Buffett and Railroads vs Icahn in Fight over RFS, RINs

Source: By DTN/Progressive Farmer • Posted: Thursday, February 9, 2017

U.S. railroads, including Warren Buffett’s BNSF, are joining a dispute over ethanol mandates with some independent oil refiners like billionaire Carl Icahn.

The American Association of Railroads (AAR), which represents the interests of BNSF, Union Pacific Corp., CSX Corp., Norfolk Southern Corp. and others, is pushing back against calls by Icahn’s CVR Energy Inc. and Valero Energy Corp. for changes to the Renewable Fuel Standard (RFS).

At issue is who is responsible for showing compliance with the program. Adherence is tracked by paper credits that have become more expensive in recent years. Petroleum refiners are required to blend renewable fuels like ethanol into US gasoline. Each gallon is tracked by a unique, 38-digit Renewable Identification Number (RIN).

Refiners argue that the costs are exorbitant and that the Environmental Protection Agency should move the onus from them to lower down the supply chain, closer to consumers.

That would put companies such as BNSF, the carrier owned by Buffett’s Berkshire Hathaway Inc., and Union Pacific, the largest publicly traded U.S. railroad, responsible for showing compliance with the credits, AAR said in statement Monday. It would also increase fuel prices, the lobbying group said. “American consumers will ultimately absorb the impact,” said Kristin Clarkson, an AAR spokeswoman. The lobby “is speaking on behalf of BNSF and the other railroads who are members,” Michael Trevino, a BNSF spokesman said.

Susan Terpay, a spokeswoman for Norfolk Southern, also said AAR’s efforts are in support of the railroad industry.

“Moving the point of obligation helps small retailers,” Valero said in a statement Tuesday. The impact on fuel retailers would be “positive,” by creating a “level playing field” between smaller and larger companies, Valero said.

If, like Icahn’s CVR Energy, a refiner does not have facilities to add the biofuels, it has the option to purchase RINs on the open market, often from gasoline distributors that are not covered by the mandate, or they can buy excess RINs from refiners that have the infrastructure to blend. CVR Refining, a subsidiary of CVR Energy, estimates 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 February 22.

Martin Parrish, Valero’s vice president of alternative fuels, said last week 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.