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Refining King Icahn Seeks Freedom From Pricey Biofuels

Refinery

Valero, America’s largest oil refiner, has been conducting a behind-the-scenes campaign to rid refiners of the costly biofuel blends mandate by the U.S. government.

Billionaire Carl Icahn, who also heads oil refiner CVR Energy, has been a big part of these efforts.

Valero Energy Corp. has been coordinating lobbying efforts to get the Trump administration to revise the Renewable Fuel Standards (RFS) governing gasoline and diesel. The refiners and its allies are asking Trump to transfer the “point of obligation” for blending biofuels – such as 10 percent corn ethanol into gasoline – away from refineries and over to gasoline retailers and shippers such as FedEx.

That comes from an investigative report from Reuters involving interviews with two former Valero executives who spoke to the media outlet. 

The point of obligation requirement has been costing refiners a great deal under rules enforced by the U.S. Environmental Protection Agency. The federal rules, that go back to a bill signed in 2005 by then-president George W. Bush, forced Valero to spend about $750 million last year buying RFS credits.

Icahn has been working with Valero since last August, with a letter submitted to EPA asking for a policy change. The letter to the EPA said the rules create a “rigged market” unfair to oil refiners. Related: Eclipse: What Happens If The World’s Giant Solar Farms Go Offline?

He’d taken a special advisor role to Trump soon after the election. Icahn resigned this position on Friday after taking a lot of criticism about having a conflict of interest.

"I never sought any special benefit for any company with which I have been involved, and have only expressed views that I believed would benefit the refining industry as a whole," he wrote in a letter to Trump on Friday.

It had a never been a problem for the president, according to the White House.

Reuters also reported that the Trump administration is considering making the point of obligation changes. The president has not yet made a formal decision on it.

Valero had sold off its own ethanol-blending operations through cash-raising deals in 2006 and 2013. That put the company in a tough position and led to the $750 million spend last year on credits to meet compliance rules.

Ethanol producers and their lobbying groups have been arch-enemies of oil companies and refiners in recent years. Biofuel blenders, corn famers, and producers of advanced biofuels blended with motor fuels, had been lobbying hard to keep the gasoline and diesel mandates in place.

They also wanted to see gasoline go up to 15 percent ethanol blend. It did get the greenlight from the EPA, but it so far has failed to find acceptance at gas stations. It also stoked more battles with the oil industry, and with automakers concerned about the corrosive engine effects of using E15 in gasoline.

One of these biofuel trade groups, has been supporting Valero’s efforts lately, according the Reuters article. Renewable Fuels Association recently dropped its long-time opposition to RFS policy changes. The ad hoc coalition’s efforts to move the burden down the supply chain is more palatable for the trade association. Related: EIA Spreads Optimism With Double Draw

Valero, Icahn, and other refiners, would like to see others play a more visible role in lobbying for the biofuel blend rule change.

That coalition may include a gas station owners’ trade group and a former Obama administration environmental advisor.

They’d very much like to restore their cash flow lost to paying for RFS credits.

Valero executives are working hard to bring in others as the public face lobbying to revamp RFS, the former Valero executives told Reuters.

By Jon Lesage for Oilprice.com

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  • Peter on August 24 2017 said:
    Not only do these ethanol mandates hurt consumers by raising the price of fuel and wrecking our cars but they increase the cost of food basics like corn. This increase of food cost is suspected in causing the Arab Spring.

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