Icahn Lobbying Trump Sparks Civil War in U.S. Ethanol Sector

March 2, 2017 07:19 PM
 
E85 ethanol

Billionaire Carl Icahn’s relationship with President Donald Trump has helped spark a round of recriminations within the $24 billion American ethanol industry just as it navigates one of the most crucial points in its history.

The discord has emerged in the past three days as ethanol companies react to a proposal from Icahn and a lobby group that would shake up how the industry is regulated.

At the heart of the dispute lies the question of who exactly should be responsible for complying with a 12-year-old law mandating the blending of ethanol in gasoline. Icahn, a renowned corporate raider, controls one of the largest independent U.S. refiners. He argued loudly and repeatedly during the general election that the burden shouldn’t fall on companies like his but on fuel blenders instead.

 

Tied Together

Icahn’s position is anathema to most of the biofuels industry. That made it all the more surprising when it emerged Feb. 27 that the 81-year-old billionaire -- now a special regulatory adviser to President -- had won the backing of the Renewable Fuels Association. The Washington-based lobbying group’s president, Bob Dinneen, had long opposed the kind of change Icahn advocates, yet his group is now backing the proposal, which is being discussed in the White House. The news roiled the gasoline and corn markets -- and triggered an unprecedented display of public disunity from ethanol producers.

‘Back-Room Deal’

“We believe the Renewable Fuels Association has been bought, sold and delivered on a platter," Todd Becker, chief executive officer of Green Plains Inc., which isn’t a member of the lobby group.

In November, the renewable fuels unit of Valero Energy Corp., the largest independent U.S. refiner, joined the Renewable Fuels Association. The company endorses the move championed by Icahn, and Becker said that may have helped to sway the deal. “Bob Dinneen sold his soul to the devil,” Becker said of Valero joining the group.

Also under fire is how the proposed deal was presented to the Trump administration without wider consultation. Poet LLC, the largest U.S. ethanol producer and a founder of Growth Energy, a separate trade group vehemently opposed to the Icahn move, called the agreement "a back-room deal" made while "leading voices" were absent.

White House officials have spent the past two days in deliberations with Icahn and with ethanol producers who oppose his proposal, according to people familiar with the talks. The flurry of meetings and phone calls came after Bloomberg News reported Monday that Icahn had helped broker a compromise with Dinneen’s group. The report led to a surge of more than $100 million in the value of Icahn’s stake in refiner CVR Energy Inc.

White House spokeswoman Kelly Love said Wednesday there’s no executive order in the works dealing with ethanol. She didn’t directly respond to questions about the status of discussions.

Compliance Costs

While ethanol regulation can be esoteric at the best of times, the industry has considerable political clout in Washington. It’s a major part of the economy in the U.S. Corn Belt, where voters helped Trump to the White House. Many in the region are waiting to see what Trump will do to support the farming sector.

Until this week, the biofuels industry had been united in fighting against changes to the mandate, arguing that to do so would undermine the intent of the program -- to increase use of ethanol and biodiesel.

CVR and other gasoline refiners countered that the current costs of complying with the mandate are excessive. Refineries that can’t add ethanol to gasoline are currently forced to buy credits to meet the requirements. Icahn has warned of bankruptcies.

Just last week, the Renewable Fuels Association filed comments with the Environmental Protection Agency asking that the agency block Icahn’s demands. But everything changed, Dinneen said, after he was contacted by the White House and told in “no uncertain terms” that Icahn’s request would be granted. Dinneen said he then tried to get support from within the industry to get the best deal available.

Unprecedented "Brouhaha"

Now there’s disarray in the biofuels world. Fuels America, a lobby group with members throughout the agricultural supply chain, said Tuesday it had severed ties with the Renewable Fuels Association. Both the Iowa Renewable Fuels Association and the Illinois Renewable Fuels Association said they oppose any efforts to change the law.

Dinneen declined to comment, other than to say he continues to “have great respect for the Fuels America coalition and its members.”

Growth Energy said Dinneen’s organization doesn’t speak for the majority of the biofuels industry. Emily Skor, the group’s CEO, said she was caught off guard by the Icahn pact and has spent the past few days talking to policymakers, lawmakers and journalists to explain the distinction between her organization, whose members are still opposed to the deal, and the Renewable Fuels Association. Skor, who started her job in May, says she’s been told that the current industry "brouhaha" is unprecedented.

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Comments

 
Spell Check

Zagnut
Eastern, NE
3/5/2017 04:29 PM
 

  Goes to show that Trump can be bought by his buddies. Icahn is obviously a buddy. Corporate raiders are nothing but a pox on corporations. Their only intent is a pump and dump. Buy stock in a corporation cheap enough, demand changes in that company--usually some sort of sale, let the arbitrage begin and then dump the stock at an obscene profit while leaving the company in disarray and on the verge of collapse. Icahn is a douche bag, but a wealthy one. Bet he has a 20 something gold digger hanging on his arm too. In this case, ethanol will get screwed. Read that as the farmer too. Good job Trump! Screw the people that got you elected.

 
 
PJ Jahn
Prophetstown, IL
3/6/2017 07:14 AM
 

  Carl Icahn could be the biggest vulcher capitilist in all history. Airlines, auto companies, apple and the list goes on. Trump who is a professional bankrutpcy (6 business bankruptcies?) agent. Mit was exactly right on with the phoney, fake, counterfeit conman tag. Now we have Bob Dinneen hooking up with them. I always thought he was a phoney/counterfit, and nothing but a partisan political hack. Trump has surrounded himself with the biggest swamp monsters on earth. All of these people are vulchers on the U.S. citizens. Just look at how they have put the tax payers back on the hook for another recession. Trump will not release his tax returns due to the fact it will expose his scams, and has broken many laws, and screwing everyone he has dealt with. Bob Dinneen is nothing but a total FAKE!

 
 
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