DOJ must maintain integrity of RFS, reject PES settlement

The National Biodiesel Board called on the Department of Justice to reconsider its proposed settlement allowing PES Holdings to escape the vast majority of its 2016-’17 obligations under the Renewable Fuel Standard. The proposed settlement would harm the renewable fuels industry and undermine the intent of the RFS program by excusing more than 70 percent of the company’s compliance obligations for the two-year period.

“While PES continues to blame the RFS for its woes, the fact is, the bankruptcy is a mess of its own making,” said Kurt Kovarik, NBB’s vice president of federal affairs. “Poor management and a failure to respond to changes in the crude oil market is to blame. PES should not be rewarded for deliberately failing to comply with the decade-old Renewable Fuel Standard. Doing so is akin to rewarding a toddler in the midst of a temper tantrum. Instead, the government should hold PES to the same renewable volume obligation as all other refiners. Not doing so could severely hinder the RFS’s goals of enhancing energy security, protecting the environment and building our nation’s rural economy.”       

NBB highlighted two key components in comments to the DOJ submitted March 26. First, the RFS holds parent companies liable for the compliance obligations of their subsidiaries. Thus, PES’s corporate parents Carlyle and Sunoco can be required to comply with the RFS obligations incurred by PES. EPA has not explained why it is abandoning that avenue for ensuring complete fulfillment of PES’s obligations. Second, the renewable volume obligations (RVOs) under the RFS cannot be discharged in bankruptcy. The RFS creates an affirmative duty for obligated parties to blend or use biofuels or to buy credits from others who have done so. Such a duty persists through the bankruptcy because it cannot be resolved by a payment to the government.

“At the very least, a finalized settlement should require PES or its parent companies to comply with a far greater share of its RVOs,” Kovarik said. “The RFS is working to drive billions of gallons of cleaner-burning advanced biofuels and thousands of jobs throughout the country, and its integrity should not be undermined.”