Icahn’s Pig in a Poke

by Brent Erickson (Biotechnology Innovation Organization/Biofuels Digest) Members of the U.S. Senate are questioning whether Carl Icahn’s lobbying to change the Renewable Fuel Standard creates an ethics conflict with his role as advisor in the Trump administration. In addition to the ethics question, Members of Congress and some in the biofuels industry should examine whether Icahn could even deliver on the purported quid-pro-quo even if he wanted to.

In late February 2017, Icahn and a biofuel trade association reportedly discussed a presidential executive order to make Icahn’s desired change to the RFS Point of Obligation (the so-called POO) in exchange for modifications to unconnected policy priorities for biofuel producers. The proposed “deal” essentially was a non-starter, since altering federal policies is a far more challenging task than Icahn or his partners care to admit publicly. In short, the reported “deal” cannot be accomplished simply by waving a magic wand or through a presidential executive order.

Icahn claims the RFS exacts a disproportionate toll on his business interests, and he therefore wants to move the POO as far from CVR as possible.

Despite owning the rack terminal, CVR protests it cannot blend enough biofuel to meet the obligation and must therefore buy Renewable Identification Numbers (RINs) on the market. However, Reuters has reported that CVR sold RINs on several occasions in the past year, creating a short position in the market and apparently gambling that it can escape the obligation or buy the RINs back at a deflated price. Based on Reuters’ reporting, Icahn has made a $50 million windfall on the deal, and Senators are now asking whether he influenced RIN prices through his connections to the administration and campaign while making the trades.

In November 2016, EPA proposed to deny petitions filed by the American Fuel and Petrochemical Manufacturers and several independent refiners asking the agency to change the point of obligation. Notably, not all petitioners agreed on who should be obligated, and some of the various petitions may not have exempted CVR. EPA made a strong economic case that moving the POO would not increase production and use of biofuels, as petitioners claimed; in fact it would likely disrupt RFS stakeholders’ investments and thereby decrease biofuel use. By law, if EPA now decided to reverse itself and move the POO, it would have to present a rational argument for doing so – one that countered its own previous evidence. An executive order to change the POO would likely face a Court challenge. EPA would have to undertake a new rulemaking and respond to comments from numerous groups opposed to moving the POO, including most biofuel producers and several oil producers.

The other part of the February “deal” floated by Icahn offered a few tidbits for the ethanol industry. Chief among them was a waiver of gasoline volatility standards for blends of 15 percent ethanol (E15) to allow E15 to be sold in summer months.

A White House executive order on E15 does nothing to change EPA’s well-documented position on the matter or alter the legal or procedural landscape around the issue. Even worse, EO’s are not legally binding. So the biofuels industry would have no recourse to force regulators to follow through on the E15 waiver.

The most absurd part of the Icahn “deal” was a proposal for the extension of the $1 per gallon biodiesel tax credit, which expired at the end of 2016. The White House does not have the authority to grant this or any other tax policy via executive order. Tax policy is set by Congress and Presidential recommendations mean little on Capitol Hill.

(A)n executive order does nothing to change the federal Administrative Procedures Act or the other bodies of law that will prevent the industry from collecting on the “deal” after we’ve given Carl Icahn what he wants. READ MORE