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21 August 2017

Valero Leading Secret Campaign To Block Biofuel Blends

The nation’s largest oil refiner has taken on a behind-the-scenes lobbying campaign to rid refiners of costly federal biofuel blend rules, according to a Reuters investigative piece published today.

Valero Energy Corp. is making the case for transferring the “point of obligation” responsibility for biofuels blending that puts about 10 percent ethanol into gasoline sold in U.S. gas stations. The obligation should be moved over from oil refiners to gasoline retailers and shippers such as FedEx, according to two former Valero executives who spoke to Reuters.

Valero and other oil refiners have taken a costly hit in recent years as the U.S. Environmental Protection Agency enforces the Renewable Fuel Standards (RFS) mandating the biofuel blend. The company was forced to spend about $750 million last year buying RFS credits, according to Valero’s securities filings.

RFS was passed as federal legislation and signed by former President George W. Bush in 2005 as a way to support U.S. energy independence, reduce air pollution, and support corn formers supplying the ethanol. The law mandates that oil refiners either blend biofuels into the gasoline they’re producing or to buy credits from companies that are doing the biofuels blending.

The Trump administration is considering making the point of obligation changes, but it has not yet made a formal decision on it.

Reuters reported that Valero has been assembling a coalition of supporters that includes billionaire Carl Icahn, who owns refiner CVR Energy and served as an advisor to the Trump administration on business regulation.

Icahn resigned from this special advisor position on Friday after taking heavy criticism that he had conflict of interests while playing this role.

“I never sought any special benefit for any company with which I have been involved, and have only expressed views that I believed would benefit the refining industry as a whole,” Icahn wrote in a letter to Trump on Friday.

The former Valero executives said that the company worked with Icahn last August to write a letter to EPA pushing for policy change. The letter said the rules create a “rigged market” unfair to oil refiners.

Icahn became a special advisor soon after Trump was elected. The White House said it didn’t see any conflict of interest in the role Icahn was playing since he wasn’t a paid presidential advisor.

According to the report, Icahn has been joined in talks supporting Valero’s efforts by a new gas station owners’ trade group and a former Obama administration environmental advisor.

Renewable Fuels Association, a biofuels industry trade group, is said to have dropped its opposition to policy changes that the coalition is working toward. RFA and other biofuels groups had been engaged in heated battle with oil companies and oil refiners for several years over the federal rule.

The investigative piece sees Valero as forging a campaign to have one or more of the backers take a visible role pushing for changes in the federal policy. The idea would be to create the perception of broad support for making this change, while Valera and a small group of oil refiners would stay in the background.

“There was an effort to line up people who would support us who were more palatable to decision makers. It’s easier to support a small business than a big refining company,” said one of the former Valero executives.

SEE ALSO:  Lux Report Says Big Oil’s Dominance May Be Coming To An End

Valero and other companies haven’t confirmed the clandestine lobbying efforts have been taking place.

Valero spokeswoman Lillian Riojas did take a position on the federal regulations, calling the rules harmful to “workers, small business retailers, consumers, the refining base, energy security and even the drive for more biofuels blending.”

Opponents to RFS have included Valero, oil companies, and a few automaker and environmental groups. Their arguments have been that the biofuel blend does little to reduce foreign oil imports as domestic oil production has been booming; that it can hurt gasoline engines and fuel systems along with mileage; and it does little to help the environment.

Reuters

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