Ergon COO Statement on United States Court of Appeals Decision in Ergon v EPA

Fri., Nov 20, 2020

JACKSON, MS – Kris Patrick, Chief Operating Officer of Ergon Inc., issued the following statement on the United States Court of Appeals’ Decision in Ergon - West Virginia Inc. v United States Environmental Protection Agency:

“This is the second time the U.S. Court of Appeals for the 4th Circuit has disagreed with EPA’s decision to deny hardship relief to Ergon - West Virginia Inc. Securing relief is more important now than ever due to the historic downturn in demand for fuel and two-year high RIN prices. This ruling will have long-term impact on jobs and the viability of the local economy, so the court’s decision is very welcome news and urgently needed for Ergon - West Virginia and its employees.”

Background

Congress created the Renewable Fuels Standard (RFS) as part of the 2005 Energy Policy Act in an effort to reduce dependence on foreign crude and expand the nation’s renewable fuel use. Their understanding of the detrimental impact the program could have on small refineries prompted Congress to direct the Environmental Protection Agency (EPA) to grant relief to small refineries that would suffer a “disproportionate economic hardship” in complying with the program. Congress intended for hardship relief to prevent small refiners from having to buy RINS instead of putting those funds towards growth and sustainability of operations.

Furthermore, a 2011 study by the Department of Energy (DOE) predicted that this disproportionate economic hardship would occur, and this is precisely what Ergon - West Virginia (EWV) has experienced. Like other small refineries, Ergon operates in rural geographic areas, supplying critical fuel supplies and supporting the local economies with jobs and tax revenue. It is vital that Congress, the EPA and the DOE continue to protect the important role of small refineries in the U.S. economy.

“Ergon has blended ethanol and bio-diesel to the maximum limits that our markets will allow and recognize their value in the market,” Patrick commented. “Hardship relief for Ergon will not reduce Ergon’s blending of biofuels. However, the current EPA position on the RFS standard heavily penalizes Ergon despite our willingness and actual track record of blending bio components to the limitations of the markets that we serve. We support our farmers across the nation. We believe that jobs in the bio-industry are important, and we also believe in the importance of jobs in the small communities where we and other small refineries operate.”

Small refineries are defined as those processing less than 75,000 barrels per day of crude oil, and EWV processes 23,500 barrels per day. Unlike large integrated refineries which primarily produce gasoline, many small refiners produce diesel fuel in higher proportions. All refiners are required to purchase renewable identification numbers (RINS), which the EPA describes as “credits used for compliance and the ‘currency’ of the RFS program.” This mandate has resulted in an artificial, government-created market for blend requirements beyond what the market will accept, primarily due to diesel-to-gasoline production ratio or “diesel disparity.” Fundamentally, this program unfairly disadvantages small refineries, particularly those with higher than average production of diesel. Unlike ethanol’s broad market acceptance at 10% in gasoline, Ergon - West Virginia’s diesel market is more reluctant to the acceptance of biodiesel blends.

EWV blends 10% ethanol with 99% of the gasoline it produces and will continue to do so, even without a mandate. However, the detrimental impact imposed by the RFS on EWV’s high diesel production is unacceptable and counter to the intent of the RFS program.

“Ergon strives to be a strong employer and good steward of the environment, making positive contributions to the communities in which we serve,” Patrick said. “In addition, Ergon has made significant investments in environmentally friendly processes and technologies over the past three decades. The recent Court decision will allow Ergon to continue to invest in our operations and our employees.”

About Ergon - West Virginia, Inc.

Ergon - West Virginia operates one of the smallest refineries in the United States, the only refinery in West Virginia, and is the single largest employer in the rural area in which it operates.

Located in Newell, West Virginia, EWV’s products include paraffinic base oils, paraffinic bright stocks, waxes, petrolatum, petroleum resins, E10 gasoline and ultra low sulfur diesel produced from local Appalachian based crude.

Contact:
Kathy Potts
Ergon Director of Marketing Communications
kathy.potts@ergon.com
601.933.3000

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ICIS Pan American Base Oils & Lubricants Conference
Dec. 03, 2020 – Dec. 04, 2020

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