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Petroleum representatives candidly express contempt for RFS2

By Ron Kotrba | February 07, 2012

A panel of petroleum trade association representatives gathered together for the National Biodiesel Conference’s opening general session on Feb. 6. While the group consisted of five oil association representatives, several of whom are outspokenly partial to biodiesel, Charles Drevna, president of the American Fuel & Petrochemical Manufacturers Association (formerly the National Petrochemical and Refiners Association), promptly took center stage with his cut-to-the-quick remarks about biodiesel, ethanol, RIN integrity, the renewable fuel standard (RFS2) and more.

Drevna told the biodiesel crowd that RFS2 is very narrow from a biodiesel industry perspective. “But when refiners look at it,” he said, “they have to look at the whole thing,” meaning the four buckets of conventional, cellulosic, advanced and biomass-based diesel. “And it’s not working as intended,” Drevna added.

When 20-plus percent of the oil industry’s market is mandated away, that’s not good, he expressed. Then, being forced to buy RINs for a product that doesn’t exist (cellulosic ethanol), or a product that lowers gas mileage (corn ethanol) when the government is mandating that automakers increase vehicle mileage, “no wonder we’re a little paranoid,” Drevna said. “I think RFS2 is an anachronism,” he said, meaning that in 2007 when the policy was drafted, “we thought we were an energy-poor country.” Since then of course, domestic oil and natural gas deposits have been producing record amounts of fossil energy.

 “Should biodiesel be part of the mix?” he asked. “Abso-positively. Should there be a tax credit? That’s another issue.”

Also on the panel was Dan Gilligan, president of the Petroleum Marketers Association of America, who said he supported the reissuing of a biodiesel tax credit, but only for biodiesel—not ethanol—because biodiesel is such a young fuel, comparatively speaking. Gilligan said from a petroleum refiner’s perspective, it’s not the biomass-based diesel portion of RFS2 that obligated parties are unhappy with, it’s the conventional and cellulosic ethanol buckets. Drevna said, “I have as much chance of buying a unicorn as I do a gallon of cellulosic ethanol. If it were just you guys (biodiesel), we could make it work. But it’s not.” For conventional ethanol, the E10 blend wall has been reached and the marketing and use of E15 at this point is cloudy at best, Gilligan and Drevna pointed out. Although EPA has issued clearance for newer vehicles to fuel on E15, Drevna said his new automobile’s user manual explicitly says it does not recommend ethanol blends above 10 percent, which is lawyer-speak for the automaker will not warranty the use of E15.

Drevna mixed no words when he said directly to the EPA regarding RFS2, “You guys screwed this one up.” National Biodiesel Board CEO Joe Jobe, who earlier in the morning announced the inter-industry staffing of a RIN integrity task force, asked Drevna if he would participate in the effort, to which Drevna conditionally agreed. “As long as [RFS2] is on the books, we have to make it work,” he said, adding, however, that “we have substantive problems with the whole RFS, and you’re part of it.”  

Jobe fielded a question from the audience, which asked, “if not this (subsidies and mandates), then what?” meaning, if the oil industry deems subsidies and mandates as the wrong ways to go about developing markets for biofuels, then how should it be done? Drevna’s answer: “consumer choice.”  

John Maniscalco, head of the New York Oil Heating Association, said biofuel mandates build straight partnerships between government and the environmental community.

Drevna was quick to bring up the shutdown of two refineries on the East Coast, stating that the halt in operations was a result of RFS2 taking away more than 20 percent of the market by 2022. Maniscalco countered that by offering other reasons such as issues surrounding Brent crude and West Texas Intermediate, desulfurization requirements, the age of the refinery equipment and more.

Regarding the “RIN debacle,” as Drevna put it, he said it’s akin to a person going to a stock broker and buying stock only to later find out that the stock was fraudulent. That person is then made to buy the stock again and pay a fine for originally purchasing the bad stock. 

No one in the biodiesel industry, however, dismisses the seriousness of RIN fraud and what it could do to this industry. “RIN integrity,” Gilligan said, “is a crack in the dike.”

 

 

3 Responses

  1. Nathan Bode

    2012-02-07

    1

    One aspect of this article that strikes me is the colloquial style used in this debate. For instance, Mr Drevna's statement, "You guys screwed this one up." I understand that this quote was recorded at a live event and not taken from a published written statement, but I think this example is still indicative. It is clear that RFS2 is not well received by many actors in the oil industry. In my opinion, a more acceptable solution could be found by fostering an atmosphere of cooperation, in which the parties involved in the debate take eachother more seriously, and actively work to find alternative solutions. If Mr Drevna did that, it didn't come across in this article. Hard-nosed positioning and accusations don't bring anyone closer to an agreement. And finding an agreement must be top priority for every party involved.

  2. Christian Antalics

    2012-02-08

    2

    The full spectrum costs of fossil fuel discovery, production and consumption are not captured or reflected in the market price of the end product. For example, shale gas producers routinely allow VOCs to evaporate from ponds and are exempt from regulations, which has created smog problems where none previously existed. Also, the global-warming impact of the burning of fossil fuels is not captured in the price. Therefore, it is proper and right for the government to apply incentives to the production of biofuels over petroleum industry objections.

  3. Ian Lawson

    2012-02-11

    3

    Drevna's answer to an alternative to RFS2 or $1 subsidy is "consumer choice." How laughable - someone should have asked him: "what consumer in the best of economic times would pay $1.75 more per gallon for B100 biodiesel. Or, more likely, over 20 cents more for a B20 blend of it." I can't imagine what he'd be saying at a Petroleum marketers Association meeting.

  4.  

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