The refining industry has long been an integral part of Greater Philadelphia's regional economy. Hard-working refinery employees produce the gasoline, jet fuel, diesel and other products our country runs on, and their good-paying jobs help sustain our communities. These refineries, however, are facing substantial economic challenges due to the significant compliance costs associated with a federal mandate that requires the blending of corn-based ethanol into finished fuels. While this issue has gained attention in recent months, now is the time to turn words into policy actions.
The Renewable Fuel Standard (RFS) was intended to reduce air emissions and diversify the nation's fuel mix. Unfortunately, the regulation has yielded unintended and harmful consequences. In order to comply with the RFS, refiners of all sizes must ensure that a specific amount of renewable fuels are blended into all gasoline and diesel. Refiners submit tradable compliance credits, called Renewable Identification Numbers, or RINs, to prove the required amount of renewable fuel has been blended. However, some independent refiners cannot do the blending themselves, so they must purchase the required amount of credits in lieu of blending.
Unfortunately, the cost of buying these credits has increased dramatically in recent years.
When the program started, credits cost just pennies, yielding annual compliance costs that were manageable. Today, independent refineries spend hundreds of millions of dollars each year to comply with the requirement. Earlier this year, the company that runs a major Philadelphia refinery, which provides refined fuel for much of the East Coast, declared bankruptcy. It cited the high cost of RINs as the number one reason for its economic hardship. RINs now cost the refinery twice the amount of paying its entire workforce.
Today, the refinery provides 1,100 direct jobs, thousands of indirect jobs, and is the largest on the East Coast. The loss of those jobs and production would be a terrible detriment to the region and nation.
This year, energy companies both large and small met with President Donald Trump to express concern about this expensive regulatory mandate. At the urging of U.S. Sens. Pat Toomey (R., Pa.), Ted Cruz (R., Texas), and others, the president and his administration reportedly arrived at a solution to help refiners as well as the farmers who grow the corn that is used to make the renewable fuel, ethanol. The proposed resolution would attach compliance credits to U.S. exports of ethanol, adding more credits into the available supply. This would boost the incentive to grow the U.S. ethanol export markets and simultaneously help reduce the price of the credits. The president also expressed support for the year-round sale of higher-level ethanol fuel at retail fueling stations, which also helps Midwest farmers.
I applaud President Trump and Sen. Toomey for recognizing the importance of this issue to our economy by finding an equitable solution to save jobs in Philadelphia and support our nation's renewable energy supply. I urge the administration to act as soon as possible to implement this fair and reasonable solution that will protect American jobs, enhance fuel security, and support both farmers and refiners. As each day passes without enacting the proposal, independent refiners continue to operate in a market that is stacked against them.