US refiner Andeavor reports $100m savings from lower RFS compliance costs

11 May 2018 |

Andeavor, one of the largest fuel refiners in the US, has reported saving $100 million since 2016 because of lower compliance costs related to the Renewable Fuel Standard.

The disclosure, and other recent earnings reports from US refiners, have prompted renewed claims from the biofuels industry that major energy companies are profiting from economic hardship waivers that are meant to help small installations.

In an earnings statement published on 7 May, Andeavor said it saved “approximately $100 million primarily related to a reduction in the RINs obligation for the 2016 and 2017 compliance periods for some of the company’s inland refineries.”

Andeavor recorded net profits of $1.5 billion in 2017, and its Q1 earnings rose threefold compared with the year-ago period. The Renewable Fuels Association (RFA) said is just one of several examples of companies that received waivers from the RFS but at the same time posted huge profits for the January-March quarter.

“Call me crazy, but when I hear ‘economic hardship,’ I don’t think of surging profits, record stock prices, generous dividends, and Fortune 100 companies,” said Geoff Cooper, executive vice president of the RFA, in a blog published 9 May.  

Besides Andeavor, Cooper’s blog drew attention to other earnings reports from companies that had requested or received small refiner hardship waivers:

HollyFrontier: Recorded Q1 net income of $137.3 million in Q1 2018, compared to a net loss of $33.4 million in the equivalent period last year. 

CVR Energy: CVR, in which billionaire and former Trump advisor Carl Icahn holds a majority ownership stake, tripled its profits in Q1 and chalked up a $23 million profit on RIN credits in the first quarter. According to its most recent earnings report this is nearly four times the $6 million it earned in the biofuels credit market in the equivalent period in 2017.

Delek: The refiner's US operations reported net income of $28 million, compared to adjusted net income of $10.1 million in the prior year period.

ExxonMobil: Saw its profits increase $640 million in the first quarter compared with the year-ago period, a rise of 16%.

Chevron: Recorded a $1 billion rise in profits in Q1—up 36% from a year ago.

The EPA, which hands out exemptions in secret, has said that its reasons for granting waivers has not changed, and that applications are viewed on a case by case basis.

Cooper said companies that likely did not receive small refiner exemptions in many cases outperformed companies that likely did receive exemptions, which he said disproved the argument that RFS obligations create a 'disproportionate' competitive disadvantage for certain 'small' refiners.

Last week, the Advanced Biofuel Association submitted a petition for review with the US Court of Appeals for the DC Circuit to sue EPA chief Scott Pruitt, and challenge how the EPA exempts small refineries from compliance with the RFS.

Waivers

The increase in waivers has come in the aftermath of a decision by a federal court last year that said the EPA had been too reticent in handing out exemptions, according to a Reuters report.  

But the biofuels lobby has countered that the program wasn’t designed to be accessed by cash-rich oil companies.  

The news agency also reported that six Democratic Party senators have sent a letter to ask Carl Icahn and Scott Pruitt to explain how the CVR refinery got a waiver from the RFS. 

At a meeting at the White House on 8 May, pro-ethanol senators told President Trump that hardship waivers had undercut the president’s commitment to meet the annual 15 billion gallon volume obligation set by Congress under the RFS.

White House deal

That same meeting agreed a tentative compromise between pro-corn and pro-oil lawmakers that could enable exported ethanol to count towards the RFS.

Such a move is aimed at lowering compliance costs for refiners but at the same time help the ethanol industry recoup some of the 1.6 billion gallon demand lost through the handing out of hardship waivers.  

American Fuel and Petrochemical Manufacturers, which is the main lobby for refiners, told Energy Census it did not want to comment on the assertions made in the RFA blog. 

 

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