This article originally appeared in The Oilworker, Issue 42.
USW oil workers are good at stirring up action to demand resolution to issues affecting their jobs. Their fly-ins to Washington, D.C., and a Capitol Hill rally are helping to push the Trump administration, elected officials, the small refiner coalition, and the corn ethanol lobby to make changes to the Renewable Fuel Standard so that both farmers and oil refinery workers can keep their jobs.
The problem has always been not the use of ethanol, but the method used to prove compliance with the Renewable Fuel Standard (RFS). Many small refiners do not have the capability at their sites to blend ethanol into gasoline, so they send their gasoline to blenders. To prove compliance, they must purchase Renewable Identification Numbers (RINs) on the market. A RIN is assigned to each gallon of ethanol produced by an ethanol producer.
The RFS mandates that the proof of compliance—also known as the point of obligation—falls on refiners—not blenders.
The Environmental Protection Agency (EPA) created the RIN system, which is an unregulated financial market. At first, it worked because the RINs were cheap. But then, Wall Street, big oil companies with blending facilities and financial hustlers discovered they could earn huge profits buying up RINs, hoarding them and selling them on this unregulated market.
Soon, small merchant refiners like PBF, HollyFrontier, and Monroe Energy were paying millions of dollars a year for RINs to the point that it was affecting their ability to do needed maintenance and upgrades, pay their employees and stay in business.
RINs are not a problem for the major oil companies like ExxonMobil, Shell, Chevron, BP and Phillips 66 because they have blending facilities to blend the ethanol into the gasoline they produce.
“When you look at the graphs for ethanol use and RIN cost, ethanol is practically a straight line, while the RIN cost line goes up,” said Kim Nibarger, head of the USW’s National Oil Bargaining Program. “The top-level negotiations are now causing the RIN cost to fall. I thank our oil workers for getting in front of their elected officials and educating them on what the real problem is with the RFS. The ethanol lobby stubbornly refuses to acknowledge it’s not the use of ethanol that we’re concerned about, it’s the RIN cost.”
Educate Washington
Robert Cammarn, Local 241 president at the HollyFrontier refinery in El Dorado, Kan., has traveled three times to Washington, D.C., to lobby his Kansas congressional delegation and testify to the EPA on the RINs issue.
“Mostly, they are concerned about being from a farm state and how to balance ethanol with refinery issues,” Cammarn said. “I don’t believe any of them had a true understanding of what our issue was. They hadn’t formed an opinion other than what the ethanol folks were talking about.
“I mostly gave them an understanding that it doesn’t matter how much ethanol they mandate. The point is that the point of obligation shouldn’t fall on the merchant refiners; it should be on blenders and retailers. We aren’t trying to reduce the amount of ethanol required,” he said.
Cammarn said he explained how small, independent refiners like HollyFrontier do not have the capacity for blending and how his whole community depends upon the refinery for its economic stability. He also emphasized that the workers share in the environmental obligation with EPA and its mandate.
He said he received surprised reactions from the congressional aides he spoke to. “They were more educated after I walked out of their office.”
Impact on Communities
Glen Nunez, who works at the PBF Chalmette, La., refinery and is vice president of Local 13-522, has traveled to Washington, D.C. to lobby on the RINs issue these past two years. He met in person with Sen. Bill Cassidy (R-La.) and said the senator understood how many small refiners would be affected by RINs costs.
“The politicians seem a lot more educated this year than the year before on the effect RINs have on small refiners,” Nunez.
“Small refineries can’t keep up with RIN costs. They can’t make money and pay RINs costs. In New Orleans, we have two small refineries and they can’t continue to pay,” he said.
Studies have shown that one refinery job affects 17 other jobs, so if a refinery is shut down, thousands are impacted.
“Our two plants employ about 1,000 people, so if they shut down it would totally destroy local communities in this region,” he said.
Possible Solutions
At the beginning of May, the Trump administration said it would scale back the use of biofuel waivers for small refineries and allow ethanol exports to count toward federal biofuels usage quotas. This would expand the market for RINs, increase the RINs supply and lower the RINs costs. The administration would also permit 15 percent ethanol fuel to be sold year round. These actions would be part of a broad overhaul of the country’s renewable fuel policy.
Media reported on May 23, 2018 that top officials for the EPA and the departments of Energy and Agriculture will meet May 24 to discuss changes to the RFS and to try to resolve long-standing tensions over the program between the oil refining and corn ethanol industries.
Nunez said he would like to see a cap on the RIN price. “I don’t want to lose this job. I’ve been here for 15 years. I would like someone to step in and put a cap in place. It is ridiculous to sell RINs on an open market as a commodity.”
Cammarn also is waiting to see if there will be a cap on RINs costs and if E85 is actually sold year round. “If they don’t change the point of obligation or put a cap on RINs, then the problem will not go away, and the ethanol lobby gets the ability to sell ethanol year round. Workers in my industry would still be negatively impacted.
“This is small oil against the point of obligation for the RFS. It isn’t big oil against the corn industry,” he added.
PHOTOS
Top: DeVon Crawford, USW Local 10-234 president at Monroe Energy in Trainer, Pa., leads a Washington, D.C., oil refinery worker rally to urge lawmakers to make changes in the proof of compliance for the Renewable Fuel Standard.
Bottom: Oil workers rally at the U.S. Capitol to press for changes in how oil refiners show they are in compliance with the Renewable Fuel Standard.