Ted Cruz has a plan to fix an environmental regulation Texas oil refiners hate.
Yet Cruz’s plan has not been widely embraced by the very industry he’s trying to help.
Texas’ powerful oil and gas sector detests the Environmental Protection Agency’s Renewable Fuel Standard, which mandates that transportation fuel contain a certain quantity of renewable fuels.
Cruz’s aggressive attempts to unravel that policy — by taking his case to the White House — could offer the quickest path to changes the industry wants.
Rather than work with a divided Senate, Cruz is appealing to Trump’s anti-regulatory EPA to change a small piece of the 2005 regulation, a piece most in the energy industry believe would blow up the entire policy Cruz has long sought to abolish.
“The Renewable Fuel Standard is broken, and that really is [Cruz’s] topline message,” said one source from the refining industry familiar with the negotiations. “He’s focused on [a smaller piece of the RFS] now because that’s where he can make a difference.”
But refining industry leaders fear that approach could jeopardize bigger, long-term changes to energy policy that they hope to accomplish through legislation.
They also say Cruz stretched the truth about a failing Pennsylvania refinery so he could make a case for his ideas to President Donald Trump.
“Sen. Cruz is well-intentioned in trying to find a fix to a broken program, but his view is not the consensus view of the industry on this,” said Frank Macchiarola, director of Downstream and Industry Operations at the American Petroleum Institute, which represents several Texas refiners.
Macchiarola called Cruz’s approach a “distraction,” adding that API believes the best way to address the Renewable Fuel Standard is through legislation that would sunset its outdated policies.
Sen. John Cornyn, R-Texas, is working on a bill to do just that, one that includes Republican colleagues from corn-growing states who currently benefit from the EPA rule. Those lawmakers have vehemently opposed Cruz’s approach, which they say would hurt corn farmers.
“There have been a number of meetings at the White House among the various combatants to see if they can break the impasse. So far they have not been able to do so,” Cornyn said of the conflict between refiners and corn growers.
But Cruz has made plenty of inroads with the White House, which could act on its own.
A regional EPA office did not respond to request for comment.
Trump campaigned on a promise to support the Renewable Fuel Standard, and his administration laid out ethanol targets that pleased corn producers last year.
But leaders from ethanol-producing states fear that Cruz, a savvy political maneuverer, could now be influencing Trump in the other direction.
Days before his own primary race in Texas, Cruz spent the Senate’s in-state work week rallying with steelworkers at a bankrupt oil refinery in Philadelphia. Cruz used the event to make his case that blue-collar workers, which helped Trump win the White House, are at risk of losing their jobs if the president doesn’t act on his ideas.
“In my view the 2016 election can be explained with one thing very simply, and that is the working men and women of this country,” Cruz said of the event in a meeting with steelworkers the following month. “The simple reality is that this is government regulation run amok that’s threatening to throw thousands upon thousands of people out of work.”
Cruz credited the campaign-style event in Philadelphia, featuring some of Trump’s most prized supporters, for shifting the president’s opinion on the issue.
“The rally we did in Philadelphia played a powerful, powerful role,” said Cruz. “In fact hours after that rally concluded is when the next meeting got scheduled at the White House with the president.”
Cruz also warned that Texas refining jobs are at risk if the changes he wants aren’t made.
“My own state of Texas would be deeply affected if we don’t take action immediately,” Cruz said on the Senate floor last month.
Texas refiners say they appreciate Cruz’s work facilitating White House conversations on the Renewable Fuel Standard, which industry leaders agree needs to be revisited.
But few refiners agree with Cruz’s assessment of the problem in Pennsylvania. Cruz blames rising costs of Renewable Identification Numbers — the piece of the RFS he wants Trump’s EPA to change — for the failing Philadelphia refinery.
Texas refiners say Philadelphia Energy Solutions suffered from other business failures, and Cruz used the sympathetic steelworkers to make his case to Trump.
“It’s just more political BS. I hate [the ethanol mandate] as much as anyone, but this is a set-up,” a lobbyist for an integrated oil major wrote in an email that was shared with the Star-Telegram.
Roy Houseman, a legislative representative for the United Steelworkers, said the union has participated in similar rallies at other refineries, and has long advocated “for ensuring that the renewable fuels volumes can be easily met.”
Refiners have to purchase RINs if they don’t blend their own product with ethanol. The refinery in Pennsylvania cited their costs in its bankruptcy filing.
Most Texas refiners do purchase the numbers, but not all of them want the changes Cruz is pushing.
“The bottom line is that the [RIN] issue... creates a division in the refining industry,” said Macchiarola, of API. “There are some that think that’s the solution, there are others that don’t. Most of our members, it doesn’t help.”
One major refiner that would benefit from lower RIN prices is San Antonio-based Valero, which sold off much of its blending operations, and therefore spends significantly more than other refiners on RINs. According to a Reuters report, Valero has lobbied aggressively behind the scenes to fight RIN prices, including seeking to “line up people who would support us who were more palatable to decision makers.”
Valero did not respond to requests for comment.
Scott Segal, a partner at the Texas-based law firm Bracewell, which lobbies for Valero, thanked Cruz for his work and called the senator an “indispensable party” in bringing Trump to the table. Without addressing specific jobs tied to the numbers, Segal said money spent on them “diverts capital away from important projects” for Texas refiners.
Asked to provide evidence of Texas jobs at risk from RIN prices, Cruz’s office pointed to a letter from Texas Gov. Greg Abbott, which cites a University of Texas-El Paso study that says the RIN mandate “puts refiners at a higher risk of bankruptcy, placing at risk a significant number of jobs that are tied to the refinery sector both directly and indirectly.”