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February 28, 2017 2:40 PM, EST
Trump to Shift Biofuel Blending Burden Off US Refiners: Sources
Jason Reed/Reuters

President Trump intends to revamp the national biofuels program to ease regulations on oil refiners while providing new incentives for ethanol and biodiesel production, people familiar with the plan told Reuters on Feb. 28.

The news sent corn prices and refinery shares up sharply and renewable credits plunging. It also drew sharp criticism from some ethanol groups who said Trump’s regulation adviser, billionaire investor and refinery owner Carl Icahn, had engaged in self-dealing by pushing for the deal.

The head of the Renewable Fuels Association said the White House had informed him that Trump intends to sign an executive order shifting the obligation of blending biofuels into gasoline away from refiners and further down the supply chain “to position holders at the terminal.”

Refiners had long requested the change, saying the country's biofuels program hits them with burdensome costs.

Biofuels organizations and groups representing fuel retailers and integrated oil companies, such as the U.S. units of Royal Dutch Shell and BP, have opposed the change, which they say will complicate managing the program.

"Despite our continued opposition to the move, we were told the executive order was not negotiable," association CEO Bob Dinneen said.

One source said the trade group also was told that the executive order would include incentives for ethanol and biodiesel in a tradeoff for the blending shift.

Those changes could include a waiver to allow greater volumes of ethanol to be blended into gasoline in the summer, a review of how the Environmental Protection Agency estimates emissions effects of biofuels, and support for a congressional tax credit for domestic producers of biodiesel, the source said.

The Renewable Fuel Standard requires that fuel companies use increasing amounts of biofuels blended with gasoline and diesel. Former President Obama expanded the standard, which started under former President George W. Bush when gasoline prices were near records and a push for alternative fuels and breaking dependence on Middle East oil was just getting started.

A White House official did not respond to a request for comment.

Meanwhile, compliance credits used to meet the annual biofuels blending standards tumbled to as low as 30 cents apiece on Feb. 28 from 47 cents to 48 cents previously.

Critics of the reported deal cried foul.

“This backroom deal would severely undermine the Renewable Fuel Standard and force everyday Americans to shoulder the burdens of higher fuel costs and more expensive goods,” according to a joint statement from the National Association of Truck Stop Operators and gasoline retailer groups. "Making this change would only benefit a handful of companies at the expense of average, hardworking Americans.”

Emily Skor, CEO of biofuel trade group Growth Energy, expressed concern about Icahn’s role.

“I assure you this is no deal for anyone but Carl Icahn," she said. "If we had been approached with this deal, we would have flat out rejected it."

Icahn owns 82% of oil refiner CVR Energy Inc., according to Thomson Reuters Eikon data. The stock rose 4% to $23.04 on Feb. 28 on heavier-than-usual daily volume and was up about 80% since Trump was elected.

Icahn was not immediately available for comment.

Seven Democratic senators, including Elizabeth Warren of Massachusetts, had sent a letter to the White House earlier in February, saying Icahn’s role as an adviser to Trump created financial conflicts of interest, and she called for a review.

In its 2016 earnings report, CVR CEO Jack Lipinski said fourth-quarter results suffered from weak margins and "continued high Renewable Identification Number expenses."

Shares of big U.S. refiner Valero, which would also benefit from the reported shift of blending obligations, were up 2.3% at $68.80 on Feb. 28.

(Additional reporting by Jarrett Renshaw and Michael Hirtzer; writing by Richard Valdmanis)