{"id":13542,"date":"2016-11-04T17:56:17","date_gmt":"2016-11-04T21:56:17","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/straddling-regulation-a-refiners-opportunities-and-setbacks-in-the-face-of-climate-change\/"},"modified":"2016-11-04T17:56:17","modified_gmt":"2016-11-04T21:56:17","slug":"straddling-regulation-a-refiners-opportunities-and-setbacks-in-the-face-of-climate-change","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/straddling-regulation-a-refiners-opportunities-and-setbacks-in-the-face-of-climate-change\/","title":{"rendered":"Straddling regulation: A refiner\u2019s opportunities and setbacks in the face of climate change"},"content":{"rendered":"
\"congressional-volume-target-for-renewable-fuel\"
Source: EPA, \u201cProgram Overview for Renewable Fuel Standard Program\u201d, https:\/\/www.epa.gov\/sites\/production\/files\/2015-09\/congressional_volume_target-02_0.png<\/figcaption><\/figure>\n

The oil industry is one of the largest contributors of greenhouse gasses (GHG). It has also been one of the most impacted industries by climate change thus far, mostly due to regulation.<\/p>\n

Thanks to increased regulations from the EPA, IRS, and the California Air Resources Board (CARB), California has seen a faster migration toward renewable fuels than the rest of the country. Each of these government agencies provide environmental credits per gallon of renewable fuel, making it more competitive in the marketplace.<\/p>\n

\"renewable-diesel\"
Source: http:\/\/www.government-fleet.com\/article\/story\/2016\/03\/what-you-need-to-know-about-renewable-diesel.aspx<\/figcaption><\/figure>\n

Renewable diesel is chemically identical to petroleum diesel, but is made from a renewable source, commonly beef tallow or vegetable oil. Renewable fuels are considered \u201cdrop in\u201d and can directly replace petroleum-based fuels.[i]<\/a><\/p>\n

Alon USA owns refineries in California and the southern US that have been both positively and negatively impacted by climate change regulations.<\/p>\n

In 2012, Alon discontinued crude refinery operations in southern California because of the high cost of crude oil relative to yield and asphalt demand.[ii]<\/a><\/p>\n

Despite those huge setbacks, Alon was able to leverage their success from their crude refineries in the south to fund an investment into their \u201cCalifornia renewables project\u201d. They converted part of the refinery in Paramount, CA to produce renewable diesel and jet fuel that turns about 2,500 barrels per day of beef tallow and other feedstocks into renewable fuels. [iii]<\/a><\/p>\n

Alon\u2019s jet fuel JV, AltAir, is the \u201cworld’s first dedicated commercial-scale renewable jet fuel production facility\u201d, producing 35M gallons per year.[iv]<\/a><\/p>\n

Alon\u2019s 2016 third quarter results were solid with operating margin of $55.81 per barrel and operating income of $6 million.[v]<\/a> The environmental credits received for every gallon impactful here because they are recorded as part of Alon\u2019s net sales.[vi]<\/a><\/p>\n

Alon will face several challenges<\/strong> going forward.<\/p>\n