An Urban's Rural View

Carl Icahn's Ethanol Crusade

Urban C Lehner
By  Urban C Lehner , Editor Emeritus
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In the very first sentence of the New Yorker's profile of Carl Icahn (…), we learn that he is "one of the richest men on Wall Street" who has "thrived, in no small measure, because of a capacity to intimidate." By the end of the first paragraph we know that the person he is trying to intimidate is the senior official in Barack Obama's Environmental Protection Agency in charge of enforcing the nation's ethanol laws.

He fails this time, but when Donald Trump takes office the story becomes more interesting. Trump may be a master dealmaker, but the magazine describes Icahn as "a pugnacious deal machine, all avarice and swagger," someone who in one deal bailed Trump out and in another outmaneuvered him. Trump looks up to Icahn, calls him his "very dear friend."

The new president names his friend special adviser to the president on regulatory reform. The stock price of the friend's refinery doubles, giving him a paper gain of half a billion bucks. Barron's, a stock-market newspaper, hints at the reason for the stock surge in a headline: "Has the hedge fund mogul been appointed Secretary of Talking His Own Book?" (…)

As majority owner of CVR Energy, a Texas-based oil refiner, Icahn is unhappy with EPA regulations making refiners responsible for ensuring that the legally required amount of ethanol is blended into gasoline. Instead of investing in blending equipment, like other refiners, CVR had chosen instead to fulfill the obligation by buying ethanol credits -- Renewable Identification Numbers, or RINs. That had seemed a smart strategy when Icahn was acquiring his CVR stake but starting in 2013 the price of RINs soared. Icahn wants the EPA to shift the obligation from refiners to retailers. That's his "book."

Obama's EPA rebuffed Icahn, but now he was no longer on the outside looking in. He was arguably part of the Trump administration, a special adviser to the president. According to the New Yorker, Trump had even sent Scott Pruitt to be interviewed by Icahn before approving Pruitt as head of the EPA. Icahn, then, may have actually thought that his word would be law -- that if he just sent the White House an executive order changing the point of obligation, Trump would sign it and CVR's problem would be solved.

Or perhaps he thought that having an ethanol trade group in his camp would help assure his word would be law -- and that he could get the ethanol group on board by suggesting the White House had already decided on the change. The group would be left thinking its only way of salvaging something from the change was to go along with the change in the point of obligation. Whatever Icahn thought, his success in landing the Renewable Fuels Association touched off what DTN's headline writer called a "Biofuels Civil War" (…).

Icahn's ploy didn't work. The point of obligation remains with refiners -- at least so far. Icahn dismisses conflict-of-interest allegations suggestions, but he is no longer a special adviser to the president.

What happened? The New Yorker paints Icahn as a financial genius but a political innocent. Icahn apparently didn't realize that to change the point of obligation would require rewriting a regulation and posting the proposed rewrite for public comment. It could never have been done by executive order.

He also didn't realize that some Washington heavy hitters, the American Petroleum Institute and most of the ethanol groups, who never agree on anything, agreed on this -- refiners should have the obligation to blend ethanol.

"This would appear to be an instance in which the same lattice of vested interests that can cause dysfunction in Washington actually led to a proper result," the New Yorker opined. "It prevented a hasty change in policy that was designed primarily to assist one person."

If the ploy didn't work politically for Icahn, it did deliver some financial relief. When word of the deal got out earlier this year, the price of RINs collapsed. CVR, which had been selling RINs, was able to buy them back cheap.

And who knows, this may not be over yet. As the New Yorker makes clear, Carl Icahn is a formidable fellow. A genuine Horatio Alger story, he started with nothing and built a $17 billion fortune. He is quick-witted, determined and unafraid of making enemies. As a corporate raider, he strikes terror in the hearts of CEOs; they know that what Icahn wants, Icahn usually gets. It's hard to believe he has given up his ethanol crusade.

Urban Lehner can be reached at



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