By Laura Sanicola and Laila Kearney
(Reuters) – Delta Air Lines (NYSE) plans to start receiving shipments of renewable fuels feedstock at Pennsylvania’s Trainer refinery as part of a strategy that could reduce its environmental commitments by hundreds of millions of dollars, according to three sources. familiar with the matter.
The move signals a shift in the strategy of Delta subsidiary Monroe Energy, which in the past has been among smaller refineries that have tried to pressure the US Environmental Protection Agency and the White House to reform biofuel laws.
The US renewable fuel standard requires refiners to incorporate an increasing amount of biofuels into the country’s fuel tank each year or to purchase compliance credits from those who do.
Delta bought the Pennsylvania Oil Refinery 10 years ago in order to save money on jet fuel costs, the first-ever purchase of an oil refinery by an airline.
The refinery is expected to begin importing agricultural products such as soybean oil, which can be used to make biomass-based diesel fuel that meets federal blending requirements.
Delta declined to comment, but referred to its latest Climate Stress Report, which states that Monroe is evaluating production of sustainable aviation and other renewable fuels after additional economic and operational analysis.
Refineries that did not have this capacity in the past have gained significant positions in these credits, and have tried to pressure the federal government to reduce their liability to avoid making payments that they claim threaten the viability of their businesses.
Monroe Energy has in the past had to pay hundreds of millions of dollars each year to buy compliance credits, saying it has limited blending capacity.
The company is now refurbishing two large tanks within the Trainer refinery complex, which has a capacity of 185,000 barrels per day. One tank has been completed, and the second is due to be completed next month, according to two sources familiar with the matter. One source said the tanks would be used to mix biofuels.
Most commercial refiners buy RINs on a daily basis to avoid accumulating significant liability and exposure to price volatility, but Monroe Energy has slowed or halted purchases in recent years, according to market sources, as the Environmental Protection Agency has delayed compliance deadlines due to COVID-19.
Monroe postponed the purchase of RINs last year because it believed that RIN prices would fall or the company would be exempted from paying its obligations, Reuters reported. However, those prices have largely remained the same, according to Refinitiv data. The company has until next year to purchase those credits.
The refining arm ran a credit deficit of $556 million in June 2022, according to its latest quarterly earnings.
Delta’s refining income has soared this year as global refining margins have risen in the wake of the Russian invasion of Ukraine.
In the first six months of 2022, Delta’s refining arm earned $323 million, compared to a loss of $283 million in the first six months of 2021. The refinery has struggled to make money since it was bought by the airline, which has tried several times to sell it.