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Andeavor Wins A Hardship Waiver From The EPA

Apr. 05, 2018 10:26 AM ETAndeavor (ANDV)CVI, CVRR, DK, PBF, VLO18 Comments
Tristan R. Brown profile picture
Tristan R. Brown


  • The share price of refiner Andeavor jumped to a 2-month high following news that some of its refineries have been granted "hardship exemptions" from the national biofuels mandate.
  • Subsequent media reports have stated that up to 25 refineries in the U.S. are expected to also be granted hardship waivers from their biofuel blending obligations.
  • Blending credit prices collapsed to a 31-month low on the news despite the fact that the exemption has historically just shifted the obligation to non-exempted refineries.
  • Yesterday's news that the White House is reviving collapsed mediation talks between biofuel producers and refiners suggests that the EPA's decision on Andeavor is a negotiating tactic.

The share price of refiner Andeavor (NYSE:ANDV) moved to a 2-month high this week (see figure) after Reuters reported that the U.S. Environmental Protection Agency [EPA] had released the company from needing to comply with some of the country's biofuel blending mandate. The move by the EPA is not entirely unprecedented, and the waiver only applies to the smallest three of the company's ten refineries, but the granting of the exemption on "hardship" grounds to a company that reported a net income of $1.5 billion last year has given rise to expectations that additional exemptions for other refineries will be forthcoming.

ChartANDV data by YCharts


The revised Renewable Fuel Standard [RFS2] requires U.S. refiners to blend predetermined volumes of biofuels, primarily corn ethanol, with refined fuels prior to retail. Every gallon of qualifying ethanol that is blended generates a Renewable Identification Number [RIN] that is then either submitted to the EPA to demonstrate partial compliance with the mandate or, if sufficient RINs have already been submitted, sold to other refiners.

Many merchant refiners sold or spun-off their blending capacity during the logistics MLP creation spree at the beginning of the decade and have found themselves purchasing large volumes of RINs on the market to make up for the lack of RIN-generating activities. While this strategy had little impact when the price of the largest D6 category of RINs traded for mere pennies prior to 2013, it has increasingly made headlines as RINs have traded well above that level in every subsequent year.

Andeavor, which was formed after the company's previous iteration, Tesoro, purchased fellow merchant refiner Western Refining in 2016, has been no exception. As Tesoro the company reported total RIN expenditures of $125 million in 2014.

This amount surged to $366 million last year as additional refining capacity

ChartANDV data by YCharts

This article was written by

Tristan R. Brown profile picture
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