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Trump to shift biofuel blending burden off U.S. refiners: sources

(Reuters) - U.S. President Donald Trump intends to revamp the national biofuel program to ease regulations on oil refiners while providing new incentives for ethanol and biodiesel production, people familiar with the plan told Reuters on Tuesday.

File Photo: Truck driver Randy Walker fills his rig's tanks with biodiesel fuel at a gas station in the town of Nevada, Iowa, December 6, 2007. REUTERS/Jason Reed

The news sent corn prices and refinery shares up sharply and renewable credits plunging. It also drew sharp criticism from some ethanol groups who said Trump’s regulation adviser, billionaire investor and refinery owner Carl Icahn, had engaged in self-dealing by pushing for the deal.

The head of the Renewable Fuels Association said the White House had informed him that Trump intends to sign an executive order shifting the obligation of blending biofuels into gasoline away from refiners and further down the supply chain “to position holders at the terminal.”

Refiners had long requested the change saying the country’s biofuels program hits them with burdensome costs.

Biofuel organizations and groups representing fuel retailers and integrated oil companies like the U.S. units of Royal Dutch Shell Plc RDSa.L and BP Plc BP.L have opposed the change, which they say will complicate managing the program.

“Despite our continued opposition to the move, we were told the executive order was not negotiable,” association Chief Executive Officer Bob Dinneen said.

One source said the trade group was also told that the executive order would include incentives for ethanol and biodiesel in a tradeoff for the blending shift.

Those changes could include a waiver to allow greater volumes of ethanol to be blended into gasoline in the summer, a review of how the Environmental Protection Agency estimates emission impacts of biofuels, and support for a congressional tax credit for domestic producers of biodiesel, the source said.

The Renewable Fuel Standard requires that fuel companies use increasing amounts of biofuel blended with gasoline and diesel. Former U.S. president Barack Obama expanded the standard, which started under former president George W. Bush when gasoline prices were near records and a push for alternative fuels and breaking dependence on Middle East oil was just getting started.

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A White House official did not respond to a request for comment.

Chicago Board of Trade corn futures Cc1 were up about 4 percent, on pace for their largest daily gains since July. CBOT soyoil BOc1, which is used for biodiesel, was up 5.6 percent, headed for its biggest daily rise since Nov. 23, the day the EPA set targets for 2017 biofuel use.

Meanwhile, compliance credits used to meet the annual biofuel blending standards tumbled to as low as 30 cents apiece on Tuesday from 47 cents to 48 cents previously.

“BACKROOM DEAL”

Critics of the reported deal cried foul.

“This backroom deal would severely undermine the Renewable Fuel Standard and force everyday Americans to shoulder the burdens of higher fuel costs and more expensive goods,” said a joint statement from the National Association of Truck Stop Operators and gasoline retailer groups.

“Making this change would only benefit a handful of companies at the expense of average, hardworking Americans.”

Emily Skor, CEO of biofuel trade group Growth Energy, expressed concern about Icahn’s role.

“I assure you this is no deal for anyone but Carl Icahn,” she said. “If we had been approached with this deal, we would have flat out rejected it.”

Icahn owns 82 percent of oil refiner CVR Energy Inc CVI.N, according to Thomson Reuters Eikon data. The stock rose 4 percent to $23.04 on Tuesday on heavier-than-usual daily volume and was up about 80 percent since Trump was elected.

Icahn was not immediately available for comment.

Seven Democratic senators, including Elizabeth Warren of Massachusetts, had sent a letter to the White House earlier this month, saying Icahn’s role as an advisor to Trump created financial conflicts of interest and called for a review.

In its 2016 earnings report, CVR CEO Jack Lipinski said fourth-quarter results suffered from weak margins and “continued high Renewable Identification Number (RIN) expenses.”

Shares of big U.S. refiner Valero VLO.N, which would also benefit from the reported shift of blending obligations, were up 2.3 percent at $68.80 on Tuesday.

Additional reporting by Jarrett Renshaw and Michael Hirtzer; Writing by Richard Valdmanis; Editing by Chizu Nomiyama and Lisa Von Ahn

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