Threatening the continued operation of Monroe Energy’s Trainer Refinery south of Philadelphia — and its hundreds of jobs — are renewable fuel compliance credits expected to hit historic highs this year under a federal proposal.
Independent refiners like Monroe Energy are already spending more on compliance credits “than on salaries, benefits, and capital expenses combined,” said Carl Marrara of the Pennsylvania Manufacturers’ Association (PMA) in testimony to the U.S. Environmental Protection Agency (EPA). “This is unsustainable.”
The EPA-administered Renewable Fuel Standard (RFS) requires refiners to either add ethanol to refined fuels or to buy credits. Because Trainer has only one small location where ethanol can be added, the refinery has to purchase the majority of the credits it needs in order to comply with the RFS, effectively a tax on domestic refining. These credits originally cost just a few cents but are now “headed north of $2.00,” according to Rapidan Energy Group.
The difference for Trainer is hundreds of millions in additional costs annually. This is money that cannot be invested into the facility to put people to work or to improve products. Since buying Trainer in 2012, RFS compliance has cost Monroe Energy more than $1 billion through 2021 — multiples more than the refinery’s purchase price.
The current issue involves an EPA requirement for fuel use that far exceeds that agency’s own projections of what actually is likely to be needed in 2022. That inconsistency results in higher prices in the credit market. Monroe Energy and groups like PMA are encouraging the EPA to adjust its requirements to avoid further burdening an industry in which seven East Coast refineries have already closed since 2009.
Since buying Trainer in 2012, RFS compliance has cost Monroe Energy more than $1 billion through 2021 – multiples more than the refinery’s purchase price.
The possibility of job loss is “always in the back of everybody’s mind,” said Ron Pierce of Chester, who started at Trainer 28 years ago as a unit operator and now leads emergency-response teams as the facility’s fire chief.
“We just want Trainer to keep making money and producing these products so that we can provide for our families,” says Mr. Pierce, who put two daughters through college debt-free. “This job has been a blessing, that’s one thing I can truly say.”
“We have a lot of young people here with young kids. They want to be here long-term and come to work everyday and go home knowing that they have a job. Hopefully, they can do the same as I have been able to.”
Trainer employs approximately 500 people and hires at any one time up to 1,400 members of the Philadelphia Building Trades for maintenance projects that can last for months. The refinery produces daily more than eight million gallons of fuel, mainly for transportation and heating.
According to industry experts, the high-priced credits threaten not only Trainer but also “countless businesses in Pennsylvania and throughout the country, especially those that contract with refineries for goods, services and a reliable energy supply,” said PMA’s Mr. Marrara.
“Thousands of Pennsylvanians rely on independent refineries for family-sustaining careers,” he said. “Hundreds of thousands more depend on the work being done at these refineries, both up and downstream — especially the pipe suppliers, valve manufacturers, chemical companies and other operations that sell goods to refineries.”
A recovering economy and strong energy prices have been positives for Trainer, which has been modernizing in recent years. Investments have included nearly $200 million to install equipment to make low-sulfur gasoline. Currently, the company is building high-efficiency electrical substations, as well as water-recycling units that are expected to provide significant environmental benefits for the region.
However, says Monroe Energy spokesman Adam Gattuso, making such long-term investments is challenging with a future clouded by the RFS’s extraordinary cost. “This uncertainty makes planning projects with long lead times difficult if not impossible,” he said.
As of late last year, more than 50 organizations representing millions of people had written in support of RFS reform. Even the National Wildlife Federation opposes the RFS because increased ethanol use has led to croplands infringing on natural habitat. Trade organizations of the dairy industry and bakeries have objected to RFS’s pressures on corn prices and supplies.
Trainer employees are counting on advocacy efforts to make clear the negative effects of the EPA rule and additional refinery shutdowns — job losses, higher fuel prices, and diminished energy security. “We hope people will side with us and allow us to keep doing our jobs,” said Mr. Pierce.
To learn more about the RFS issue and why this program needs to be reformed, visit www.FuelingUSJobs.com
Gordon Tomb is a senior fellow with the Commonwealth Foundation, a Pennsylvania-based free-market think tank.