Delta Air Lines Joins Oil Industry Groups to Fight EPA Biofuel Mandates

Delta Air Lines recently joined other oil industry trade groups to fight the U.S. biofuel mandate that requires refiners to meet an annual biofuel quota, either through production or through the purchase of credits.

The airline filed a lawsuit through its year-old refiner, Monroe Energy, in the U.S. Court of Appeals for the District of Columbia Circuit that challenges the EPA’s 2013 renewable fuel requirements, according to FuelFix.

Under the EPA policy, refiners generate renewable identification numbers (basically, compliance credits) for every gallon of biofuel they incorporate. Monroe’s status as a “merchant refiner” that sells unblended products to wholesale marketers means it must always purchase credits. The refiner, in its Oct. 4 federal court petition, claimed this forces it to spend millions of dollars to acquire compliance credits at what it says are “artificially inflated” prices.

Monroe’s chief financial officer Frank Pici said in written comments filed with the EPA in June that the agency’s policies are creating winners and losers in the oil industry, with his company on the latter side. The winners will inevitably be vertically integrated refiners that can blend biofuels, and small refiners eligible to seek exemptions from the renewable fuel requirements.

“The losers are those refiners, like Monroe Energy, that are much smaller operators than the integrated refiners, must purchase virtually all RINs needed for compliance and yet do not qualify for small refiner hardship relief,” Pici said.

Delta and Monroe Energy previously asked the EPA to reduce the burden on refiners they claim bear a disproportionate burden for the rising price of compliance credits.

According to disclosures filed with Congress the airline spent a total of $1.4 million to lobby lawmakers and executive officials on the Renewable Fuel Standard (RFS) and other issues during the second and third quarters of this year.

If Monroe wins its current legal battle, it could possibly force the EPA or elicit Congress to shift the focus for renewable fuel compliance from refiners to blenders that can generate compliance credits.

RFS is a federal program that requires transportation fuel sold in the U.S. to contain a minimum volume of renewable fuels. The policy originated with the Energy Policy Act of 2005 and was extended by the Energy Independence and Security Act of 2007 (EISA).

Earlier this year, the RFS came under attack by people like Robert Bradley Jr., a Forbes writer and adjunct scholar of the fossil-fuel-friendly Cato and Competitive Enterprise Institutes, who said it is now is the time to roll back the EPA policy.

Interestingly, RFS might not be as eco-friendly as it seems. Ethanol, one of the most commonly used biofuels, can cause increased food prices and requires significant land use. Some experts also say that up to six times more energy is used to make ethanol than the finished fuel actually contains.