Trump regulatory reform adviser faces conflict of interest scrutiny over RFS

Carl Icahn, US President Donald Trump’s special adviser on regulatory reform, is facing a conflict of interest scrutiny after the shares of an energy company owned by him doubled in value.

The shares of CVR Energy have surged after projections that the new administration would ease environmental regulations, including the Renewable Fuel Standard (RFS) that has cost CVR more than $200 million (€186.7m) a year.

The expectation of Trump weakening the RFS has dragged down the prices of renewable identification numbers (RINs) that fuel refiners such as CVR must buy to comply with the standard’s rules.

“It’s true that I would benefit as a refinery owner, but so would every refinery as well as the small petrol station owners and as far as I’m concerned the public, because certain of these refineries can now stay alive,” Icahn told Financial Times. 

But Icahn, who helped Trump choose Scott Pruitt to run the Environmental Protection Agency (EPA), has attracted scrutiny as due to his role as an adviser but not as a federal employee, he has not been required to separate himself from his investments.

“The EPA, in far too many instances, has run amok. Overregulation is the reason corporations are afraid to invest and as a result there’s a lack of good jobs and productivity in this country,” Icahn said.

But Bruce Babcock, an energy economist at Iowa State University, suspects that there is “a huge conflict of interest” with Icahn and his position.

This view was shared by Norman Eisen, a former legal ethics adviser for Barack Obama, who told Financial Times that Icahn’s “title, responsibilities and involvement in personnel choices make him a de facto special government employee”.

As such, Icahn would be subject to conflict of interest rules preventing work on matters relating to his investments.

The RIN prices have staggered multiple times with news of Trump’s nominations to his administrative team.

The prices tumbled 8% after Pruitt was nominated to lead the EPA, and another 6% on Icahn’s appointment.

According to the Oil Price Information Service (OPIS), RIN prices fell to $.46 on 25 January, less than half their value in December.

‘RINs quintessential example of absurdity’

Icahn’s general counsel Jesse Lynn said it was “ludicrous” to claim Icahn had done wrong as a businessman to offer advice on “an industry he knew well.”

The market value of CVR Energy, 82% owned by Icahn, has increased by $1.1 billion since the election to $2.2 billion. 

Icahn has repeatedly attacked the RFS, saying the RIN system was riddled with fraud and stating that instead of refiners, integrated oil companies and large petrol stations should be required to buy them.

Oil refiners that are unable to meet the biofuel blending standards set in the RFS have to by RINs to comply with the programme.

“RINs are the quintessential example of the absurdity of so many regulations the EPA has issued,” he said.

EPA has attempted to deny requests to shift the point of obligation in the RIN programme away from refiners, but this stance may have to change after Valero Energy, the largest independent oil refiner in the world, sued the EPA over the ruling in Texas.

In a confirmation hearing last week, Pruitt reassured senators that he would “make sure that the statute is upheld and enforced and not undermined”.

Some experts expressed doubt that Trump would touch the RFS, as the votes from US corn farmers helped him win the election in November and during his campaign Trump had spoken positively of corn ethanol.

However, Barclays, in a research note, said it expected the new administration would cut required ethanol volumes and suggested ethanol RINs would drop further. 

This article was written by Ilari Kauppila, deputy editor at Biofuels International