(Bloomberg) -- The Trump administration is formally rejecting a bid to relieve refiners of their obligation to fulfill annual biofuel quotas, dealing a blow to billionaire investor Carl Icahn and oil companies that had sought the change.
The Environmental Protection Agency denied petitions by Valero Energy Corp. and other refiners to alter the U.S. biofuel mandate because it doesn’t believe the changes "would result in net overall benefits to the program," according to an 87-page document posted on the agency’s website.
The decision is a win for farm-state lawmakers and ethanol producers who had opposed the proposed shift.
"Changing the point of obligation at this time would be very disruptive to the program, and likely the fuels marketplace as well," the agency said in its rejection. "Even if there were some marginal net benefits to changing the point of obligation, we believe that the disruptive effects of a change at this time would still warrant denial."
The formal declaration satisfies EPA Administrator Scott Pruitt’s earlier pledge to senators that he would retain the current structure of the Renewable Fuel Standard, which requires refiners and importers to blend biofuels into transportation fuels.
Refiners are affected unevenly by the current mandate; those without sufficient infrastructure to blend in biofuels themselves must instead buy credits to comply. Meanwhile, other companies that blend transportation fuels -- but don’t own refineries and therefore are not required to satisfy annual biofuel quotas -- can sell those tradable credits.
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A surge in the price of those credits, known as renewable identification numbers, or RINs, prompted some refineries to petition the EPA to shift the point of obligation to companies closer to consumers, such as blenders. Icahn, the majority owner of CVR Energy Inc., had complained that the program structure is "rigged" and the changes were urgently needed.
Icahn had served as a regulatory adviser to Trump, and his advocacy for this change while in that role prompted complaints from Democratic lawmakers. Federal investigators have issued subpoenas seeking information on Icahn’s efforts to alter biofuel policy during his time advising Trump.
RINs tracking 2017 targets have been volatile this year amid uncertainty surrounding the program. RINs for 2017 ethanol quotas cost 89 cents apiece, data compiled by Bloomberg show. Biodiesel RINs fetched $1 apiece. By contrast, in late 2012, an ethanol RIN cost 4 cents and a biodiesel RIN fetched 52 cents.
The EPA said it did not agree with refiners’ arguments, repeating the reasoning the EPA previously used to propose denying the change last November, under former President Barack Obama.
The news was cheered by biofuel advocates, who argued the change would have disrupted markets and could discourage ethanol production.
The EPA came to "the right policy conclusion," said Senator Chuck Grassley, a Republican from Iowa. "This decision puts the issue to bed, and certainty is so important.”
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