Why is the Corn Belt so mad at Carl Icahn? Two words: ethanol waiver

Flickr/photolibrarian
The billionaire's Oklahoma oil refinery falls just 500 barrels below the 75,000 barrel-per-day limit that defines “small.” That classification allowed it to plead economic hardship and skirt the Renewable Fuel Standard with an EPA waiver.

Environment Farm Science Systems

On Monday, Reuters broke a story that infuriated Corn Belt legislators and ethanol manufacturers alike. An Oklahoma oil refinery mostly owned by billionaire Carl Icahn, a former advisor to President Trump, was exempted from the biofuels mandate, meaning the Environmental Protection Agency (EPA) bought its claim that it was facing “economic hardship.”

The RFS exemption that Icahn’s refinery just received will save it tens of millions of dollars.

The mandate, commonly known as the Renewable Fuel Standard (RFS), requires oil refiners like Icahn’s—CVR Energy, Inc.—to blend increasing amounts of renewable fuel, primarily ethanol, into any transportation fuel sold in the the United States, up to 36 billion gallons by 2022.

It’s a standard that EPA Administrator Scott Pruitt has pushed to reform. Though, he is by no means its only opponent. Since 2007, when the mandate officially went into effect, market conditions have shifted and natural gas production has grown. Those changing conditions have prompted voices from both political parties and numerous sectors—including some environmentalists, who’ve begun to question whether ethanol is as clean as we think—to argue that we no longer need to subsidize the renewable fuel industry.

The RFS exemption that Icahn’s refinery just received will save it tens of millions of dollars, according to Reuters. That’s because oil refiners can meet the RFS in one of two ways: blend their own biofuels, meaning they generate renewable energy credits, or purchase renewable energy credits generated by other refiners. Because some small-scale refiners don’t have the infrastructure to blend their own biofuels and sometimes struggle to buy enough credits to meet their quotas, EPA occasionally grants exemptions to entities that can prove the RFS has caused them economic hardship.

There’s a lot of money in play. More biofuels exemptions mean less money for corn growers.

Icahn’s refinery falls just 500 barrels below the 75,000 barrel-per-day limit that defines “small.” The Reuters report suggests that Pruitt’s EPA has been more generous than the previous administration in letting refiners opt out of meeting RFS regulations. The agency granted more than two dozen waivers for 2017, whereas the agency under President Obama granted about eight per year. In February, both ExxonMobile and Chevron sought biofuel waivers for their smallest refineries.

Bloomberg reported in February that Trump administration officials were planning two summits to discuss potential changes to the regulations. If so many entities seem to agree the standard could benefit from some adjustments, why are corn growers so mad about the Icahn exemption and other small refiner waivers?

First and foremost, there’s a lot of money in play. More biofuels exemptions like the waiver Icahn’s refinery received mean fewer customers for corn growers. The RFS was a huge windfall for the Corn Belt when it was first implemented because it essentially guaranteed a market for turning corn into fuel. But the Renewable Fuels Association, an ethanol lobby group, estimates the waivers lowered blending obligations by 1.6 billion gallons in 2016 and 2017. Association president and CEO Bob Dinneen called the waivers “Administrator Pruitt’s secret small refiner bailouts.” A statement from the National Corn Growers Association on the waivers added that they “contradict President Trump’s commitments to America’s corn growers.”

But part of the ire is also about Icahn himself. He has long advocated against the RFS, first ruffling feathers among ethanol advocates when he pushed to shift the responsibility for meeting the standard from refiners to wholesalers, a change which would’ve directly benefited his own refinery. At the time, he was an unpaid regulatory advisor to the White House, and he stepped down after he was accused of violating ethics rules. After he left Washington, the Justice Department opened an investigation into his actions.

The waiver granted by EPA is retroactively applied to 2017, meaning one of Icahn’s refineries doesn’t have to meet the biofuel mandate he wagered against.

For some, the waiver for Icahn’s refinery looks like a favor from Pruitt. In a statement reported by Politico, the CEO of ethanol producer group Growth Energy pointed out that Icahn interviewed Scott Pruitt for the job and now “stands to make millions more from a secret EPA handout.”

Back in August, CNBC reported that “Carl Icahn’s bet on Donald Trump went terribly wrong.” The story chronicled Icahn’s decision to hold off on buying renewable fuel credits for his refinery because he thought they’d continue to decrease in value. The story noted that the price of credits had gone in the opposite direction, rising 200 percent and leaving his refinery with a $280 million unmet obligation.

Monday’s revelations seem to reveal that Icahn may have won the day in the end. Though his proposal to move the obligation away from his own company never panned out, he managed to opt out of the biofuels credit through a side door anyway. The waiver granted by EPA is retroactively applied to 2017, meaning one of his refineries doesn’t have to meet the biofuel mandate he wagered against. His energy company’s income more than doubled in the first quarter of this year.

H. Claire Brown

Claire Brown is a staff writer for The New Food Economy focusing on food policy and the environment. Her reporting has won awards from the Newswomen’s Club of New York and the New York Press Club. She is based in Brooklyn. She can be reached via email at claire.brown@newfoodeconomy.org or on Twitter at @hclaire_brown.

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