As former governors who have supported projects that create good jobs and enhance our country's energy security, we've learned how the federal government can help or impede those efforts. One well-intended program, whose implementation threatens Pennsylvania workers, is the Renewable Fuel Standard (RFS), which requires the use of renewables in fuel supplies. The good news is it can be fixed.
Renewables are an important part of our fuel mix, and should remain so. Unfortunately, the Environmental Protection Agency uses a complicated system to verify their use, involving credits called Renewable Identification Numbers (RINs), which can be held or sold. Environmental regulations often use trading programs that reward parties with credits when they exceed expectations, creating a virtuous cycle. But the RFS has it backwards, by placing the compliance obligation on one party — refiners — and providing the credits to another party — blenders. This fundamental disconnect shatters that virtuous cycle and makes no sense.
The current RFS design puts extreme economic pressure on independent refiners such as our region's own Philadelphia Energy Solutions and Monroe Energy, which together support thousands of jobs and provide the Northeast with a stable supply of gasoline, heating oil, and diesel fuel.
United Steel Workers president Leo Gerard is pressing the EPA to fix the RFS by moving the point at which the obligation is placed to the same place where the RINs are awarded — thereby reestablishing the "virtuous cycle." According to the USW, efforts to "move the point of obligation from refineries to all blending facilities … will create a level playing field and allow … smaller refiners to compete."
When gasoline prices spike, those least able to afford it — the working poor, minority, and elderly communities — get hurt the most. The National Black Caucus of State Legislators found that "adverse impacts on refining related to these implementation problems endanger gasoline supply and price, creating substantial unequal impacts for consumers living on fixed incomes and in communities of color." They too have formally asked the EPA to move the point of obligation to where renewables are blended.
The high price of RINs (2 to 3 cents in 2012 to about 80 cents today) has even raised concerns about national security, as our country's refining base is fundamental to maintaining the readiness of our armed forces. Worried about our ability to mobilize in an emergency, military experts have told the EPA, "There can be little doubt that the volatility created by spikes in the RIN marketplace constrains the domestic refining base," which constitutes "a strategic threat to the security of the United States."
Some may suggest changing the RFS program as we advocate would inappropriately benefit special interests. But that isn't what this is about. For us, this is about protecting thousands of well-paying jobs for our fellow citizens and preserving smaller refineries that are critical to our region's economic health and prosperity.
A year ago in Pittsburgh, candidate Donald Trump said: "I'm going to lift restrictions on American energy and allow this wealth to pour into our communities, including right here in the state of Pennsylvania." In the face of both the president's interest in maintaining America's energy advantage and the widespread discontent with the RFS, the EPA should move quickly to fix this problem.
As two people who care deeply about the continuing health of Pennsylvania and this country — and who both remember very well how just a few years ago a massive bipartisan effort successfully defeated an existential threat to our region's refineries — we see little upside or basic fairness to this program's current structure.
We do, however, see an effective way to improve it: move the point of obligation under the RFS. With a stroke of the pen, the administration can preserve refineries in Pennsylvania and across the nation, protect tens of thousands of jobs, unleash billions in capital investment, safeguard consumers, and advance the cause of national security — all while maintaining the role that renewables have to play in our fuel supply. Not a bad way to keep a promise to the American people regarding our country's energy.