It’s Buffett vs. Icahn as Lobbying Heats Up Over U.S. Ethanol

  • Association of American Railroads argues against Icahn efforts
  • Renewable fuel paper credits trading at one-week high

U.S. railroads, including Warren Buffett’s BNSF, are joining a corporate brawl over ethanol mandates that pits American corn farmers and fuel distributors against independent oil refiners like billionaire Carl Icahn.

The American Association of Railroads (AAR), which represents the interests of BNSF, Union Pacific Corp., CSX Corp., Norfolk Southern Corp. and others, is pushing back against calls by Icahn’s CVR Energy Inc. and Valero Energy Corp. for changes to the Renewable Fuel Standard, the law that requires escalating amounts of biofuel to be mixed with petroleum.

At issue is who’s responsible for showing compliance with the program. Adherence is tracked by paper credits that have become more expensive in recent years. Refiners argue that the costs are exorbitant and that the Environmental Protection Agency, the regulator that has jurisdiction over the mandate, should move the onus from them to lower down the supply chain, closer to consumers.

That would put companies such as BNSF, the carrier owned by Buffett’s Berkshire Hathaway Inc., and Union Pacific, the largest publicly traded U.S. railroad, on the hook for showing compliance with the credits, AAR said in an e-mailed statement Monday. It would also increase fuel prices, the lobbying group said.

Consumer Impact

“American consumers will ultimately absorb the impact,” said Kristin Clarkson, an AAR spokeswoman.

The lobby “is speaking on behalf of BNSF and the other railroads who are members,” Michael Trevino, a BNSF spokesman said in an e-mail.

Susan Terpay, a spokeswoman for Norfolk Southern, also said AAR’s efforts are in support of the railroad industry. Spokesmen for CSX and Union Pacific didn’t return messages left for comment. Icahn, who owns an 82 percent stake in CVR, declined to comment.

“Moving the point of obligation helps small retailers,” Valero said in an e-mailed statement Tuesday. The impact on fuel retailers would be “positive,” by creating a “level playing field” between smaller and larger companies, Valero said.

Petroleum refiners are required to blend renewable fuels like ethanol into U.S. gasoline as part of a 2007 energy law passed under President George W. Bush that sought to slow the pace of oil consumption and its carbon footprint. Each gallon is tracked by a unique, 38-digit Renewable Identification Number.

If, like Icahn’s CVR Energy, a refiner doesn’t have facilities to add the biofuels, it has the option to purchase them on the open market, often from gasoline distributors that aren’t covered by the mandate, or they can buy excess RINs from refiners that have the infrastructure to blend. CVR Refining, a subsidiary of CVR Energy, estimates it may have spent $250 million on credits last year.

EPA Rejection

In November, the EPA rejected Valero’s petition to have the obligation moved, saying that while the program has its challenges, making that change would create fresh obstacles. The agency left open the possibility for change, though, by opening up a comment period that ends Feb. 22.

Meanwhile, RINs have tumbled about 48 percent since Donald Trump was elected U.S. president on Nov. 8. In December, he named Icahn as a special adviser on regulations, and he’s also nominated Oklahoma Attorney General Scott Pruitt, a critic of the program, to head the EPA. In confirmation hearings last month, Pruitt vowed to support the law, though he did not rule out the administrative change.

To read more about the EPA pick, click here.

Also in January, Trump’s administration also ordered a temporary freeze and review of 30 environmental regulations published in the Federal Register between Oct. 28 and Jan. 17, including the Renewable Fuel Standard.

Martin Parrish, Valero’s vice president of alternative fuels, said last week at the Iowa Renewable Fuels Summitt in Altoona that he thinks the revision will be granted. The renewable fuels industry “opposes the change” and will fight any potential challenges, according to Monte Shaw, the executive director of the Iowa Renewable Fuels Association.

Tweaking the law would raise consumer fuel prices and increase costs for the EPA to regulate the mandate at a time when government spending is increasingly scrutinized, said David Fialkov, vice president of government relations for the National Association of Truck Stop Operators.

“What we’re doing is defending the status quo,” Fialkov said.

— With assistance by Jennifer A Dlouhy, and Thomas Black

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