Icahn confirms CVR Energy fuel waiver: Correction

Corrects compliance cost units to USG in ultimate paragraph.

US independent refiner CVR Energy cut its obligations under federal blending mandates amid a surge in waivers from the program, majority owner Icahn Enterprises said in a securities filing.

CVR would not confirm receiving a small refinery waiver under the Renewable Fuel Standard (RFS) during an earnings call last week. The waivers have angered agribusiness and biofuel representatives that believe the Environmental Protection Agency has used the exemptions to undercut mandates setting minimum volumes of US renewable fuel blending.

CVR did acknowledge that its 73,000 b/d refinery in Wynnewood, Oklahoma, qualified for the program, and reported a $23mn gain for compliance markers called renewable identification numbers (RINs) during the quarter.

CVR Energy recorded a RINs asset of $60mn in the first quarter "representing excess RINs primarily due to a reduction in its RFS obligation," Icahn Enterprises said in the securities filing.

RFS requires refiners, importers and other companies to each year ensure minimum volumes of renewables blend into the gasoline and diesel they add to the US transportation fuel supply. Companies acquire RINs representing each gallon of this blending to prove compliance with the law. Refiners and importers that do not blend fuel purchase the credits from others.

Refiners, including CVR, Valero and PBF Energy, have said this structure encourages manipulative trading, not biofuel blending. The companies have criticized the growing costs for RINs.

Costs have only climbed because obligated companies have refused to ensure adequate blending, according to agriculture and biofuels supporters.

Individual refineries processing less than 75,000 b/d can apply for hardship waivers under the program. Such waivers were difficult to gain under President Barack Obama's administration.

Too difficult, a federal court told the EPA last fall. The agency under administrator Scott Pruitt had approved a record 25 exemptions as of early April. The agency and refiners treat the exemptions as confidential business information.

Waivers effectively reduce blending obligations for the entire industry. Individual recipients may hold or sell the RINs they acquired to satisfy the obligation, and the blending requirements do not pass to other refiners.

Argus calculated compliance costs for the program have averaged 6.5¢/USG so far this year and 4.8¢/USG in the second quarter so far, compared to 7¢/USG and 6.8¢/USG over the same periods last year.