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Exclusive: Inside Edge – Trump Advisor Icahn’s Big Bet against Biofuels Credits
by Chris Prentice and Jarrett Renshaw (Reuters/KFGO) Billionaire investor Carl Icahn's oil refining company, CVR Energy, made a massive bet in 2016 that prices for U.S. government biofuels credits would fall - just before Icahn started advising President Donald Trump on regulations driving that market.
The size and specifics of the gamble - involving $186 million worth of biofuels credits the company said it needed at the end of 2016 to satisfy regulatory requirements - have not been previously reported by the media.
Icahn's firm positioned itself to slash those regulatory costs by tens of millions of dollars if biofuels credit prices declined, according to a Reuters review of CVR filings with the Securities and Exchange Commission and interviews with two brokers involved in the firm’s trading of biofuels credits.
Last year, in a counterintuitive trading strategy, Icahn’s refining firm postponed buying biofuels credits and instead sold millions of them – a bet that it could buy the credits it would need later at lower prices, according to the two brokers and CVR’s year-end SEC filing.
That strategy looked prescient, starting in December, as prices for biofuels credits fell in response to a series of political events tied to the election of Trump. These included his appointment of Icahn - a vocal critic of biofuels credit mandates - as an unpaid “special advisor to the President” on regulatory issues.
In February, biofuels credit prices fell again after the famed activist investor proposed policy changes to the White House that would free certain refiners - including CVR - from their obligation to buy the credits.
(For a graphic detailing how CVR played the volatile biofuels credit market, see: http://tmsnrt.rs/2p5LNT9).
Icahn should not be advising Trump on policy changes that move markets in which Icahn is "speculating deeply," said Brooke Coleman, executive director of the Advanced Biofuels Business Council, a trade group that represents producers of renewable fuels and opposes Icahn’s policy recommendations.
Richard Painter - a law professor at the University of Minnesota and the chief White House ethics lawyer for former President George W. Bush from 2005 to 2007 - believes that Icahn’s unique access to the White House and influence on policy creates a conflict even though, as an informal advisor, he isn’t getting a government paycheck.
“We don’t give out knighthoods in the United States. If you have a title, that means you have a job,” Painter said.
On February 27, news broke that Trump – after being advised by Icahn – would be preparing an executive order on biofuels regulation.
The next trading day, biofuels credit prices dropped to an intraday low of 30 cents. READ MORE