Cooperative Relies on RFS Waivers

first_imgShare Facebook Twitter Google + LinkedIn Pinterest By Todd NeeleyDTN Staff ReporterOMAHA (DTN) — The farmer-owned CountryMark cooperative and fuel refinery is caught in the middle of the small-refinery exemption controversy.The company operates in Indiana, Illinois, Michigan, Ohio and Kentucky — most of its customers at more than 100 retail stations are farmers and rural communities that have benefitted from the commodities markets bolstered by the Renewable Fuel Standard since 2005.It is — by EPA’s definition — a small refinery producing 75,000 barrels per day or less.In 2017 and 2018, CountryMark received small-refinery waivers to the RFS.It is one of the few refiners owned by farmers, and small-refinery waivers made CountryMark’s business more viable in 2017 and 2018.On the other hand, the refiner is a big supporter of the RFS. The company blends as much ethanol and biodiesel as possible and fulfills the rest of its legal obligation through buying biofuels credits.Kent Hoffman, an Indiana farmer and CountryMark board member, told DTN the refiner’s need for waivers started in 2015 when its bottom line took a hit when crude oil prices dropped. Yet costs to comply with the RFS continued to rise, he said.“In 2015 it was a huge loss for our refinery as crude oil prices collapsed,” Hoffman said.According to the U.S. Energy Information Administration, lower crude oil prices led to a decline in U.S. production that began in the second quarter of 2015. By the end of 2015 prices dipped to below $40 a barrel — the lowest price since 2009.Click on the link to see the EIA price decline report: https://www.eia.gov/…The price of renewable identification numbers, or RINs, for all biofuels categories in 2015 remained mostly below $1 throughout the year. The highest price for any RIN in 2015 was $1.13 for a D3 cellulosic RIN on July 27, according to EPA’s database.Click this link to view EPA RIN trades and price information: https://www.epa.gov/…In 2016, the price of D3 RINs spiked to a high of $2.35 on Dec. 12, while the prices of other RINs ranged from 52 cents to $1.10 throughout the year.CountryMark’s RFS compliance costs ballooned to more than 350% of profits in 2016, Hoffman said.Refiner costs for natural gas to run the plant and maintenance was about $18.1 million, employee costs came in at around $20.4 million, he said.The costs to comply with the RFS, however, topped them all at about $22.9 million.“Over the next five years, we’re projecting $70 million for compliance costs,” Hoffman said.The refinery started as a gusher well discovered on farm ground in the southwestern tip of Indiana in the 1930s.The farmers who owned the newly discovered oil decided to cash in, so they built a 2,000 barrel-per-day refinery near Mount Vernon, Indiana. Today, it processes about 30,000 barrels per day.The CountryMark refinery brings to market about 450 million gallons of finished fuel products each year to farms, fleets and families. The refiner is owned and operated by CountryMark’s farmer cooperatives.WAIVERS NECESSARYMatt Smorch, CountryMark vice president of refining and logistics, said the process to apply for a waiver isn’t easy but sometimes necessary. The EPA asks companies for a lot of detailed financial information, so a waiver isn’t granted automatically.Because CountryMark has received waivers retroactively, he said the company is allowed to un-retire RINs it has on hand, even though it met its RFS obligation through blending and buying RINs throughout the year. Un-retiring RINs, he said, has led to more RINs flooding the market. That has created lower demand and lower prices for RINs.When it comes to CountryMark’s un-retired RINs in 2018, however, Smorch said the law allows the company to use just 20% of those credits for 2019 compliance.Since RINs prices have fallen, the company may not be petitioning EPA for a 2019 waiver.“Depending on how the rest of the year comes in and where the markets are at, and if our RFS compliance costs are not very high, with the way everything is this year we probably won’t apply for an exemption,” Smorch said.“It wouldn’t pass the red-face test.”The company supports the RFS because it understands its importance to the rural economy and its cooperative members, he said.“We’re a farmer-owned cooperative so we blend as much in our products that we can, and we incent our members to blend,” Smorch said. “Even with everything we do through blending, we are still short.”The company blends 60% to 65% of its obligation and fills the rest through RINs purchases.“We have to go out and buy credits,” Smorch said. “Typically we buy biodiesel and sell it at the diesel price. That’s part of our cost. We don’t own retail. We have branded stations but we don’t own them. With the way the RFS is set up today, mandates are so high that it’s hard to meet in the marketplace. If we fall short of blending, the waivers are a fallback.“Is applying for an exemption something we will do every year? Probably not. It really is there for a safety valve. We’re very supportive of the RFS. We’re in rural Indiana, our refinery is in the southwest part of the state. This is what saving rural jobs looks like.”BIOFUELS DEMANDEthanol and biodiesel interests contend 85 waivers granted by the EPA has destroyed biofuels demand to the tune of about 4 billion gallons since 2016.President Donald Trump reportedly is ready to make a peace offering to farm country at some point, to alleviate the sting felt in rural America where agriculture interests have doubts about where the president stands on the RFS.Smorch said he is unconvinced small-refinery waivers have led to reduced demand for biofuels, especially since the exemptions were granted retroactively.That’s because, as an example, CountryMark already blended as much biofuels as it could and bought RINs throughout the year to comply with the RFS. The company would like to blend more but doesn’t have the ability.If CountryMark decided it was going to meet its RFS obligation only through blending, it would face the daunting task of having to blend ethanol at a blend rate of greater than 12% of all of its gasoline and sell all diesel fuel at greater than B5, or a 5% biodiesel blend.CountryMark, however, is expanding its fuel offering of E15 and continues to look for other biofuels opportunities.Hoffman said the ability to ask for waivers is important to CountryMark’s business.“It is critical to our survival,” he said.“Waivers have made a huge difference on our profitability.”Todd Neeley can be reached at todd.neeley@dtn.comFollow him Twitter @toddneeleyDTN(BAS/CZ)© Copyright 2019 DTN/The Progressive Farmer. All rights reserved.last_img read more

Mighty Sports sweeps group stage in Dubai tilt

first_imgUS judge bars Trump’s health insurance rule for immigrants ‘We are too hospitable,’ says Sotto amid SEA Games woes LATEST STORIES Private companies step in to help SEA Games hosting ‘We are too hospitable,’ says Sotto amid SEA Games woes Sports Related Videospowered by AdSparcRead Next Photo by Tristan Tamayo/INQUIRER.netMighty Sports Philippines needed a late run to put away Al-Wahda Syria, 85-81, and finish the group stage undefeated in the 30th Dubai International Basketball Championship Wednesday (Manila time) at Shabab Al Ahli gymnasium in Dubai, United Arab Emirates.Justin Brownlee and Roosevelt Adams led the game-clinching 14-0 blast after Mighty Sports trailed, 76-70, with less than five minutes remainingADVERTISEMENT MOST READ Grace Poe files bill to protect govt teachers from malicious accusations SEA Games hosting troubles anger Duterte Oil plant explodes in Pampanga town PDEA chief backs Robredo in revealing ‘discoveries’ on drug war Don’t miss out on the latest news and information. Wizards lose John Wall for year with ruptured left tendon Brownlee unleashed 27 points, including a 3-pointer that put Mighty Sports ahead for good, 79-76, with 2:32 to go.Roosevelt Adams was again a spark off the bench with 21 points, highlighted by four triples, and seven rebounds in 29 minutes.FEATURED STORIESSPORTSPrivate companies step in to help SEA Games hostingSPORTSUrgent reply from Philippine ‍football chiefSPORTSPalace wants Cayetano’s PHISGOC Foundation probed over corruption chargesRandolph Morris added 19 points, six rebounds and two blocks for the Philippine side, which climbed to 4-0.Jordan Adams, who had a brief stint with the Memphis Grizzlies in the NBA, paced Al Wahda with 22 points. PH underwater hockey team aims to make waves in SEA Games PLAY LIST 02:42PH underwater hockey team aims to make waves in SEA Games01:44Philippines marks anniversary of massacre with calls for justice01:19Fire erupts in Barangay Tatalon in Quezon City01:07Trump talks impeachment while meeting NCAA athletes02:49World-class track facilities installed at NCC for SEA Games02:11Trump awards medals to Jon Voight, Alison Krauss View commentslast_img read more