Railroads ramp up biofuel dispute
Refineries want out of enforcing mixing rules
railroads, including Warren Buffett’s BNSF, are joining a corporate brawl over ethanol mandates that pits American corn farmers and fuel distributors against independent oil refiners like billionaire Carl Icahn.
The American Association of Railroads, which represents the interests of BNSF Railway, Union Pacific, CSX, Norfolk Southern and others, is pushing back against calls by Icahn’s CVR Energy and Valero Energy for changes to the Renewable Fuel Standard, the law that requires escalating amounts of biofuel to be mixed with petroleum.
At issue is who’s responsible for showing compliance with the program. Adherence is tracked by paper credits that have become more expensive in recent years. Refiners argue that the costs are exorbitant and that the Environmental Protection Agency, the regulator that has jurisdiction over the mandate, should move the onus from them to lower down the supply chain, closer to consumers.
That would put companies such as BNSF and Union Pacific, the latter is the largest publicly traded U.S. railroad, on the hook for showing compliance with the credits, the American Association of
Railroads said in an emailed statement last week. It would also increase fuel prices, the lobbying group said.
“American consumers will ultimately absorb the impact,” said Kristin Clarkson, an association spokesman.
The lobby “is speaking on behalf of BNSF and the other railroads who are members,” Michael Trevino, a BNSF spokesman, said in an email.
Susan Terpay, a spokesman for Norfolk Southern, also said the American Association of Railroads’ efforts are in support of the railroad industry. Spokesmen for CSX and Union Pacific didn’t return messages left for comment. Icahn, who owns an 82 percent stake in CVR, declined to comment.
“Moving the point of obligation helps small retailers,” Valero said in an emailed statement last week. The impact on fuel retailers would be “positive,” by creating a “level playing field” between smaller and larger companies, Valero said.
Petroleum refiners are required to blend renewable fuels like ethanol into U.S. gasoline as part of a 2007 energy law passed under President George W. Bush that sought to slow the pace of oil consumption and its carbon footprint. Each gallon is tracked by a unique, 38-digit renewable identification number.
If, like Icahn’s CVR Energy, a refiner doesn’t have facilities to add the biofuels, it has the option to purchase them on the open market, often from gasoline distributors that aren’t covered by the mandate, or they can buy excess identification numbers from refiners that have the infrastructure to blend. CVR Refining, a subsidiary of CVR Energy, estimates that it may have spent $250 million on credits last year.
In November, the EPA rejected Valero’s petition to have the obligation moved, saying that while the program has its challenges, making that change would create fresh obstacles. The agency left open the possibility for change, though, by opening up a comment period that ends Feb. 22.
Meanwhile, renewable identification numbers have tumbled about 48 percent since Donald Trump was elected U.S. president Nov. 8. In December, he named Icahn as a special adviser on regulations, and he’s also nominated Oklahoma Attorney General Scott Pruitt, a critic of the program, to head the EPA. In confirmation hearings last month, Pruitt vowed to support the law, though he did not rule out the administrative change.
Also in January, the Trump administration ordered a temporary freeze and review of 30 environmental regulations published in the Federal Register between Oct. 28 and Jan. 17, including the Renewable Fuel Standard.
Martin Parrish, Valero’s vice president of alternative fuels, said recently at the Iowa Renewable Fuels Summit in Altoona that he thinks the revision will be granted. The renewable fuels industry “opposes the change” and will fight any potential challenges, according to Monte Shaw, the executive director of the Iowa Renewable Fuels Association.
Tweaking the law would raise consumer fuel prices and increase costs for the EPA to regulate the mandate at a time when government spending is increasingly scrutinized, said David Fialkov, vice president of government relations for the National Association of Truck Stop Operators.
“What we’re doing is defending the status quo,” Fialkov said.