By STAN MADDUX

Indiana Correspondent

WEST LAFAYETTE, Ind. — The largest oil refinery on the East Coast blaming the federal ethanol mandate for its bankruptcy filing has corn growers worried more about the axe dropping on blended fuels.

Wally Tyner, a professor of agricultural economics at Purdue University, believes ethanol at least for the short term is practically untouchable, though, because of how deeply the corn-based fuel is woven into the process nowadays of making fuel.

He said refineries produce 84-octane gasoline. The octane levels go up once blenders add ethanol, which has a rating of 113. Without ethanol, he said refineries could produce straight 87-octane or higher gasoline, but it costs more to do it than by blending and isn’t cleaner-burning until mixed with ethanol.

“Corn ethanol is now sort of part of the system,” said Tyner.

Philadelphia Energy Solutions (PES) pointed to “skyrocketing costs” of complying with EPA’s Renewable Fuel Standard (RFS) and pressure on refining margins for its bankruptcy. The refinery plans to continue operating by restructuring up to $10 billion in liabilities cited in the bankruptcy filing.

Under the RFS mandate, Tyner said refineries like PES without the infrastructure to blend their own fuel must pay for renewable identification numbers. The amount of RINs is determined by market share, and that pay-in goes to the blender.

“That‘s their compliance cost,” he said of the refineries.

In its bankruptcy filing, PES listed $832 million in RINs purchased since 2012 and said last year about $218 million was spent, or twice what the company spent on payroll.

Tyner said there is no cost for refineries that do their own blending.

Greg Gatta, CEO for PES, said it will continue to work with the government to fix what he called a “broken” system he alleged is hurting smaller independent merchant refiners.

Before the bankruptcy filing, corn growers were already concerned about the RFS mandate being lifted because of ongoing pressure from within the oil industry and President Trump’s support for loosening restrictions on businesses, in general. The mandate was signed into law by former President George W. Bush in 2005 to help reduce greenhouse gas emissions and reduce reliance on foreign oil.

Also benefiting from RFS is the biofuel industry, some members of which doubt the significance of the mandate on the refinery’s bankruptcy. “Blaming the RFS is a better story than admitting strategic mistakes related to crude oil markets. It’s a smokescreen,” said R. Brooke Coleman, executive director of the Advanced Biofuels Business Council.

In response, Gatta said such claims throughout the renewable fuels industry are false and misleading. He said his desire is to have an even playing field.

“We are not fighting against ethanol or other biofuel producers, farmers and the many Americans they employ. We simply want to correct the flawed and indefensible RINs compliance mechanism that is destroying the independent merchant refining industry and the thousands of families supported by it,” he said.

Even without the RFS mandate, Tyner believes ethanol is here to stay for a while longer, calling it the cheapest, most environmentally friendly source for achieving the octane levels needed in gasoline. He also said corn growers would not be impacted much because 14 billion gallons of ethanol are needed to meet the octane requirements, or 1 billion gallons less than what’s now mandated.

 “What about five years down the road? Ten years down the road? I don’t know. The oil companies could come up with a way to produce a cheaper source of that. It’s possible down the road something could come up,” he said.

Bob Dinneen, president and CEO of the Renewable Fuels Assoc., said during its recent National Ethanol Conference that the RFS mandate has been a “tremendous success” and the discussion should be on growing biofuel.

“It does not need to be reformed simply because some refiners don’t like the policy,” he said.