Icahn refinery cuts biofuels short amid reform standstill

Source: By Jarrett Renshaw and Chris Prentice; Reuters • Posted: Thursday, November 2, 2017

NEW YORK (Reuters) – Carl Icahn’s oil refining company CVR Energy has significantly unwound a large short position in the U.S. biofuel credit market, more than halving its outstanding blending obligation, the company said on Wednesday.

CVR’s refining arm cut its outstanding biofuel obligation to $127 million by the end of the third quarter, Chief Financial Officer Susan Ball said on an earnings call. That was down from $280 million at the end of June.

The move follows failed attempts by Icahn and other refiners to convince the Trump Administration to reform the U.S. renewable fuel program and lower credit costs.

Corn-state lawmakers successfully fought the reforms, causing the administration to back off making changes.

“What I cannot understand is how the Trump administration capitulated to the senators from Iowa,” CVR Energy CEO Jack Lipinski said. “Trump failed to drain the swamp as he promised.”

Icahn ended his role as an unpaid adviser to President Donald Trump in August after criticism that policy recommendations he offered could help his own investments. He was working at price-crushing reforms at the same time he was betting that credits at the center of the program would fall. Icahn has denied any conflict of interest.

The U.S. Renewable Fuel Standard requires oil refiners to blend increasing volumes of ethanol and other biofuels into gasoline and diesel every year, or to purchase credits from competitors that blend it instead.

CVR delayed buying credits for much of the past year in hopes prices would come down, building up a company-record $280 million outstanding obligation by end-June, a Reuters review of company filings showed.

The company was seen buying credits in the third quarter, Reuters reported.

Basic renewable fuel credits are trading at about 95 cents each, but they dipped as low as 30 cents in March while Icahn lobbied for changes.

Prices should remain in higher ranges, Lipinski said, but they will be largely offset by strong refining margins in 2018. He said if they continued to increase, refineries like those in Pennsylvania will shutter and ultimately force changes to the program.

Shares of CVR Energy, the parent company in which billionaire investor Icahn holds a majority stake, rose 5.6 percent to $28.99 by 2:42 p.m. ET (1842 GMT).

Reporting by Jarrett Renshaw and Chris Prentice; editing by Susan Thomas