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NEW YORK Biofuels compliance expenses for CVR Energy's refining unit (CVRR.N) (CVI.N) fell to the lowest level in almost five years during the first quarter, the company said on Thursday, as the U.S. government weighs an overhaul of its renewable fuels policy.
The cost of compliance credits required by the Renewable Fuel Standard (RFS) have fallen sharply in recent months, driven in part by a proposal to alter the regulation by shifting the blending burden away from refiners to fuel terminals.
The proposal was made in February by Carl Icahn, the majority owner of CVR Energy and an informal adviser to President Donald Trump on regulation. The White House is considering it. CVR said it spent $6.4 million on the compliance credits in the quarter. That was down 85 percent from last year, the company said on a conference call with investors to discuss quarterly earnings. CVR attributed the decline in part to lower prices.
Renewable fuel credit prices averaged about 53 cents in the first three months of 2017, about one-third lower than the prior-year, Oil Price Information Service data show. CVR declined to explain in greater detail the full reasons for the sharp reduction. "We don't discuss our market activity," Chief Executive Officer Jack Lipinski said, when asked by an analyst on the call about how to square the low first-quarter expenses with CVR's projections of a full-year cost of $170 million. The first-quarter tab was CVR's lowest since the second quarter of 2012, a review of Securities and Exchange filings showed. CVR positioned itself to slash regulatory costs by deferring the purchase of some $186 million worth of credits it needed to satisfy its biofuels requirements at the end of 2016, the company said in filings in February. Lipinski and Icahn have argued that the U.S. renewable fuels program unfairly punishes independent refiners by pushing them into a highly speculative credit market.
Democratic lawmakers have accused Icahn of self-dealing in his proposal to alter the 12-year-old RFS regulation. Icahn has said his proposal is not self-interested because it would help CVR as well as many of CVR's competitors. The credit market was created under the RFS, which makes refining companies responsible for blending increasing volumes of biofuels like corn-based ethanol into gasoline and diesel each year. Companies without facilities to blend the fuels, like CVR, must purchase credits from those who do.The law aimed to cut greenhouse gas emissions and reduce dependence on foreign oil, while giving a boost to farmers who grow corn for ethanol production.
(Reporting by Jarrett Renshaw and Chris Prentice; Editing by Leslie Adler)