Ted Cruz finds allies in region's refinery workers

Clad in orange and blue coveralls, hundreds of unionized refinery workers on Wednesday erupted in applause for Senator Ted Cruz, the conservative Congressman from Texas who just two years ago had run for president on policies that had alarmed organized labor.

It was a show of political might – and, possibly, shifting alliances –  that featured Cruz holding up a Philadelphia Eagles jersey stamped with his own last name, as the crowd of workers from Delaware, New Jersey and Philadelphia cheered.

Yet, the spectacle of sport was not the issue.

Instead, the workers and refinery executives gathered with the politically divisive senator to rally at the recently bankrupt Philadelphia Energy Solutions refinery in opposition to a federal law that requires fuel producers to blend ethanol with gasoline. 

Created in 2005, proponents of the renewable fuel standard program said it would reduce greenhouse gas emissions and grow the country's renewable fuels industry, which today is dominated by ethanol-producing corn farmers in the Midwest.

The mandate has created the country's multi-billion market for renewable identification numbers, or RINs, which essentially are receipts that show that gasoline sold at a filling station contains an ethanol mix.

Yet, so-called merchant refineries, such as Philadelphia Energy Solutions and the Delaware City refinery, don't mix gasoline and ethanol themselves. Therefore, they must buy RINs on the open market.

And, the prices of those RINs have surged in recent years.

They are now costing merchant refiners several hundred million dollars a year, sparking calls for a reform of the Renewable Fuel Standard program. 

"The RINs market broke. It broke and the price of RINs skyrocketed and they went from 1 or 2 cents each to as high as a $1.40 each," Cruz said on Wednesday.

Company officials at Philadelphia Energy Solutions blamed a January Chapter 11 bankruptcy on high RIN costs. Matt Lucey, president of PBF Energy, which owns the Delaware City refinery, said his neighboring facility is "the canary in the RINs coal mine."

Yet, ethanol proponents argue RIN costs are not unbearable for refineries.

Instead, the Philadelphia refinery's bankruptcy was a result of poor decisions made by its management, said Emily Skor, the CEO of biofuel trade organization, Growth Energy.

"Ted Cruz seems more interested in the spotlight than facts," she said in a statement. "If Mr. Cruz cared about jobs, he would support workers in the heartland who produce America’s homegrown energy."

As the sometimes vitriolic battle has descended onto the Mid-Atlantic, Delaware Gov. John Carney also has come to the defense of refineries.

Last fall, the governor spoke at a rally with union leaders and oil workers at the Delaware City refinery, arguing that the federal program needs to be reformed, or else it could put Delaware jobs at risk.

Similar to Wednesday's event, the rally last fall highlighted the unusual political coalition that has formed around the issue. While it was organized by the Washington, D.C.-based Republican lobbying firm CGCN Group, it featured pro-union demonstrators holding signs that read, "#ProtectRefinerJobs."

Earlier this month, Carney asked the Trump Administration to waive the federal renewable fuel volume mandates for PBF.

On Wednesday, Cruz said he has been petitioning President Donald Trump for a "fix" to the program.

In an unusual move for a nominally free-market politician, Cruz said one option could be to cap RIN prices at 10 cents.

Cruz's hometown of Houston is the corporate hub of the U.S. energy industry, and Texas is home to 31 percent of the country fuel refining capacity. His mother, Eleanor Darragh, originally is from Wilmington.

"My mom was born on the Brandywine, down in Delaware," he said to the crowd Wednesday. 

While Philadelphia refinery officials blamed financial problems on the increasing costs of the renewable fuel standard, the company also has been burdened by other costs, according to a report from Reuters published on Tuesday.

The news agency reported the Philadelphia refinery each quarter has faced a contractually-obligated multimillion-dollar payment to a crude oil rail company, even though it receives few train shipments due to a declining competitiveness of North American crude in recent years.

Local biofuel advocates also hold a contrary view, contending ethanol's impact on Philadelphia Energy Solutions financial troubles is overstated.

Mark Martell, conservation chair for the Delaware Audubon Society, even suggested that PBF Energy may be using Carney's fear of job losses to help pad its bottom line.

"PBF Energy appears to be using shutdown scare tactics to rouse union and government leaders alike into taking actions to support enhanced profits," he told the News Journal last month.

Cruz on Wednesday contended advocates and ethanol lobbyists are doing a disservice to corn farmers, arguing the industry could grow if it weren't regulated by the federal government.

Corn lobbyists, he said, are working for the interests of "Wall Street" speculators, who trade RINs.  

"If you've got billions and billions of dollars, Washington is very responsive to you," he said.

Asked about the allegation, Skor said, “unfortunately, Senator Cruz is not presenting a full picture of what we have been advocating." 

"America’s farmers overwhelmingly support the RFS because it allows homegrown energy to compete at the fuel pump," she said.

Contact Karl Baker at kbaker@delawareonline.com or (302) 324-2329. Follow him on Twitter @kbaker6.

Reporter Scott Goss contributed to this story.

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