Never mind what the Republican presidential nominee said about November's election. It may matter more that investor Carl C. Icahn thinks the US Environmental Protect Agency's biofuel credits system under the Renewable Fuels Standard is what's rigged.
Markets have been rigged throughout history so certain speculators and companies can profit at others' expense, he said in an Aug. 9 letter to EPA Administrator Gina McCarthy and Acting Assistant Administrator Janet McCabe.
"Innocent people and companies are badly damaged and go bankrupt from 'rigged' markets. Most crashes and panics have been the result of these types of 'rigged' markets, such as the 1929 crash and the 2008 housing bubble," Icahn explained. EPA's Renewable Identification Number (RIN) system is a rigged market which, if not stopped immediately, might cause disastrous consequences, he warned.
It's a rigged market "where large gas station chains, big oil companies, and large speculators are assured to make windfall profits at the expense of small and midsized independent refineries which have been designated the 'obligated parties' to deliver RINs," Icahn asserted.
He said EPA has designated refiners as obligated parties to deliver a certain amount of RINs each year or be severely penalized. "But to make refineries obligated to prove their gasoline was blended is irrational. These refineries will almost certainly go bankrupt unless this obligation is changed almost immediately."
Since biofuels can't be blended at refineries and the fuel mixture shipped by pipeline, blending actually occurs farther downstream at the rack, Icahn said. This also is where excise taxes are collected, the American Fuel & Petrochemical Manufacturers said on Aug. 4 when it asked EPA to move the RIN point of obligation there.
"Independent merchant refiners, who provide almost half of our nation's transportation fuels, do not control the vast majority biofuels blending of their hydrocarbon product. They have to buy credits from blenders who are exempt from compliance," Icahn said.
'Wealth transfer program'
RIN prices have jumped more than 5,000% since the system's inception, and blenders are using the loophole "to siphon off billions of dollars in windfall profits selling blending credits to refiners," Icahn said, adding, "[The] RFS was intended to promote renewable fuels and provide energy security but under EPA's leadership it has turned into a wealth transfer program that works against renewables and hurts national security."
The Federal Trade Commission and EPA's Inspector General's office should investigate why EPA is letting a loophole distort the system, which isn't serving its purported regulatory purpose, he urged.
"Time is of the essence. I implore you to immediately change the 'obligated' party in the RINs program before it is too late," Icahn told McCarthy and McCabe.