As published by Pennsylvania’s Lancaster Farming on March 10, 2018 (Page A9)
By: Former Missouri Senator Jim Talent
Date: March 10, 2018
Over the last month, the oil industry attacks on homegrown biofuels have reached a fever pitch. Their latest salvo centers on a private equity firm, the Carlyle Group, which owns Philadelphia Energy Solutions (PES) and recently announced plans to restructure the refiner’s debt in bankruptcy court. But the false notion that cutting out renewable energy will help PES is nothing more than political spin – an argument that delays real solutions and threatens hundreds of thousands of U.S. jobs in homegrown energy.
President Trump has stood firmly behind America’s growing biofuel sector, vowing to protect rural manufacturing jobs like those at Pennsylvania Grain Processing, a company that provides a vital market for 300 Pennsylvania farmers and 100 more in neighboring states. Trump’s support has been critical to rural economies at a time when U.S. farm income is at a 12-year low, and Environmental Protection Agency (EPA) Administrator Scott Pruitt would be wise to follow the president’s lead.
At the same time, the Administration has been incredibly generous to companies like PES, enacting a tax reform bill expected to boost refinery profits over 20 percent. But that’s not enough for a handful of refinery owners, including those at PES, who argue that America’s Renewable Fuel Standard (RFS) is a threat to profits because it requires the addition of biofuels into the energy mix. We heard the same arguments when Congress passed the RFS with strong bipartisan support over 12 years ago. They weren’t true then, and they aren’t true now.
U.S. refiners – including other non-integrated refiners like PES – are posting surging profits. The loudest refining voice against biofuels, Valero, just announced a six-fold increase in earnings. PBF Energy’s share price rose nearly 50 percent over the last six months.
PES owners simply want to blame the RFS for real problems they failed to address. Thankfully, the firm announced that no local jobs were in immediate jeopardy, but the situation is far from comfortable for workers who had to endure the same scare in 2012, before Pennsylvania taxpayers provided the Carlyle Group $25 million to keep the facility running.
A new analysis from the University of Pennsylvania offers a detailed look at the biggest issues facing PES. The RFS is not among them. In fact, the report notes that both large and small refiners “recover their compliance costs through the market price of refined fuel.” Other market analysts and the Environmental Protect Agency have reached the same conclusion.
So what’s the real issue? According to Christina Simeone at the University of Pennsylvania, PES is struggling with a strategy that left the refinery high and dry when its access to low-cost, domestic crude oil evaporated – a predictable outcome after oil companies won permission to export America’s crude oil. To make matters worse, Simeone reports, “PES also had to siphon over $616 million between 2012 and 2017 in the form of dividends, debt repayment, and advisory fees to equity investors.”
Clearly, the time has come for managers at PES to invest in long-term growth – investments that competing refiners like Tesoro have called the “rational, business-oriented approach.” But nothing about the situation justifies attacks on the RFS, which has driven over a decade of economic growth and rising U.S. energy security.
According to the U.S. Department of Agriculture, U.S. ethanol slashes greenhouse gasses by 43 percent. Biofuels also drive competition at the pump, generating an average savings of $142 per household, according to the American Journal of Agricultural Economics. And they insulate U.S. markets from relentless attempts by Russia and the Organization of the Petroleum Exporting Countries (OPEC) to control global fuel supplies. But most importantly, thanks to the RFS, homegrown biofuels support jobs – both in the farm sector and at over 200 biorefineries from coast to coast. We shouldn’t let those jobs fall prey to smoke and mirrors from a few refinery lobbyists.
~ Former Missouri Senator Jim Talent currently serves as Co-Chair of Americans for Energy Security and Innovation, which supports homegrown, renewable energy to reduce our dependence on foreign oil.