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 and MORE (AZCentral The Arizona Republic) and MORE (Politico’s Morning Energy) and MORE (Ethanol Producer Magazine)
Excerpt from Politico’s Morning Energy: Add “Fueling American Jobs” to your roster of groups fighting over changing which companies must comply with the Renewable Fuel Standard. The new umbrella group backing the change brings together the United Steelworkers union with Valero and several Philadelphia-area refining companies, Monroe Energy, Philadelphia Energy Solutions and PBF Energy. The steelworkers will be swarming the Hill today (May 4, 2017) to make their case, highlighting possible independent refiner layoffs if a change isn’t made. “Steelworkers have been supportive of moving the point of obligation,” Roy Houseman, legislative representative for USW, told ME. “We have 30,000 members in refining sector, they are impacted by the RFS.”
The missing link: The group notably does not include Carl Icahn’s CVR, which has been forcefully advocating for the change. Icahn is a longtime Trump associate and holds a title in the White House. Icahn’s position raises ethical questions, and the new group may be trying to avoid being controversial. READ MORE
Excerpt from Ethanol Producer Magazine: “We have no way of knowing at this time whether Mr. Icahn made any of his renewable fuel credit trades or decisions about trades based on material, non-public information or otherwise manipulated the market,” said the senators in the letter. “But the publically available evidence is troubling, and based on this evidence, we ask that your agencies investigate whether Mr. Icahn’s conduct violated any laws under your jurisdiction.” In addition to requesting five specific areas of investigation, the letter also asks that Pruitt and SEC Chairman Jay Clayton recuse themselves from the matter due to potential conflicts of interest.
The letter is signed by Sens. Elizabeth Warren, D-Mass.; Debbie Stabenow, D-Mich.; Tom Carper, D-Del.; Sherrod Brown, D-Ohio; Sheldon Whitehouse, D-R.I.; Tammy Baldwin, D-Wis.; Tammy Duckworth, D-Ill., and Amy Klobuchar, D-Minn. A full copy of the letter is available on Warren’s website. READ MORE