Phillips 66 sees US renewable fuels mandate as 'unworkable'

By ALISON SIDER

Phillips 66 CEO Greg Garland said Wednesday that lawmakers need to change course before increasing the amount of ethanol required to be mixed into gasoline, an issue he says affects the entire refining industry.

Calling it an "unworkable mandate," Mr. Garland said the ethanol-blending-requirement level shouldn't be increased.

He said the US Environmental Protection Agency's proposal to require refiners to add more ethanol to the fuel, coupled with flat or declining demand in the US for gasoline, means the industry as a whole is likely to hit the so-called blend wall by 2014, a point after which refiners say more ethanol can't be added to the fuel supply.

"There's broad agreement there's an issue but not how to solve it," Mr. Garland said.

Mr. Garland made his remarks to reporters ahead of the company's first shareholders meeting since it spun off from ConocoPhillips last year.

Mr. Garland said he expects the proposed Keystone XL pipeline, which would bring crude from Canada to the Gulf Coast, to be approved, but likely not this year. Last month, TransCanada pushed back the start date for the pipeline to the second half of 2015 as it awaits the US State Department's decision on whether to approve the project.

"When I back up and think about North American energy, Keystone should be an important part of that," Mr. Garland said, noting Phillips 66 hasn't subscribed to any capacity on the pipeline.

He said US refining capacity is equipped to handle growing North American crude-oil production for the next several years, but in the long term the industry will have to start thinking about undertaking projects to expand capacity.

Though he said Phillips 66 will "always be in the refining business," Mr. Garland said the company is focused on growing its other segments -- transportation, logistics, midstream, and chemicals, which he said are growing more quickly than refining.

"Ultimately, we see refining itself being less than 50% of our income stream," he said.


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