WASHINGTON/NEW YORK (Reuters) - The Environmental Protection Agency will reject a proposed overhaul of the U.S. biofuels program that would have shifted blending responsibility away from refining companies further down the fuel supply chain, three sources familiar with the matter told Reuters on Thursday.
The decision is a blow to independent oil refiners like Valero Energy Corp and CVR Energy that have said the requirement costs them hundreds of millions of dollars every year, as well as to billionaire investor Carl Icahn who holds a majority stake in CVR and vocally supported the change.
Online news site Politico was first to report the EPA’s decision, citing an unnamed senior administration official.
One of sources who spoke to Reuters said agency will likely announce the move next week.
An EPA official declined to comment. Efforts to reach Icahn were not successful.
None of the sources were able to give a reason behind EPA’s decision. But ethanol producers had lobbied for years against the proposed change, saying it would undermine biofuels policy by making it too complicated.
The sources declined to speak for attribution because they were not authorized to speak publicly.
The U.S. Renewable Fuel Standard, adopted in 2005, requires increasing volumes of biofuels like ethanol in the nation’s gasoline supply to boost U.S. agriculture, reduce pollution, and cut reliance on imports.
Independent refiners had petitioned the EPA repeatedly during the administration of former President Barack Obama to change the law’s requirement that refiners blend the fuels, saying they do not have the facilities needed to do so.
Refiners unable to blend are required to purchase blending credits, called RINs, from others who can. The requirement cost Valero, America’s top refiner, some $750 million in 2016, the company has said.
Icahn threw his weight behind the proposed change this winter, submitting a plan to the White House on the topic. This raised the hackles of Democratic lawmakers who said the move was a conflict of interest because of his refinery stake.
His company, CVR Energy, deferred most of its 2016 RIN obligation into this year, betting prices would fall. Prices fell in the first quarter as Icahn, then an adviser to Trump, was working to change the point of obligation or where the responsibility lies for blending.
RIN prices were stable on Thursday.
“I think refiners knew this was coming,” one broker said.
Shares of CVR were down 0.4 percent at $19.02 on Thursday afternoon. Valero shares were down 0.2 percent at $68.38.
Biofuels maker POET LLC applauded the move.
“Changes to the point of obligation would create market confusion, raise fuel prices and remove incentives for offering cleaner-burning biofuel blends to consumers across the country,” said spokesman Rob Walther.
Additional reporting by Chris Prentice in New York