NEW YORK (Reuters) - The Trump administration has offered to place a $10 million cap on Philadelphia Energy Solutions’ biofuel blending obligations, effectively slashing the bankrupt refiner’s regulatory liability by more than 70%, according to a proposed settlement between the two parties dated earlier this week.
The deal is intended to free up more cash for the company to pay off its list of creditors, according to the filing.
It marks the second time the U.S. Environmental Protection Agency under President Donald Trump has agreed to waive significant portions of PES’s obligations under the U.S. Renewable Fuel Standard, a law that requires refiners to blend biofuels like ethanol into the fuel pool or buy credits from those that do.
Under the agreement, PES - which entered into bankruptcy after a catastrophic fire last summer - will have to hand over 161,830,963 biofuel blending credits, called RINs, or pay up to $10 million to meet its obligations, whichever comes first, the filing said. The cost of those credits had previously been estimated at $35 million, according to court documents.
The agreement “can reduce the $35 million RINs Retirement Obligation Reserve to $10 million on the Effective Date, which makes funds available to satisfy the creditors’ claims promptly,” the filing said.
RINs, or Renewable Identification Numbers, are used by oil refiners to show compliance with the RFS and are generated with every gallon of biofuel produced.
Trump’s EPA had previously waived some $350 million in biofuels compliance costs for PES after its initial bankruptcy in 2018. That deal allowed PES to briefly exit bankruptcy before the 2019 fire triggered its latest collapse.
PES blended little to no biofuels itself, which meant it was required to buy credits to comply with the RFS. Before its 2018 bankruptcy, however, the refiner took a large short position in the RIN market by opting to delay its purchases of those credits, and even sold some of the credits it had on hand, ballooning its exposure when it went bust.
The shut 335,000 barrel-per-day Philadelphia refinery site will be sold for $252 million and redeveloped under a plan approved in bankruptcy court earlier this year. The sale ended months of uncertainty over whether the idled plant would be restarted.
Reporting by Stephanie Kelly; additional reporting by Jarrett Renshaw; Editing by Richard Valdmanis and Paul Simao
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