Green Energy Mandate Bankrupts East Coast Oil Refinery, 1,100 Jobs at Risk

Guest essay by Eric Worrall

h/t Willie Soon – the hangover of President Obama’s war on cheap energy is still causing financial hardship. Philadelphia Energy Solutions, which employs 1,100 people, has been driven into financial distress by the cost of compulsory green energy mandates.

Exclusive: Philadelphia Energy Solutions to file for bankruptcy – memo

Jessica DiNapoli, Jarrett Renshaw

5 MIN READ

(Reuters) – Philadelphia Energy Solutions LLC, the owner of the largest U.S. East Coast oil refining complex, announced to its employees on Sunday that it plans to file for Chapter 11 bankruptcy, according to an internal memo reviewed by Reuters.

The bankruptcy would come six years after private equity firm Carlyle Group LP (CG.O) and Energy Transfer Partners LP’s Sunoco Inc rescued Philadelphia Energy Solutions from financial distress, in a deal that was supported by tax breaks and grants that saved thousands of jobs.

Following an agreement with its creditors, the company has secured access to $260 million in new financing, and said it expected the bankruptcy filing to have no immediate impact on its employees, according to the memo, which was confirmed by a spokeswoman for Philadelphia Energy Solutions. The spokeswoman declined to comment further.

Philadelphia Energy Solutions owns two refineries, Girard Point and Point Breeze. It can convert about 335,000 barrels of crude oil per day to products such as gasoline, jet fuel and diesel. It employs about 1,100 people.

Part of the refiner’s financial troubles stem from a costly biofuels law called the Renewable Fuels Standard, which is administered by the Environmental Protection Agency and requires refiners to blend biofuels into the nation’s fuel supply every year, or buy credits from those who do.

Since 2012, Philadelphia Energy Solutions has spent more than $800 million on credits to comply with the law, making it the refiner’s biggest expense after the purchase of crude, according to the memo.

Read more: https://www.reuters.com/article/us-philadelphiaenergysolutions-bankruptc/exclusive-philadelphia-energy-solutions-to-file-for-bankruptcy-memo-idUSKBN1FA18P

Obviously our hearts go out to the workers, who must by now be wondering when their paycheques will stop. But this story has wider implications – how many other US energy businesses are close to the brink, thanks to the lingering after effects of President Obama’s green energy mania?

Former Obama EPA head Gina McCarthy once boasted that Trump has “Limited Room to Manoeuvre” – Gina claimed her EPA administration had created a tangled thicket of green court rulings and regulations which she thought would be impossible for President Trump to clear away. The evidence suggests that Gina might have been right – despite President Trump and Scott Pruitt‘s best efforts, a year after President Trump’s election the EPA is still causing totally unnecessary hardship and financial distress for major US businesses.

I suggest it is time to consider more radical surgery, time to end this ongoing menace to US prosperity once and for all.

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Latitude

Fracking makes biofools even more ridiculous…..

Bryan A

Can this be explained?

The bankruptcy would come six years after private equity firm Carlyle Group LP (CG.O) and Energy Transfer Partners LP’s Sunoco Inc rescued Philadelphia Energy Solutions from financial distress, in a deal that was supported by tax breaks and grants that saved thousands of jobs.
Following an agreement with its creditors, the company has secured access to $260 million in new financing, and said it expected the bankruptcy filing to have no immediate impact on its employees, according to the memo, which was confirmed by a spokeswoman for Philadelphia Energy Solutions. The spokeswoman declined to comment further.
Philadelphia Energy Solutions owns two refineries, Girard Point and Point Breeze. It can convert about 335,000 barrels of crude oil per day to products such as gasoline, jet fuel and diesel. It employs about 1,100 people.

How can a deal save Thousands of jobs in a company that employs only 1100 unless the deal didn’t really save Thousands of jobs.

Feedbacks. They triple everything.

paqyfelyc

Jobs of subcontractors. Their number are usually not precisely known, and AFAIK their is no standard methodology to do that (you’ll surely included people doing maintenance on the machines and computers of the facility, but do you include workers of the cafeteria? gardeners of the staff who afford them, and won’t anymore? etc.) , but typically 2x to 5x as much as directly employed by the bankrupted company, Hence the “thousands”

Bryan A

Would those be pseudo employees?
Naw
Collateral Employees
Nope
Unrelated employees of other employers

Catcracking

I don’t know the exact ratio but most refiners extensively depend on outside contractors to supplement their workforce especiall during turnarounds where the unit undergoes major maintenance.
I have consulted at that refinery numerous times so they also depend on outside engineering contractors extensively today while in the past inside employees were typically used.
The claim is totally believable and the biofuel mandate needs to be eliminated.

Bryan A

But outside contractors aren’t employees of the refinery. Their paychecks aren’t generated from the refineries ledger or signed by the refineries bookkeeper. They are paid by the company awarded the contract and would be paid by them regardless of where their labors were required. Their W2s carry the name and address of the contractor not the refinery

Klem

Oil companies are gradually squeezing supply to control and raise the price of energy. Can’t blame them, it’s their business after all.
In the 1980s the US population was about 200 million, it’s grown over 50% since then. But the number of oil refineries has been reduced by half and oil refining output has grown by only 15%.
The world is awash in fossil fuels.

GREG in Houston

“Oil companies are gradually squeezing supply to control and raise the price of energy.”
Where did you get this?
“Oil companies” have little capability of affecting the price of crude because of the huge number of small companies. In fact, the bigger worry in the oil patch now is that independents will “over drill” and cause the price to drop back downs below $50/BBL. (Chevron is drilling like mad in the Permian basin.) And of course the world’s largest company, Saudi Aramco, can disrupt markets with the turn of a few valves.

John W. Garrett

Nobody in their right mind will invest in greenfield refineries (assuming they could even get the necessary permits). There’s a reason no new greenfield capacity has been built for decades.

Geoman

It really is astonishing to consider – biofuels is a terrible racket, and seemingly reduce carbon dioxide emissions not a bit. Yet the compulsion to use this source of energy remains. It is all just nonsense, and that fact has been apparent for a decade or more. yet we keep doing it…

John Harmsworth

It always was an indirect farm subsidy. The politicians know exactly what they’re doing.

Tom in Florida

I would rephrase that to read: the people who control the politicians know what they are doing.

AGW is not Science

Yup, government imbecility at its finest.

Sommer

Tom, you’re on the right track.
Take a look at the ‘trusted advisors’ in Ontario heavily lobbying on energy issues.
Sussex Strategy Group
Look at their commentary on climate change mitigation. It’s all in the public domain.
Check out their ‘Adrenaline’ digital developments.

Joseph Adam-Smith

I read that biofuels indirectly caused the so-called Arab Spring. The reason being that taking out a lot of food-producing farmland for bio-fuels increased the cost of food….. And, as we all know, in the poorer people food is a higher proportion of their living costs

Geoman

I mean , if you want to reduce carbon dioxide emissions from vehicles, there are numerous cheaper and better ways to do it. Even a slight increase in fuel economy standards for one. But we continue to pursue a truly wretched idea simply because farmers and certain refiners are invested in it, and politicians are too stupid to understand the science.

Barbee

Is anyone working on scrubbing or cleaning up the car’s exhaust. Perhaps on-board devices that can be replaced like we do our regular air (intake) filers???

Bruce Ryan

a modern car warmed to operating temperature runs fairly clean. Its exhaust is cleaner than the air in most cities.
Corn ethanol doesn’t help clean air at all, and it lowers fuel mileage. It does get votes in the corn belt.

Sheri

Isn’t that what catalytic converters are for?

Corn ethanol’s support in Congress is slightly disproportionately from Republicans, because that is the party that corn-growing states generally supports.

Bryan A

Really bad for modern IC engines though. Plays havoc on Gaskets and the like

MarkW

Increasing car mileage requirements results in more road deaths.

Bryan A

That is really because they are trying to do so by reducing the weight of vehicles. Tin Foil really only works for hats rather than Auto Body parts

Alan Tomalty

Why is the West committing economic suicide?

paqyfelyc

“The West” is a strange miracle, born in Renaissance out of Enlightenment by free speech, free thinking, knowledge that humans actually knew pretty much nothing, and that books conveyed as much bullshit as valuable knowledge, so you had to verify yourself. This was subversive of governments and rulers, and they stroke back with every weapon they could, all of them failing, except two which worked pretty fine (for the government, that is, obviously not for the citizen):
* pretending to be charities (which should be having lefties ROFLAO, but no, they swallow this shit), doing social work, protecting the weak, the environment, or whatever is popular at the time
* bribing “intellectuals” to take control of the schools. a stone that hit two goal: it restored belief that humans actually knew pretty much everything they needed, and that books conveyed only valuable knowledge. And it turned young boys into future soldiers willing to fight. Napoleon never could muster more that 2% of french population into soldiers, and farmers rebelled when he tried to get more; A century later, thanks to schools, the whole of Europe was eager to fight the Enemy
The west is not committing suicide, he was back-stabbed in the middle of the XIXe century.

The aim of the Socialist driven CAGW hysteria is to reduce industrialised countries to the level of Haiti and Chad. The increase in power costs caused by daytime Solar and intermittent Wind-power are a major means of de-industrialising by bankrupting companies and forcing the employees into retirement. The virtually unchallenged run of this agenda was stopped only by Trump’s election. People sensed that something was amiss and there was only one way out. Meanwhile, China and India are ignoring the Central Directive.

Chris

“The increase in power costs caused by daytime Solar and intermittent Wind-power are a major means of de-industrialising by bankrupting companies and forcing the employees into retirement.”
What increases in power costs are you referring to? Between 2009, when Obama came into office, and 2016 (the last data shown), the rate increased from 9.82 cents to 10.28 cents. That’s an average increase of .5%, which is far lower than the rate of inflation.
https://www.statista.com/statistics/183700/us-average-retail-electricity-price-since-1990/

James Schrumpf

That’s actually 4.7%. You forgot the decimal place.

SocietalNorm

The cost of natural gas ($/million metric BTU) from Feb. 2009 (after inauguration) to Dec 2016 was 3.89 to 2.46 ($/million BTU) — 63% of 2009 costs
https://www.statista.com/statistics/383557/us-henry-hub-average-natural-gas-price/
The cost of crude oil ($/barrel) from 2009 to 2016 was 60.86 to 51.64 — 85% of 2009 costs
https://www.statista.com/statistics/262858/change-in-opec-crude-oil-prices-since-1960/
The cost of coal ($/ton) went from 43.74 to 40.64 from 2009 to 2016 — 93% of 2009 costs
https://www.statista.com/statistics/183962/average-cost-of-coal-for-us-electricity-generation-from-2005/
Good thing the hard work of the miners and drillers working in many places that are not necessarily pleasant, as well as increases in effiiciencies from competence of the engineers of the energy producing companies and power companies have kept the power costs reasonable.
Too bad the American people don’t get to benefit from the lower power generation costs they deserve by the selfishness of politicians and bureaucrats who want to feel good about themselves.

SocietalNorm

For the cost of natural gas, that should be average for the years of 2009 and 2016 (changed the way I was doing it and didn’t edit it right).

James Schrumpf: The increase cited by Chris from 9.82 cents to 10.28 cents is 4.7% over a 7 year period from 2009 to 2016. The annual rate of increase in percentage terms is 100 * ((10.28/9.82)^(1/7)-1), which is .66%. Chris was a little off in saying .5%, and wasn’t clear enough in saying his figure was an annual rate because his only indication of that was comparison to the inflation rate (where he did not state a number), which is an annual rate.

Chris

Yes, I should’ve said annual, as Donald noted – though I did indicate rate of inflation as the relevant comparison, which is an annualized figure. The price of electricity has gone up at a much lower rate than that of inflation, which has ranged from 1-3% during the same period. http://www.inflation.eu/inflation-rates/united-states/historic-inflation/cpi-inflation-united-states.aspx

paqyfelyc

The cost of all energy source that are turned into electricity dropped, https://wattsupwiththat.com/2018/01/22/green-energy-mandate-bankrupts-east-coast-oil-refinery-1100-jobs-at-risk/comment-page-1/#comment-2724446
why didn’t electricity? It should not had increased at all, it should had decreased, as it did before.
why not?
Because the part of the more expensive electricity (sun and wind) increased, not of its own, but because of policies
Nothing to credit Obama for.

GREG in Houston

It should be noted that the drop in energy prices from 2009 to 2016 was in spite of Obama’s policies, and not “because of.” The huge drop in 2014 occurred due to the “fracking” revolution… prices are only just now recovering from that spate of over-supply.

D. J. Hawkins

Those numbers are simple arithmetic means of the electricity cost in each state. It doesn’t take into account the population of each state. It looks like their number comes from the EIA data:
https://www.eia.gov/electricity/state/
California has an average of 15.42 cents per kW-hr. There are a lot more people paying that than the average 8.9 cents per kW-hr you find in Montana.
The remainder of the top 10 are:
Texas at 8.7
Florida at 10.49
New York at 15.28
Pennsylvania at 10.31
Illinois at 9.4
Ohio at 9.98
Georgia at 9.62
North Carolina at 9.37
Michigan at 10.76

MarkW

The US hasn’t gone as far down this path of insanity as have other countries.
The fact that wind and solar drive up the cost of electricity has been proven and even most acolytes accept it.

MarkW

I love how the acolyte believes that the big drop in natural gas prices never happened.

Chris

MarkW said: “I love how the acolyte believes that the big drop in natural gas prices never happened.”
I didn’t say that – so why did you fabricate that statement? It’s not cool to lie.

It may be time to have Trump do some drastic emergency Executive Orders to cut away the cancer that is causing the problem. Let the far-left maggots go to court – we can drag that process out for years before ending in the SCOTUS. Before then we can change the laws.

joelobryan

They should simply charge more for “ethanol-free” gasoline. I’d buy it ahead that 10% blend crap that soaks up water, and corrodes my engines and destroys gaskets.
Scott Pruitt can’t put a stake through the ethanol fuel vampire fast enough IMO.

Barryjo

The carburetor on my 1989 Jeep has been rebuilt twice because of ethanol. I now use non-alcohol gas. Fortunately I have a close source for it.

Retired Kit P

Only twice in 10 years since E10? My ’74 IH TravelAll carb was in need of frequent rebuilding after 5 years then I bought a new one.
Had an ’89 Toyota PU with over 300k miles and an ’89 Ford ranger until 2014 with 270k. Never had to rebuild the carb. Oh wait, no carb.

joelobryan

The biggest problem is that EtOH blends can cause rubbers gaskets to shrink and leak. GMC vehicles with “FlexFuel” designations have engines that are designed and manufactured to endure fuels up to E85%.
My Chevy Silverado P/U that I use to pull my Travel Trailer down the Interstates is a FlexFuel vehicle. But I avoid E85 fuel like the it was the Plague. Gas mileage is horrible with that crap. No amount of subsidy can fix the problems with EtOH fuel.

Absolutely correct. The good lord made ethanol for human consumption. It is a sin to burn it.

“how many other US energy businesses are close to the brink, thanks to the lingering after effects of President Obama’s green energy mania?”
In fact, the Renewable Fuel Standard was established by the Energy Policy Act of 2005, when GW Bush was present and Republicans controlled both houses of Congress. Nothing to do with Obama.

joelobryan

Part of a bi-partisan CornHusker Kick-back to Iowa and Nebraska. (I’m assuming you know what “corn husker” refers to Nick)
The ethanol standard ramped up slowly
“the Act increases the amount of biofuel (usually ethanol) that must be mixed with gasoline sold in the United States to 4 billion US gallons (15,000,000 m3) by 2006, 6.1 billion US gallons (23,000,000 m3) by 2009 and 7.5 billion US gallons (28,000,000 m3) by 2012;[4] two years later, the Energy Independence and Security Act of 2007 extended the target to 36 billion US gallons (140,000,000 m3) by 2022.[5]”
The EISA was of course more CornHusker kickback to Iowa as corn commodity prices were slumping as climate optimum CO2 enhancement-driven corn harvests began ramping up.

“Part of a bi-partisan CornHusker Kick-back to Iowa and Nebraska. “
So hardly even a “green energy mandate”? Still nothing to do with Obama. Could it be that Trump can’t afford to disappoint this part of his base?

joelobryan

Freely admit Republicans are guilty of Ethanol sins in order to buy Iowa votes. Texas Senator Cruz was the only candidate who admitted he’d kill the Iowa popular EtOH mandate if he were President.
Ethanol, as a biofuel, was sold on a Green agenda. Establishment Republicans including Bush Jr. went along with the ploy, as it seemed a decent bet in the pre-fracking world of 2005, and everyone was spending lots of money trying to make biofuels, algae-based diesel and jet fuel. None of it was affordable in a fracking world of cheap energy.
The cheaper fracked fossil fuels (simply due to supply increase, Law of Supply and Demand, not because it is “better’) of the 2nd decade of 21st Century in the US has completely buried the 2005-2008 paradigm of biofuels.
RIP.
Now just waiting on Trump and Pruitt to finally kill the US ethanol standard. Dems in Congress no doubt will fight it to try to gain an Iowa vote advantage.
But Trump and Pruitt I have no doubt they are plotting strategies to that end.

Sheri

Between ethanol and the PTC, Iowa is out to destroy the environment and soak up all the subsidies it can. “Red” states love that government handout just as much as “blue” ones do.

joelobryan

Sheri,
Who doesn’t love free money?
I do. I do!
It’s Gimee. Gimee.
and then Gimee, more.
It’s all fun,
until you run…
out of OPM.

Michael Jankowski

Obama mandated higher levels each and every year, with his final touch here http://instituteforenergyresearch.org/analysis/obamas-epa-ups-renewable-fuel-requirements-2017/ But yeah, blame Bush.
Obama also instituted tax credits for stations to install pumps offering various ethanol mixes higher than 10%.
Lots of people thought this was hokey to begin with, and that was pretty clear 2008-2009. With the “great recession” reducing demand and fracking increasing supply, it was no longer necessary for security reasons, and Congress did the right thing in ending subsidies for corn ethanol producers. Obama and his EPA kept increasing mandated use, though, because they claimed it reduced climate change https://www.forbes.com/2010/02/08/corn-ethanol-obama-technology-ecotech-biofuels.html#52a9733f5498
Stick to politics down under.

Bryan A

joelobryan
January 22, 2018 at 10:03 pm
Sheri,
Who doesn’t love free money?
I do. I do!
It’s Gimee. Gimee.
and then Gimee, more.
It’s all fun,
until you run…
out of OPM.

Let me fix that poem for you
I do. I do!
It’s Gimee. Gimee.
and then Gimee, more.
It’s all fun,
until you run…
out of OPiuM.

R. Shearer

$800 million since 2012 doesn’t sound like a lot compared to 335,000 b/d of oil, which i guess would be about $30 to $40 billion over that period. Basically, they can’t compete with refiners in the gulf sending their products to Philly via pipeline.

R. Shearer
Exactly, one also has to ask how much cash has been sucked out in both dividends and purchase finance interest (loaded) over that five years by the new owner’s.
$160m per annum is small change for green fees in that industry. This may show as a very week entry balance sheet at time of purchase.
The annual corrected financials would be interesting.
Regards

As for pipelines to Philly: I see lots of rail tanker cars moving in Philly, and I think they are mostly going to or coming from Philly’s refinery complex. “Green types” lately have been opposing every pipeline they can, but pipelines and their pumps consume less energy than their alternatives, which means obstructing pipelines causes increase of the carbon footprint of transportation of fluids that can be transported by pipelines and by competitors to pipelines. And when a supply shortage forces a decrease in demand via a price spike, folks come out of the woodwork to take advantage of the price spike, often including even transport by trucks.

MarkW

The troops actually believe that if they stop a pipeling they will stop people from using oil.
They never manage to figure out that there are always alternatives.
Simple minded world views for simple minded acolytes.

paqyfelyc

certainly so, in current legal context. Which also make the business harder for everyone, and shrink the oil market while increasing the ethanol (at taxpayer expenses).
Maybe without Ethanol, the competition wouldn’t had excluded this player.

joelobryan

Montana has a few E0 gas stations. It is usually only in premium gas blend with octane 91+. Still I’d buy it.
Lots of Montana folks can have real problems with cold weather performance of 10% ethanol-gas blends in extreme cold. Ethanol absorbs water. Water, being denser than either hexane or ethanol, can separate in a tank if it sits long enough, and then freeze and the pump inlet.

scraft1

In coastal NC ethanol-free gas is readily available, both in 89 and 93 octane. I use 93 octane in my car. It runs better and gas mileage is 5-7% better. Boats love 89 ethanol-free (4-stroke outboards).
Premium ethanol-free is also great for small gas engines/lawn equipment.

Chris

Eric said: “But this story has wider implications – how many other US energy businesses are close to the brink, thanks to the lingering after effects of President Obama’s green energy mania?”
Except that the Renewable Fuels Standard was passed in 2005 under the Bush administration.

Chris

Eric, why no mention of the fact that Carlyle and the other PE investors that participated in the buyout have extracted many 100s of millions out of PES since the buyout in 2012? They loaded the company up with debt so they could enrich themselves, putting the company at risk of default should oil prices decline.
https://www.reuters.com/article/us-usa-refinery-debt/four-years-after-rescue-u-s-refinery-reels-as-investors-profit-idUSKBN1320H0

John F. Hultquist

Chris,
You beat me to this issue. My comment is 2 down.
Seems many commenting here need a refresher course in skepticism.

Grames

If only there were a naturally occurring source of heat energy of 100 MegaWatts per square meter . . .

Trebla

Biofuels make absolutely no sense, even if you believe in CO2 reduction. I did a calculation that showed it would take the equivalent of 30 football fields to grow the biofuel for one city bus. Do any of our policy makers have even a grade two level of common sense? It takes a full growing season to produce a crop. The conversion of CO2 and water into plant material is a slow, inefficient process.

joelobryan

Biofuels were really sold as an energy security solution in a troubled world where MidEast oil supplies could be disrupted as they were in the early 70’s embargo. The Navy was at one point ready to pay $25-$30/gallon for algae-biodiesel if that meant the difference between being able to or not send out advanced Aegis-missile Destroyers to defend US allies or US military from an Iranian or NorK ballistic missile attack.
To the US Dept of Defense, access to fuel, at any cost as a national security imperative to run Naval ships, to fly fighter jets and bombers, to drive Humvees, armored vehicles and Apache helicopters to defend US interests in a dangerous world or Iraq or Afghanistan deployed troops.
Thus fuel energy access was allowed to come to the fore in US Defense doctrine. Our past dependence on imported oil was major security issue for the World’s only SuperPower. Obama then in 2009 perverted that to his Climate socialism views.
But not “because of” Obama, but “in-spite of” every effort to curtail it by the Obama Administration, fracking happened in the US shale oil/gas fields. Fracking oil and gas has saved the US economy despite the Obama’s and Greens’ efforts to send the US into a 3rd World oblivion of energy scarcity and expense.
Make no mistake: The US is still the World’s only Super Power.
Russia still struggles to send a few bombers or a single Naval ship into the Western Hemisphere. China simply can’t. The US military does it everyday, with abandon, with ease, to secure world shipping lanes, trade, and our allies from bullying neighbors and even pirates.
And it is all dependent of affordable access to fossil fuel. You can sleep well everynight becasue Navy Aegis Destroyers are patrolling in the Sea of Japan RIGHT NOW.. US Nuclear-capable bombers are deployed to Guam, ready to pound Kim to dust if need be. And Putin and Xi know this. They won’t seriously F with US as long as we have our fuels to drive our ships, planes, tanks and attack helicopters.

John F. Hultquist

Check out how the current iteration of this company was formed and how much money has been taken out of it. A buyout firm — Carlyle Group — is involved.
In 2014, the CEO received $2.2 million in total compensation. Then the company was to go public and his pay was to increase and he was also to get a cash bonus of 180%, plus an additional deferred cash bonus. He was also an investor.
Also, the United Steelworkers Union is involved.
Someone with the right skill set and interest could likely produce an old-fashioned newspaper scoop about this.
I doubt the failure has much to do with ethanol or biofuel.

scraft1

Interesting. How many other refiners are really endangered by this situation?

Extreme Hiatus

“I doubt the failure has much to do with ethanol or biofuel.”
Indeed. Which friend of Carlyle’s gets to buy this ‘bankrupt’ company on the cheap? Same gang buying coal shares on the cheap?

paqyfelyc

The fact is, the investor now has a refining asset, and his best interest is to have it kept running as long as it can. “give me money or I close” is pretty standard tactics, and it works best when you can point out some specific charge others haven’t; “credit to comply to the law”, for instance.

John W. Garrett

You have made an important point.
The “financial engineers” frequently engage in thimblerigging through excessive leverage and dividend payments made to themselves.
The historic razor-thin margins and violent cyclicality of the refining business make it an inappropriate place for lots of leverage.

Biofuel mandates have the economic effect of tying the world price of crude oil to the price of food grains through substitution. But it goes deeper: why should we burn food in our motor vehicles when we could burn something that we cannot eat like coal or crude oil?

paqyfelyc

Biofuel is just that: fuel. Not food. It is not meant to be edible anymore than wood, and couldn’t sell as food (not even as free food for refugees or poor countries, paid for by US taxpayers and marketed as “food relief” or “foreign help”!), as there are already plenty of it. Actually, that’s the whole point: farmers couldn’t sell it as food, and wouldn’t produce it at all otherwise. So they successfully lobbied into having it sold as … whatever. fuel you want? fuel it will be.
Only roughly half of all crop are food, the other half is part animal food, and part industrial use (the list of which is literally infinite, fuel being only the best known)

I would suggest any good Austrian economic text, such as Rothbard’s excellent Man, Economy and State. You will learn there that there is an effect called substitution, which takes place when one aspect of the economy is directly touched, yet it causes a myriad of follow-on effects as every other aspect that touches it must adjust.
When farmers plant more non-food corn, this takes acres away for use in growing grain crops for food. When some regulatory change causes the price of non-food corn to be bid sufficiently high, it is only a matter of price when corn that is used for food will be bid up as well. Higher corn prices shift acres away from other crops. Higher non-food corn prices cause the price of farmland to be bid up and tends to support higher equipment costs as well. While we cannot eat “biofuel”, when some artificial force gives it economic value, that value will always compete for the resources used to grow food crops.
My basic contention is that we are fools to burn something that is either food or directly substitutes for food (like GMO corn) when we could burn something that cannot compete with food. Pure and simple.

paqyfelyc

@buckwheaton
I think you misread them Austrian economists (from which Rothbard is not excellent, IMHO). Read again.
There are, indeed, ” myriad of follow-on effects as every other aspect that touches it must adjust”. Among which
* it push in bankruptcy oil businesses, as illustrated in the article we comment
* people pay more for the gas in their car, trucks, etc. This makes everything more expensive or less profitable (to the point of some business opportunities vanishing, with related jobs), impoverishing everyone.
* it allows farmers to stay in the business (remember, this is the whole point), and to produce food that they wouldn’t otherwise
* since the food business is consumer-driven (meaning: fixed, as far as farmers are concerned), and since these farmers (pushed out of the market but allowed to stay thanks to the scheme) also produce food, someone else has to be pushed out of the food business instead of them. These are farmers who do not benefit from the scheme; these farmers are abroad, in developing countries; and you certainly heard/read the rant against the ethanol scheme bankrupting farmers in poor country (alongside the rant that the ethanol mandate makes food more expensive; both rant are mutually exclusive, the first is true, the second is not)
* everybody gets poorer
However, ” farmers plant more non-food corn, this takes acres away for use in growing grain crops for food” is NOT one of the effect, for a very simple reason: the order of profitability in agribusiness is
special crop (seeds, tobacco, weeds, …) >human food> animal feed>industrial uses>bio-fuel
So it makes no sense for a farmer to take acres away from food to produce non food. Indeed, quite the opposite: the ethanol mandate guaranties revenue for benefiting farmers and amortize their capital, lower their marginal cost for producing food, allowing them to produce food they wouldn’t produce otherwise.

scraft1

Another peculiar effect of the cornused as biofuel – hog farmers in North Carolina can no longer find cheap domestic corn as feed, and are importing their feed from Brazil. Rail transportation problems contribute to the shortage.
The port of Wilmington NC has built a large bulk terminal to accommodate the business.

paqyfelyc

@scraft1
hog farmers in North Carolina are importing their feed from Brazil just because it is cheaper, and no US farmer can compete with Brazilian guys in this business (if they could, they would). This has just nothing to do with the Ethanol scheme.

scraft1

paqyfelyc. “hog farmers in North Carolina are importing their feed from Brazil just because it is cheaper”.
That’s the whole point. Why do you think it’s cheaper? Could it be because the ethanol mandate drives up the price of american corn. Duh.
North Carolina hog producers certainly have no other reason to buy Brazilian corn.

paqyfelyc

“Could it be because the ethanol mandate drives up the price of american corn. Duh”
Brazil is just a place with as good climate and agronomical conditions, cheaper workforce, cheaper regulation, and just as much machinery, skill and knowhow than USA.
Animal feed is a global commodity, very cheap to move all around the world (cheaper to move from Brazil to USA, than to move from the US farm to nearby town!). Farmers have no control on price.
They only have some control on their cost, which the Ethanol mandate doesn’t change much (probably lowers it, but not that much).

Snarling Dolphin

This is pure bs! Actual people with actual jobs being sacrificed for virtue signaling liberal consciences. Pathetic. EPA’s a joke. Shut it down.

“EPA’s a joke. “
The EPA administers it. It is required to do so by an Act of Congress, signed by GW Bush. EPA can’t change the legislation. Republicans could, but don’t seem to want to.

Extreme Hiatus

Right you are Nick. For the same reasons Democrats could have changed the legislation but didn’t.
And the EPA was established by Nixon, another Republican.
It is almost as if both parties are two sides of the same coin. (That’s why Trump got elected.) Unfortunately with so many with vested interests in the ethanol business I suspect we are stuck with it for the foreseeable future, and since the entire biofuel industry is a disaster for the environment I think that is a sad scenario.

kenji

Uh, yeah … the EPA has left a tangled mess of regulations. All of them imposed with the collusion of the government-lawyer-green-complex. How did they collude? Well, they hid all their collusion behind FAKE identities, and multiple fraudulent email accounts. Obama’s last EPA Director learned well from the failings (i.e. getting caught) of Obama’s first EPA Director.
http://www.foxnews.com/politics/2012/12/27/attorney-claims-epa-chief-resigned-over-alias-email-accounts.html
Couple this seditious behaviour with; HER smashed phones, bleach bit, and bathroom server wiped with a cloth, and now the entire FBI and DOJ infiltration of seditious Leftists. Didn’t Nancy Pelosi promise the Obama Admin. would be the MOST transparent of all Administrations? Good luck Mr. Pruitt … you’re gonna need it.

Tom

As I work for a refining company doing refinery planning and economics, I can attest to the fact that the RFS is very costly. Every gallon of fuel produced by a refiner (and in some cases blenders and importers) incurs a renewable volume obligation (RVO). The RVO is met by submitting to the government the Renewable Fuel Identification Numbers (RINS) associated with the renewable fuel they have blended. You can obtain the RINS by purchasing and blending a biofuel, such as ethanol, or you can purchase them on the open market from refiners or blenders who have blended more biofuel than their renewable obligation, so they an what are called “detached RINS.” RINS are a commodity. Unfortunately, some of the RVO must be met by blending certain types of biofuels such as renewable diesel or biodiesel (renewable diesel and biodiesel are not the same thing chemically or for regulatory purposes) which do not exist in sufficient quantities to cover the RVO. The government handles this after the fact through some regulatory legerdemain, which I won’t try to explain here. To make a long story short, the cost of RINS adds about 10 cents per gallon to the cost of refined products. (We have a person whose full time job is keeping track of our RVO, and buy and selling RINS.) This cost is born largely by refiners. Even a small refiner can incur costs of tens of million of dollars per year. However, this is a cost that all refiners have endure, so the playing field is for the most part level. If a refining company is going bankrupt, they cannot blame it on the RFS, because it is the same for all refiners. It’s a tax we all pay.
Finally, the ethanol mandate is not going away; not under Trump, not after Trump, not ever. It is totally entrenched in the refined fuels business and has the support of the Ag lobby, which is loved by lawmakers.
p.s. The above does not begin to explain the complexities of the RFS.
[Request you expand this into a full article for Anthony to consider here. .mod]

sy computing

“If a refining company is going bankrupt, they cannot blame it on the RFS, because it is the same for all refiners. It’s a tax we all pay.”
Would I be correct in assuming that by the “we” you mean the end consumer?

rms

Correct.

Retired Kit P

Tpm
Thanks for the info.
On the other hand, having to follow complex regulations, oh boo hoo!.

I’d love to see this too, Tom.

paqyfelyc

“the playing field is for the most part level”, true, but it is smaller that it would without the mandate, so it does reduce the number of facilities that can exist, and this translate into more bankruptcy in the business. This company seems just to be first in line for the next execution by mandate, so it is fair to blame the mandate

MarkW

The cost of regulations don’t scale with size.
The cost is pretty much the same for a small company as for a large company. The difference is the large company has a larger base to spread the costs over.
Government puts small companies at a disadvantage.

John W. Garrett

Thank you for this informed comment.
Archer Daniels Midland and the Constitution of The United States which gives every state two Senators ensures that the ethanol mandate is not likely to disappear anytime soon.
The chumps in this drama are the bankers and creditors who provided the funds permitting Carlyle to engage in sleight-of-hand financial engineering.

James Francisco

Tom. I have thought that the renewable fuel mandate might be reduced or stopped if we ever have a wide spread crop failure.

paqyfelyc

renewable fuel mandate might be reduced or stopped when farmers stop supporting it, or when a stronger political force find it convenient to get rid of rednecks by cutting their earning. I don’t see any reason for that to happen anytime soon.

Pamela Gray

Chances are good to excellent the biofuel industry will successfully paint themselves as victims of a perceived mean bully at the head of the classroom, who was intent on true measurable improvement instead of “feel good” stuff. Trust me on this one. In many instances, economic improvement isn’t handed to you on a government platter of subsidy selections, but only on the blood, sweat, and tears earned burning the midnight oil of your own making. But even then you are not home free. Chances are in the post modern age you will then get fired because nobody wants hard work to be uncomfortable.

Retired Kit P

I think E10 and B20 are great. Anytime we can produce something in America it makes me happy.
Being in the nuclear industry, I am used to baseless criticism.
I also think fossil fuels are great too.
The point here is that you can like lots of things.

MarkW

Wasting money is great, especially when my family benefits from it.

MarkW

Forcing people to buy something they don’t want, and in fact is bad for them, makes you happy.
Interesting.

Joseph Toomey

I’ll never be credibly accused of being an apologist for Obama policies. Indeed, I wrote two books taking him to task. The first in 2012 charted his broken promises and failed policies, https://tinyurl.com/y8fppy9k The second was an economic evaluation of his failed Green Energy policies. https://tinyurl.com/ycwnvgj2 So I take a back seat to no one when it comes to highlighting Obama policy failure.
But the reason why the refineries are in financial distress is spelled out in the article, and was overlooked by Eric Worrell. It has to do with the obligation to purchase D6 and D3 Renewable Identification Numbers to comply with Sections 201 and 202 of the Energy Independence and Security Act of 2007. George Bush signed that monstrosity into law, not Barack Obama (although Senator Obama voted in favor and was a vocal proponent). Credit where credit is due.

Speaking of ethanol, there is a massive ethanol tanker truck fire just down the road from me :
https://www.langleytimes.com/news/massive-fire-burning-at-port-coquitlam-rail-yard/

michael hart

Hmmm..irony
So Philadelphia Energy Solutions is insolvent? The English language has its revenge upon those using management buzz-words. It does make me wonder how well the company is really being managed if it seems like there is an over-use of such words.
I also mistrust companies who like to use the term “going forward” when the word “future” is adequate.

This is the tactic employed by Gillard in Australia that prevented the Abbott administration from unwinding the garbage. Tactics borrowed from the Soviets.

How can such idiocy as biofuels be enacted, let alone sustained, after all the years of information gathering of biofuel cost and inefficiency. Land, water, chemicals, and transportation resources are all wasted in an effort to accomplish nothing useful. If that doesn’t define a government program, nothing does.

AGW is not Science

Indeed that is the personification of a “government program.”

So like restaurants had to buy parsley, refiners have to buy renewable fuel they no one needs.
http://presentationsunplugged.com/blog/tag/mafia-parsley/

Eric W wrote:
“I suggest it is time to consider more radical surgery, time to end this ongoing menace to US prosperity once and for all.”
I have to agree Eric – it is time for radical surgery – “Scrap the Lot!” – but properly done, it will cut deeply into Trump’s farm vote.
I used to Chair the Mining and Technical Committees of Syncrude Canada, one of the world’s largest and most complex refineries. Later I was CEO of an oil company that also owned a corn (fuel) ethanol plant in the USA. These are both complicated businesses, but I do know a bit about them, given my two engineering degrees.
First, on the refinery: I will not speculate on why this plant went under – refining is a highly-competitive, razor-thin-margins business, where simple decisions such as how and when to hedge the price of your feedstock can make or break you. You would have to be on the inside, or spend months in careful analysis, to obtain a credible answer. Excess regulation of any sort, including biofuels mandates, only add to the difficulties of making a profit.
Biofuels are much simpler. None of it makes sense, economically or environmentally, and a rational man would scrap the lot, in my opinion. The rapid depletion of the Ogalalla aquifer in the USA is of particular concern. What sense does it make to excessively deplete the world’s most important agricultural aquifer to make corn ethanol and other biofuels that nobody should want or need? This is the green movement at its best – costing a fortune AND screwing the environment.
The sole exception for biofuels may be where you can use waste as a feedstock. We have a huge garbage disposal problem in the world, and some form of pyrolysis-to-fuel may make sense, if one can control the resulting air pollution.

Retired Kit P

“The rapid depletion of the Ogalalla aquifer in the USA is of particular concern.”
What is next Allan concern about depleted Uranium? The word ‘concern’ sets off my BS meter?
I was actually a practicing engineer which in no way made me an authority on US geography.
The US ‘Midwest’ is not the middle west which is more correctly labeled the ‘Great Plains’.

Kit – Nothing you wrote makes sense.
You wrote: “The US ‘Midwest’ is not the middle west which is more correctly labeled the ‘Great Plains’.”
That was Irrelevant tripe. I referred clearly to the Ogalalla Aquifer. Its location is not in dispute,
The Ogalalla Aquifer is rapidly depleting due to excessive withdrawal. Here is recent evidence:
https://www.usgs.gov/news/usgs-high-plains-aquifer-groundwater-levels-continue-decline
That excessive depletion is also not in dispute.
Regarding one’s technical experience, my two engineering degrees and decades of experience enabled me to write the Hydrogeological Impact Assessment for the new Shell refinery that was built near Edmonton Alberta years ago, among other such assignments.
If you were actually a “practicing engineer” you apparently were not a Professional Engineer, which I still am. If you were ad P.Eng. or PE, you should re-read your Code of Ethics regarding your conduct towards fellow Professional Engineers.
Regards, Allan

Gareth

According to the Solar Energy Industries Association, the tariffs imposed on the import of Solar panels would increase prices and kill 23,000 jobs. It maybe that such job losses are a worthwhile sacrifice for Mr.Trump in his efforts to ensure renewable energy schemes do not take root in the US. When will we have an article on the hundreds of coal miners thrown out of work under the Trump administration ?
Whether job losses are a sacrifice someone is prepared to make depends on their own prejudices and beliefs.

paqyfelyc

There is no more reason to impede renewable energy than there are to promote it. Let it have its fair share of the market, no more, no less. No subsidies, no special tax/tariff or whatever.
I am confident that the Chinese will do just what the Japanese did when USA used dirty tricks to keep their cars from Japan out of US market. They stopped shipping finished cars, shipped pieces to newly purchased US factories (with US workers inside) to finish the cars. They didn’t care for lost jobs in Japan, as the workforce was shrinking there, and they could ship them elsewhere anyway; they did care about the profit (they continued making).

Gareth

Thats a reasonable point paqyfelyc. I also wonder whether the avoidance of subsidies would be applied to all energy related industries, or indeed to all industries as a principle.

MarkW

Of course there are no subsidies to other energy related industries, as has been shown over and over again.

Chris

“Of course there are no subsidies to other energy related industries, as has been shown over and over again.”
Links to support that claim?

paqyfelyc

@Chris
MarkW comment was obviously /sarc ,

MarkW

The only purpose for tariffs is to increase profits for the politically well connected.
That said, I love it when those who live by politics die by it.

paqyfelyc

yep.
Trouble is, by design subsidies and tariff benefit hugely to a small segment of the population, who do have the urge to lobby for it, while the remaining population only suffer a minuscule amount and have no urge to protest, and even less to lobby against. I mean, you may feel somewhat angrier because you pay your gas a few dozen bucks more than you would without ethanol mandate, but that’s not enough for you to pay a lobbyist to stop it, is it? At some point you may just vote for some guy promising to “drain the swamp”, with no guarantees that he succeeds or even really tries.
Not sure even a constitutional ban on subsidies, on using taxpayer money for any business operation, would prevent that. There are so many ways to bypass such a ban

Peta of Newark

Visit here then think long and hard.
Visit here
Coz if you you and many other people don’t, we are all going to a very hot place where we will have an infinite amount of time to think.
Not only are we humans smashing the roof timbers out of our home (to put in the living room stove and keep warm), we are digging, literally, our own graves.
I”m trying to recall learning of a parasite somewhere (possibly a wasp injecting eggs into a caterpillar) that causes the infected creature to go through all sorts of crazy contortions, do stupid dumb things, eat noxious stuff and generally act completely crazily.
Until it inevitably dies.
Horribly.
Such a thing, to my mind, exists for the Human Animal.
Corn is but one manifestation of that thing but this story illustrates it perfectly

Peta of Newark

and they like to think of themselves as green..
http://agebb.missouri.edu/news/pics/lg067.jpg
Are there the words………………

J Mac

Yes, there are ‘words’. It’s a muddy field, after a heavy deluge….
What are you trying to say???

paqyfelyc

https://en.wikipedia.org/wiki/Dicrocoelium_dendriticum
Turn the ant into a night zombie aiming at being eaten by a grazing animal

Richard

And therin lies the key to Green plans: bankrupt industry, as much of it as possible. Look at Oz. The liberal politicians are absolutely thrilled that South Australia no longer has industry that needs large amounts of energy. It’s Great!
What about the jobs? The people?

ResourceGuy

This is great news because of where it is. Shut down the rest of them in the northeast–they deserve the consequences.

ResourceGuy

Can the refinery workers sue Iowa farmers and biofuel lobbyists? Go for it.

paqyfelyc

Seems hard to sue any people just because a law was enacted, that has detrimental effect on you.

ResourceGuy

That has not stopped certain AGs from throwing resources at their targets.

ResourceGuy

…and those lawmakers make their pilgrimage through Iowa for reelection suck ups.

Joel Snider

It will be years, if not generations, before we see the full extent of the deliberate damage Barrack Obama did to us.

DrTorch

As CMA has recently destroyed the agent stockpiles throughout the US, it seems to me that those sites would be ideal for new refineries. They aren’t large population centers nor very pretty (where else are you going to store chemical agent). And they have some infrastructure and technician support already in place, who now need jobs.
And in the past few years I’ve learned that stored biodiesel is a highly desirable food source for algae and bacteria. Leading to ruin of the biofuel and contamination of the storage tanks and valves, or even vehicle engines.
There is NO savings w/ biofuels, neither of money nor of the environment.

US biofuel mandate increases biofuel use year on yearcomment image
EPA article on biofuel mandates

Those are the targets that were specified in the EISA, passed by Congress in 2007 and signed by GW Bush.

Tom

I don’t think they’re hearing you, Nick.

sy computing

“Those are the targets that were specified in the EISA, passed by Congress in 2007 and signed by GW Bush.”
Why do you continue throughout this thread to cite government approval of a policy as a moral justification of said policy? By your logic, Trump’s dismissal of the Paris Accord is also moral policy wouldn’t you agree?
If not don’t you contradict yourself? If you don’t contradict yourself, why don’t you?
And if you do agree, then don’t you contradict yourself on the morality of the biofuel policy versus the morality of the Paris Accord? Why is one environmental policy justified while the other is not?
In other words, no matter where you go, regardless of your choice, don’t you contradict yourself? If so, why should anyone listen to you? If you don’t contradict yourself, why don’t you?

“to cite government approval of a policy as a moral justification of said policy”
I don’t. I simply point out that it wasn’t, as the article claims, ” the lingering after effects of President Obama’s green energy mania”. It isn’t even really green policy. It is the result of Republicans and others in Congress trying to drum up votes in Iowa and Nebraska. As Eric noted above, even Trump campaigned calling for a higher ethanol mandate.

sy computing

It makes sense to point that out up-thread, but not here. Maybe you just got lost in your zealousness to correct the record.

paqyfelyc

what do you mean, Nick?
This policy wasn’t actually Obama’s, despite his claim, but Big Oil Bush’s ?
You mean, Obama boasted, or even (will you dare say that?), lied?

“This policy wasn’t actually Obama’s”
The legislation, including the targets in the above table, were from Bush’s time. And then there’s this, from November 30, 2017 2017:
“On Thursday, the Trump administration sided with the farmers and announced that it would stick closely to the current rules and quotas for fuel: Refineries must blend about 20 billion gallons of biofuel — much of it ethanol made from corn — into the nation’s gasoline supply, a level largely unchanged from last year.”
Green maniacs are everywhere. Note that the target set by Congress in 2007 was actually 25 billion gallons.

Bryan A

WOWO Nick
If the mandate from 2007 was 25bn gallons and President Trump has indicated only 20bn Gallons to be blended, then it would appear that President Trump has slashed the mandated ammount by 20%. Just chipping away at the mandates until they are nonexistant

Tom

Sy: I think it’s because people keep trying to blame it on Obama.

sy computing

That wasn’t the case with mark4asp. All he did was quote an article produced by the EPA itself:
https://wattsupwiththat.com/2018/01/22/green-energy-mandate-bankrupts-east-coast-oil-refinery-1100-jobs-at-risk/#comment-2725330
Hence my question to Nick stands as valid.

paqyfelyc

could it be that Obama and minions (like his EPA head Gina McCarthy) kept trying to boast about it?

scraft1

A couple of good points have been made here:
1. The ethanol mandate is a questionable policy that has some environmental roots but is really a product of typical politics. We could call it a gravy train for corn producers and another example of the power of the agricultural lobby, but that would not be the whole story. It is a great example of an idea that had some merit at the time, but also has taken on a life of its own with many unforeseen consequences.
2. The failure of PES would appear to be mostly self-inflicted. Many here prefer to pay the blame game and look to government regulation as the institution at fault. Renewable energy mandates, another product of politics, make life difficult for refiners, but I would bet money that well-run businesses look at this difficulty and simply view it as a cost of doing business.
In this era of toxic politics we all tend to look for a fall guy. PES was a victim of previous administrations who pushed political solutions that we would never consider today, right? Uh, wrong. Today’s sausage factory looks a lot like yesterday’s, but with a new set of sausage stuffers.

Retired Kit P

“1. The ethanol mandate is a questionable policy….”
Scaft1 did you read the 2005 Energy Bill? I have read a large part of the the 1000+ page legislation. I think it is very good legislation to implement the 2001 National Energy Policy.
Renewable energy is a small part of the bigger energy picture. There is no mandate for corn ethanol.
You might ask why the critics in Texas and California did not lead Iowa wind and biofuels?
The answer is easy for California. Environmental regulations impede getting anything done there. Texas was already a leader in renewable energy under Governor Bush with modest mandates. Texas is rich with fossil fuels and being a leader with sugar cane might be more of a distraction.

Retired Kit P

“If you were actually a “practicing engineer” you apparently were not a Professional Engineer, which I still am. If you were ad P.Eng. or PE, you should re-read your Code of Ethics regarding your conduct towards fellow Professional Engineers.
Regards, Allan”
The problem I have with Allan and all the like of college professors or other PhD’s that cite themselves as an authority.
Then they start piling BS high and deep on subjects where they are not an authority.
So what does an aquifer one place have to do with growing corn someplace else? Did this issue of irrigating with ground water only occur after the mandate? Does this have anything to do with a refinery in NJ?
I was once in a room with 5 PhD geologists. The big picture was how the flow of ground water would carry fission products to the nearest drinking water well. The sub-context was how fission products affected water turning into hydrogen and water. Four were yelling at me that I did not have a PhD so therefore I was wrong. The fifth terminated the debate by saying he would work with me to get the terminology right.
About the same time, I had to tell a PhD in nuclear physics from Los Alamos that they derived the equation wrong for input to the model.
Two points, first even experts make mistakes. It is somebody’s job to catch those mistakes. Second being an authority in one area does not make you an expert in another.

Ahhh, those stupid American politicians. Why don’t they use their legislative powers to pass superior laws instead? While Obama probably meant well, had he been more like Canadian, Australian, or EU politicians he may have done something truly bold. As one example, imagine how much more energy efficient the world would be if he signed legislation that would lower the boiling point of water to 75ºC or change Carnot efficiency? Oh, how I miss the Rhinoceros Party.