CVR proceeds with stalled Oklahoma RD conversion as soybean oil prices drop

The lower price of soybean oil has given CVR Energy the incentive to finish the conversion of the hydrocracker at its Wynnewood, Oklahoma, refinery and get it ready to start up in mid-April.

Originally scheduled for September 2021, CVR put a halt to the conversion of the hydrocracker and kept it running petroleum-based feeds mainly because of the high price of soybean oil.

"We anticipate the start up of the Wynnewood [renewable diesel unit] in April....We are concurrently progressing other projects, including the expected installation of the pre-treater at Wynnewood," CEO Dave Lamp said Feb. 22 on CVR's earnings results call.

The unit is now being prepped to make renewable diesel as the basis for soybean oil has fallen to about 14 cents/lb from 30 cents/lb in September. The basis is the difference between the local spot prices and the futures price.

"We also have engineering design work underway to evaluate a renewable project at the Coffeyville refinery, which could be potentially larger than the Wynnewood refinery and could include sustainable aviation fuel production," added Lamp, referring to CVR's other refinery — the 74,500 b/d plant located in Coffeyville, Kansas.

CVR is in discussions with a number of vegetable oil producers to secure feedstock supply "as we believe there could be a benefit in partnering with the feedstock supplier in order to have more control and potentially better economics," Lamp said.

Besides soybean oil, CVR has a good source of corn oil that can be processed without a pretreater "and it has a little higher basis than what [soy] bean oil has, but it's also a lower [carbon intensity]. So with that mix, we feel we can make money in the short haul and offset a lot of RINs," Lamp added.

The battle over SREs

The lower carbon intensity of a feedstock, the more valuable the refined product is, according to California's Low Carbon Fuel Standard credits.

Credits are also given by the Environmental Protection Agency's Renewable Fuel Standard, which uses renewable credits, known as RINs, which many refiners must buy to meet their renewable volume obligation if they can't make or blend enough renewable fuel into their transportation fuels.

The skyrocketing cost of RINs in 2021 weighed heavily on CVR's results. The crack spread for its key Midwestern Group 3 market in Q4 averaged about $17/b, but RINs consumed over 35% of that or about $6.19/b.

Lamp expects its RIN exposure to be reduced "significantly in the near term, as we complete the renewable diesel unit at Wynnewood which we currently plan to have online by the middle of April and at full rates during the second quarter."

CVR's full year 2021 RINs expense was $345 million compared with the $190 million in 2020.

"Our estimated RFS obligation at the end of the year approximates Wynnewood's obligations for 2019 through 2021 as we continue to believe Wynnewood's obligation should be exempt under the RFS regulation," Lamp said, referring to the small refinery exemption built into the RFS for refineries with less than 75,000 b/d of capacity.

CVR has been on the forefront of refiners in taking on the EPA and its SREs, which the agency looks to want to deny going forward.

Having won a battle in the US Supreme Court last year, which allowed for non-contiguous years of exemptions, CVR is poised to seek judicial redress if the EPA does indeed do away with SREs as the agency's comment period ends.

Lamp noted that some of the responses in favor of SREs were "pretty dramatic."

"If I know the EPA, they will basically ignore them all [the comments] and just go like they want to. And...as soon as they deny in the federal register...we will be filing our lawsuits that minute," he added.