Icahn Sees Biofuels Fight Deepening as Refinery Losses Mount

  • Billionaire makes first comments since letter to Trump on role
  • Convenience store owner lawsuit challenges EPA on biofuels

Billionaire Carl Icahn says an oil industry push for structural changes to the U.S. biofuels mandate will persist, even if the Environmental Protection Agency rebuffs requests from refiners to relieve them of the regulatory burden.

Icahn’s remarks came as convenience store owners took the fight to federal court and mark the investor’s first public comments since an Aug. 18 open letter announcing his departure as a special regulatory adviser to President Donald Trump.

Independent oil refiners are convinced the design of the Renewable Fuel Standard program is flawed and have a number of tools to pursue changes, including litigation, Icahn said. 

That includes a lawsuit filed Tuesday by the Small Retailers Coalition, a trade group representing about 200 convenience store owners and independent fuel retailers. The group is challenging the EPA’s latest slate of annual biofuel quotas, arguing the requirements give an advantage to big refiners and truck stops at their expense.

At issue is the structure of the EPA’s renewable fuel program, which puts the onus on refiners and importers to satisfy annual quotas for biofuel use. Like Icahn, the majority owner of independent oil refiner CVR Energy Inc., the group has said changes are required to that compliance burden, called the "point of obligation."

Earlier: Icahn Bets Against Renewables Market He Wants Trump to Overhaul

Without revisions, the group says in its filing with the U.S. Court of Appeals for the District of Columbia, coalition members "will be forced to cease operations or sell their businesses to their larger competitors."

Icahn has argued that costs to comply with the biofuels requirements are burdensome and that the onus for compliance should be moved away from refiners and shifted further down the fuel supply chain to entities such as fuel blenders. Icahn was named a special adviser to Trump in December, spurring criticism about conflicts of interest with his business dealings, given his public criticism of the biofuel program. 

Icahn pointed to a White House statement in a New Yorker story asserting ‘‘there was no ‘effective’ end date" to his role as a special adviser, "because there was never a formal appointment or title after Jan. 20.” 

“I only spoke to Donald a handful of times after Jan. 20 and the subject of the title never came up. So what the White House said might well be true,” Icahn said in response to the statement.

Congressional Democrats have questioned Icahn’s involvement in the debate over the biofuel program while he served as a regulatory adviser, suggesting the arrangement ran afoul of ethics laws.  In May, eight Democratic senators asked financial regulators at the Commodity Futures Trading Commission and Securities and Exchange Commission to open an insider trading investigation.

Icahn said he wrote editorials and criticized the structure of the Renewable Fuel Standard before he knew Trump would be president. Compliance with the program is tracked by credits called Renewable Identification Numbers (RINs). Prices have been volatile amid escalating biofuel consumption targets. On July 27, CVR said it expects to spend between $200 million and $215 million on the credits this year.

Read more: Icahn Ends White House Role After Conflict Questions Raised

“The fight over the point of obligation is certainly not over,” Icahn said. “There are a number of refineries in trouble because of it, and many are continuing to fight it.”

With the EPA preparing to formally reject requests by Valero Energy Corp. and other refiners to shift the biofuel compliance burden, that fight is shifting to federal court. The new legal challenge from the Small Retailers Coalition isn’t the first lawsuit challenging the structure of the U.S. biofuels program -- Valero also sued the EPA over the issue last year -- but it’s the first by retailers and the first of its kind focusing on how that affects small businesses.

The coalition is using a novel approach for its claim, bringing it under a 21-year-old law designed to blunt the impact of regulations on small businesses by requiring agencies to develop alternative approaches for compliance.

"The point of obligation has created a multi-billion dollar financial windfall for large retailers who control the vast majority of blending terminals across the country," the coalition says in its legal filing. "Large retailers with blending capabilities are profiting from the sale of RINs, which allows them to artificially lower the price of gasoline to undercut small retailers and push them out of the market."

The case is Small Retailers Coalition v. Environmental Protection Agency, 17-1197, U.S. Court of Appeals (Washington).

— With assistance by Andrew M Harris

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