Refiner Valero’s secret campaign against US biofuels mandates
WASHINGTON: US biofuels regulations, which mandate mixing corn-based ethanol into gasoline, have lately drawn together a diverse cast of political opponents.
They include an upstart gas station owners’ trade group, a former Obama administration environmental adviser and billionaire activist investor Carl Icahn, who owns a refiner and served as US President Donald Trump’s special advisor on business regulation - until he resigned Friday amid allegations of a conflict of interest.
Even the Renewable Fuels Association (RFA), a leading biofuels industry group, recently dropped its opposition to policy changes sought by this ad hoc coalition.
These players would seem to have few shared interests, but they share one key connection – close ties to Valero Energy Corp, America’s largest oil refiner.
As part of an extensive behindthe-scenes lobbying campaign, Valero played a key role in bringing these people and groups together around a policy proposal that could save the refiner hundreds of millions of dollars each year in regulatory costs, according to two former Valero executives with knowledge of the firms’ lobbying strategy.
Valero is a big loser under current regulations, which require refiners to either blend biofuels into their gasoline and diesel or buy governmentissued credits from firms that do such mixing. After selling off much of its ethanol-blending operations in cash-raising deals in 2006 and 2013, Valero was forced to spend US$750 million last year alone buying the credits, according to Valero’s securities filings.
The policy overhaul favored by Valero would free refiners from the obligation to blend biofuels or buy credits, shifting that burden to firms further down the supply chain toward retailers.
Such a change would amount to a multi-billion-dollar transfer of wealth to Valero. It would also benefit Icahn’s refining company, CVR Energy, and a handful of other refiners that lack blending operations.
Top Valero officials wanted others to act as the public face of the push to upend renewable fuels policy, the former Valero executives told Reuters.
“There was an effort to line up people who would support us who were more palatable to decision makers,” said one of the former executives. “It’s easier to support a small business than a big refining company.”
In response to Reuters’ inquiries, Valero stressed that it has publicly criticized current regulations. Spokeswoman Lillian Riojas called the rules harmful to “workers, small business retailers, consumers, the refining base, energy security and even the drive for more biofuels blending.”
Valero has joined petitions to change the law, sued the EPA, and sent executives to challenge the policy at industry conferences. But its more extensive and less visible lobbying through proxies served a purpose – to create a perception of broader support for a change that would primarily benefit Valero and a small number of other refiners.
The push to change the socalled “point of obligation” for biofuels blending is opposed by most ethanol producers and large integrated oil companies with blending facilities. They argue the shift would rope in thousands of additional companies – from gasoline retailers to shippers such as FedEx – and undermine the program by complicating enforcement.
The Trump administration has said it is considering the regulatory changes, but it has not announced a decision.
In early August, three sources familiar with the administration’s biofuels policy deliberations told Reuters that the Environmental Protection Agency (EPA) was preparing to reject proposals for the change. The White House declined comment and referred questions to the EPA, which did not respond to requests for comment.
Valero strategists viewed Icahn as a better public advocate to change biofuels policy despite his majority ownership of a small refinery, the two Valero executives said. That’s because the famous Wall Street investor has a diverse array of business interests and unique access to Trump, a longtime friend.
“Our folks wanted to get him involved,” said one of the Valero executives, who was regularly involved in company discussions on biofuels lobbying.
When Icahn wrote the EPA in August of 2016 to push for the policy change - arguing current rules create a “rigged market” – representatives from Valero helped him craft the letter, the executive said.
Valero declined to comment on its role in crafting Icahn’s proposal. Jesse Lynn, a lawyer for Icahn, said the billionaire “sought input from a number of people” on the letter but declined to name them.
Shortly after being elected, Trump named Icahn his special advisor on regulation, an informal role.
Icahn stepped down from the post on Friday after facing criticism that he was advising Trump on policy changes that would enrich his refining business.