WASHINGTON (Reuters) - The head of the U.S. Environmental Protection Agency said on Thursday that the recent bankruptcy of Pennsylvania oil refiner Philadelphia Energy Solutions was evidence that the nation's biofuel policy needs an overhaul.
PES, the largest oil refiner on the East Coast, filed for bankruptcy last month. It blamed the cost of complying with the U.S. Renewable Fuel Standard, which requires refiners to blend corn-based ethanol and other biofuels into their gasoline and diesel.
EPA chief Scott Pruitt agreed in an interview with Fox News that the bankruptcy largely stemmed from the RFS. He cited the program's requirement that refiners earn or purchase biofuel blending credits called RINs to prove to the EPA that they were meeting their obligations.
"We need RIN reform," Pruitt said. "It is something I’ve talked to Congress about."
In response to a question about whether an overhaul would upset the Midwest corn lobby, he said: "This isn’t getting rid of the ethanol requirement. This is about the accounting mechanism to ensure that a certain percentage of our fuel actually has ethanol. We need to get reform around that."
PES owes the EPA about $185 million worth of RINs. Other refiners, including Texas' Valero Energy Corp, have also complained about high RIN costs.
Revamping the RFS, which the George W. Bush administration started to help farmers and reduce U.S. petroleum imports, would require an act of Congress. John Cornyn, the No. 2 Senate Republican, is trying to build consensus for a bill that would alter the RFS in a way that helps the refining industry.
In the interview, Pruitt also said the EPA wanted to take a more conservative approach to setting annual biofuel blending volume requirements, an idea he has floated in the past and which has faced stiff resistance from Midwest lawmakers and the ethanol lobby.
"We set volume obligations every November," he said. "Our job should be to take the market and production levels and set volume obligations that are consistent with objective factors – not set inflated or blue-sky types of numbers that create this inflationary pressure on RINs."
The RFS requires refiners to blend 15 billion gallons (57 billion liters) of ethanol into the nation's fuel each year.
(Writing by Richard Valdmanis; Editing by Lisa Von Ahn)