Unintended consequences
HOLLYFRONTIER's
President and CEO George J Damiris
From Q2 2016 earnings call transcript
Also impacting earnings this quarter were increasing costs associated with purchasing RINs to comply with the RFS mandate, which in this margin environment continue to have significant impact as a proportion of earnings.
Before I discuss operational results and expectations, I'd like to spend a moment on the RFS program. Obviously, this mandate has been receiving increased attention in recent months, given the price of RINs and negative blending economics. We believe the constructs of the RFS do not align the ability to influence biofuel blending with the burden of compliance.
Along with others in our industry and our trade association, AFPM, we're advocating for the EPA to address this mismatch in the point of obligation and to do so expeditiously. The simple fact is that RINs were intended to be a certificate of compliance under the RFS, not a method of extracting value or creating winners and losers based on asset configuration in the value chain.
A far more equitable structure would be to expand the point of obligation to include those parties that have the ability and desire to increase volumes of biofuel blending as of the intent of the RFS. Further, we agree with those advocating for oversight of the RIN market. We believe oversight is needed to regulate speculatory participation, which has caused RIN prices to trade well in excess of the cost of blend in a market that is thinly traded and where demand for RINs has already pegged against supply.
The current point of obligation carries severe unintended consequences for merchant refiners like HollyFrontier, and does not advance goals set forth by the EPA. We believe the mismatch between the burden of compliance and the ability to influence biofuel blending is becoming more understood in Washington, by other affected parties and by EPA officials. We ask that EPA move quickly in their analysis of the point of obligation and, ideally, initiate a rulemaking process that will provide the quickest path to implementing an equitable solution.
President and CEO George J Damiris
From Q2 2016 earnings call transcript
Also impacting earnings this quarter were increasing costs associated with purchasing RINs to comply with the RFS mandate, which in this margin environment continue to have significant impact as a proportion of earnings.
Before I discuss operational results and expectations, I'd like to spend a moment on the RFS program. Obviously, this mandate has been receiving increased attention in recent months, given the price of RINs and negative blending economics. We believe the constructs of the RFS do not align the ability to influence biofuel blending with the burden of compliance.
Along with others in our industry and our trade association, AFPM, we're advocating for the EPA to address this mismatch in the point of obligation and to do so expeditiously. The simple fact is that RINs were intended to be a certificate of compliance under the RFS, not a method of extracting value or creating winners and losers based on asset configuration in the value chain.
A far more equitable structure would be to expand the point of obligation to include those parties that have the ability and desire to increase volumes of biofuel blending as of the intent of the RFS. Further, we agree with those advocating for oversight of the RIN market. We believe oversight is needed to regulate speculatory participation, which has caused RIN prices to trade well in excess of the cost of blend in a market that is thinly traded and where demand for RINs has already pegged against supply.
The current point of obligation carries severe unintended consequences for merchant refiners like HollyFrontier, and does not advance goals set forth by the EPA. We believe the mismatch between the burden of compliance and the ability to influence biofuel blending is becoming more understood in Washington, by other affected parties and by EPA officials. We ask that EPA move quickly in their analysis of the point of obligation and, ideally, initiate a rulemaking process that will provide the quickest path to implementing an equitable solution.
