The first big issue to face President-elect Trump's Environmental Protection Agency will not be rolling back climate change regulations, but rather a proposal by the refinery industry looking to upend the agency's renewable fuel program.
Some refiners want to change the Renewable Fuel Standard so that they are no longer on the hook for complying with the standard, which requires refiners to blend primarily corn-based ethanol and other renewable fuels into the nation's gasoline and diesel supplies.
Instead, they want to change the "point of obligation" from the refiners to those that actually sell the fuel, like wholesalers and convenience stores WaWa and Sheetz, which control their own supply chain.
The issue has created a collaboration among strange bedfellows in opposing the switch. The oil and renewable fuel industries are now joining together, instead of fighting each other, in urging the EPA to swiftly deny a petition by some refiners led by Valero, one of the largest refiners in the country, to change the program.
The EPA has "proposed to reject" the Valero petition "that set off a 60-day comment window that I believe expires around Jan. 23, which means it will be one of the first things that the new EPA administrator has on his desk," said David Fialkov with the National Association of Truck Stop Operators, one of the groups opposing the petition, in an interview with the Washington Examiner.
It is not clear where Oklahoma Attorney General Scott Pruitt, Trump's nominee to head the agency, "stands on this issue," Fialkov said. "He has obviously been an opponent of the [Renewable Fuel Standard] in general, but then again so has [the American Petroleum Institute] and API doesn't want to change the point of obligation either because they recognize that the market disruption that would result is not desirable."
The American Petroleum Institute, the lead trade group for the oil and gas industry, signed a letter sent last month to the EPA with the ethanol industry opposing the proposed change. The change would not only increase the regulatory burden on retail fuel suppliers, but it also would increase the cost of fuel for the average consumer and hurt the economy, the trade groups said in the letter.
On Wednesday, a poll is being released that shows that average voters don't like Valero's idea, either.
A coalition of trade groups representing convenience stores, and gas and diesel stations, including Fialkov's group, are using the poll to show EPA, as well as Pruitt, that changing the structure of the standard would be the wrong move.
The poll showed that 86 percent of voters "believe that changing compliance requirements would pass the burden onto businesses and individuals with higher gas prices at the pump," according to an executive summary of the poll's findings. Respondents were informed about how the federal government uses the fuel standard to encourage the use of renewable fuels and which groups are required to comply. The poll was conducted online Nov. 3-7 by pollster PSB among 1,201 likely voters nationwide, and had a margin of error of 2.83 percent.
The refiners that have the most problem with the program are "merchant refiners" such as Monroe Energy, which is owned by Delta Air Lines. Valero is a special case, but because it is refining more fuel than it is buying ethanol to blend into, it now fits in the merchant category, Fialkov said.
Basically, they don't have the capacity to blend ethanol and other renewable fuels into gasoline and diesel to be able to comply with the fuel rules, so they want the program changed to only include those companies that have the wherewithal to both purchase gasoline and diesel and blend it with renewable fuels.
Supporters of leaving the fuel standard alone are worried that Pruitt may endorse Valero's proposed changes, as Trump adviser Carl Icahn is a top donor with interests in merchant refineries.
It has been suggested that Icahn had a say in Trump picking Pruitt as EPA administrator because he opposed the fuel standard, even though Trump said during the campaign that he supports the program.
Icahn wrote an op-ed in last month's Wall Street Journal in which he explained that Icahn Enterprises, where he serves as chairman, "indirectly controls CVR Refining, a merchant refiner that is losing hundreds of millions of dollars because of the Renewable Fuel Standard." He wrote how the added expense of buying renewable fuel credits to meet the standard could bankrupt the merchant refiners, while helping to bankroll the major oil companies that can cash in on the excess credits they generate since they can blend more fuel than they refine.
"Those blenders, often gas-station chains, earn windfall profits by generating [renewable credits] that the merchant refiners are forced to buy to comply with the law," Icahn said. "Big integrated oil firms are practically exempt: Most of them blend more fuel than they refine, meaning they end up with excess [credits] to sell," he argued.
"The [renewable credit] program is effectively doing for the Big Oil firms what the Federal Trade Commission would never allow them to do for themselves: destroy their competitors in the refining business," Icahn said. "If merchant refiners go under, the Big Oil oligopolies will be strengthened and gasoline prices will go up, with ripple effects throughout the economy — lower consumer spending, decreased travel, higher shipping costs, increased unemployment, labor market monopsony, decreased consumer confidence, higher food prices, and less public funding for priorities like education. The failure of multiple refineries would absolutely wreck America's economy."
The merchant refiners also had argued that lifting the 40-year-old ban on oil exports would force them to shut down. The export ban was lifted in last year's spending bill.