Who are the winners?
Speculators, which includes Wall Street banks.
Big Oil, such as Chevron, Shell, BP and others (they control huge retail chains and some even have RINs trading desks).*
Integrated Refiners, such as Marathon, Tesoro and others.*
Big Retail Service Stations, which includes 7-Eleven, Murphy USA, Casey’s and others.
Certain biofuel producers, who not only receive tax dollars as subsidies, but are allowed to directly market their RINs.
*See the Baker & O’Brien report here.
Below are a few examples of how the WINNERS benefit from the broken RFS program.
As Bloomberg recently reported, Murphy USA, which operates more than 1,300 gas stations across the Midwest and South (usually connected to Wal-Mart stores), has earned record profits from RIN sales. Murphy has access to fuel distribution and blending facilities that generate RINs, but the company isn’t legally required to comply with the RFS.
According to filings with the SEC, Murphy generated 85 percent of its 2015 net income ($117.5 million), excluding profits from a plant sale, from selling RINs to obligated parties. The company has continued to earn windfall profits in 2016, with a record $43.9 million from RINs in the second quarter. Murphy even touts its windfall in the company’s 2015 Annual Report:
“In recent years, we have benefited by our ability to attain RINs and sell them at favorable prices in the market… A significant decline in revenues from RINs in future periods could adversely affect our results of operations, and the impact could be material.”
Casey’s General Stores, which operates more than 1,900 stores and gas stations, is another beneficiary of this broken program. The company mixes bulk fuel with ethanol and biodiesel to generate RINs, which it then sells for a profit.
According to a filing with the SEC, in the fiscal year that ended April 30, 2016, Casey’s earned $31 million from RINs, representing 14 percent of its overall record profit. Furthermore, Goldman Sachs predicts that Casey’s will see a one percent increase in EBITDA for every 10 cent increase in the price of RINs.
When Congress enacted the RFS program, the goal was to reduce dependence on foreign oil and greenhouse gas emissions – NOT to affect a massive transfer of wealth by deeming some companies as winners and condemning others as losers. And, Congress likely didn’t intend for this program to provide windfall profits for foreign-owned companies. You can learn more about that here.
The EPA must close the Blender Loophole by making ALL BLENDERS responsible for complying with the RFS. If the blender loophole were closed, blenders would have both a legal obligation and a financial incentive to increase renewable fuel use – the same as refiners and importers – and the RFS would have a better chance of working as intended. This would benefit consumers, as well as the many companies involved in the program.