruptcy blaming regulations for its chapter 11 filing.
The upcoming meeting, scheduled for Tuesday, will include Environmental Protection Agency Administrator Scott Pruitt, Republican Senators Ted Cruz of Texas, Chuck Grassley and Joni Ernst of Iowa, Agriculture Secretary Sonny Perdue, and potentially Energy Secretary Rick Perry.
The sources preferred the cover of anonymity since they were not authorized to speak to the media.
As per a source, the meeting would focus on finding short term solutions to help PES continue its operations.
As part of its restructuring package, PES is asking a bankruptcy judge to write-off $350 million of its current RFS compliance costs owed to the EPA which administers the program.
As per other sources, one of the agenda’s in the meeting will also include whether the Administration will prices for biofuel credits, eliminate speculation from the market and let higher-ethanol blends be sold throughout the year.
They went on to add, the outcome of the meeting is likely to be constrained by political and legal issues – realities that have derailed previous efforts at establishing reforms.
As far as the EPA is concerned, although it will officially weigh in on the matter on the PES’s request to release itself on its compliance obligations, however any such move would immediately draw flak from other U.S. refiners who have no hope of receiving such a waiver.
Under the RFS norms, refiners must earn or purchase blending credits called RINs to prove they are complying with the regulation. With the increase in the volume quotas of biofuels, prices for the credits have also increased, as a result refiners who have invested in blending facilities have benefited while those that have not, such as PES, have had to shell out.
According to PES, its RFS compliance costs exceeded its payroll in 2017 and was second only to the cost of purchasing crude oil.
Another issue which may have attributed to PES’s financial difficulties include investors withdrawing more than $594 million in a series of dividend-style distributions since 2012, even as regional refining economics slumped.
Lawmakers and regulators have since long tried to bring down the cost of the RFS to the oil industry.
As a step in this direction, Senator John Cornyn, a Texas Republican, is preparing a draft legislation aimed at overhauling the RFS which includes the creation of a new specialized RIN credit intended to push down prices; however this is also facing strong resistance from the all powerful oil and corn lobbies.