U.S. renewable fuel credits double since court decision on refinery waivers

By Stephanie Kelly

NEW YORK (Reuters) – U.S. renewable fuel prices have doubled since a U.S. appeals court in late January ruled that the Trump administration must reconsider three waivers it previously handed out to oil refineries that exempted them from biofuel blending laws.

Renewable fuel (D6) credits for 2019 are trading at around 19 cents each, up from nine cents before the court’s Jan. 24 court decision, traders said. Refiners including Phillips 66 and Valero Energy Corp have actively bought in the market, two traders said.

Prices have steadily risen because the court decision raises the possibility of fewer small-refinery waivers going forward, creating higher demand for the credits, traders said.

Under the U.S. Renewable Fuel Standard, the nation’s oil refineries are required to blend billions of gallons of biofuels such as ethanol into the nation’s fuel pool, or buy credits known as RINs from those that do. But the EPA can waive refiners’ obligations if they prove compliance would cause them financial distress.

The Environmental Protection Agency under President Donald Trump has roughly quadrupled the number of waivers handed out to small refiners, angering the biofuel industry, which claims the exemptions hurt demand for corn-based ethanol. The oil industry rebuts that and says the obligations are too pricey.

According to the court’s decision, the EPA overstepped its authority to grant waivers in the past for HollyFrontier’s Woods Cross and Cheyenne refiners and CVR Energy’s Wynnewood refinery because the refineries had not received exemptions in the previous year.

Market participants are awaiting clarity on how the EPA will address the court’s ruling. The court vacated the EPA orders granting the exemptions to the three refineries and sent the issue back to the EPA for further action.

Biomass-based (D4) credits for 2019 have also risen since the ruling, to 55 cents each from 45 cents each, traders said.

(Reporting by Stephanie Kelly; Editing by Steve Orlofsky)