US refiner PES lauds court rejection to biofuel obligation challenge

HOUSTON (ICIS)–Philadelphia Energy Solutions (PES), operator of a 335,000 bbl/day refinery in Pennsylvania, late on Wednesday lauded a challenge rejection by ethanol groups to the US Energy Protection Agency’s (EPA) granting of a waiver to PES’s renewable fuel obligation.

PES filed for bankruptcy earlier this year, citing compliance to the EPA’s Renewable Fuel Standard (RFS) as a chief factor in its insolvency.

The RFS mandates refiners and fuel suppliers to mix ethanol and other biofuels into gasoline and diesel, and the EPA tracks compliance through credits called renewable identification numbers (RINs)

On Wednesday, a Delaware bankruptcy court rejected a challenge to the EPA’s waiver, clearing the way for PES to settle its renewable energy credit obligation.

“This is another important milestone in our quest to strengthen our financial foundation and ensure that PES can successfully emerge from the restructuring process,” the refiner said in a statement.

The waiver granting and challenge rejection has now paved the road for other US refiners to break free from the annual blending quotas. A programme in the RFS grants small refineries temporary exemptions if they can prove compliance obligation RFS causes economic loss.

Market observers note proving that hardship can be subjective.

“RINs played a part [but] refiners can use whatever metric they want to call [obligation with the RFS] a hardship,” said a former ethanol trader.

“There’s no objective statement in the law that says you must show [specific losses] to prove your loss.”

Ethanol groups expressed outrage, slamming the EPA’s waiver and court’s decision.

“The EPA’s sue-and-settle-style settlement will give the Carlyle Group a free pass for skirting the law, even after they neglected the refinery while pocketing hundreds of millions of dollars in cash payouts,” said Growth Energy CEO Emily Skor.