Mr. Trump’s pick to run the Environmental Protection Agency, Oklahoma Attorney General Scott Pruitt, has called the ethanol mandate “unworkable” and filed a legal brief in 2013 backing a lawsuit challenging it. Mr. Trump during his transition also has sought advice from other critics of the program, many of whom stand to gain if it is changed or scrapped altogether. This has set off high-stakes jockeying across the oil, refining and agriculture industries about what will become of the mandate, which requires refineries to blend increasingly large amounts of biofuels—mostly corn-based ethanol—into gasoline.

During the GOP primary, Mr. Trump emphasized his support for the mandate in Iowa—the nation’s biggest corn-producing state and home to the first nominating contest—in contrast with his Republican rivals who were mostly critical of it.

Since then, however, critics of the ethanol mandate have had Mr. Trump’s ear. Billionaire investor Carl Icahn , the majority owner of a small refinery operator facing hundreds of millions of dollars in costs to comply with the policy, was an early supporter of Mr. Trump’s and helped select Mr. Pruitt as his EPA chief.

Most major oil companies, represented by the American Petroleum Institute, want Congress to scrap the mandate altogether. Some smaller refineries are calling on the agency to ease the rules in a narrower way. Biofuel companies, and farmers who grow corn for ethanol, fear that even a small change could pave the way for wholesale repeal.

Mr. Pruitt is “from an oil state, so obviously that gives us a little concern,” Iowa Gov. Terry Branstad said in a Dec. 12 press conference. Mr. Branstad, who is Mr. Trump’s pick to be ambassador to China, said the president-elect on his recent trip to Des Moines reassured him Mr. Pruitt would support ethanol.

“I can confirm anybody signing up to join the Trump administration is going to be supportive of the president-elect’s positions and be able to help implement those viewpoints just as he campaigned on during this past year and half,” said Jason Miller, a spokesman for Mr. Trump, on Friday.

Some powerful Trump allies, however, are pushing in the other direction. Mr. Icahn has blasted the EPA over the biofuels mandate, and in an interview, he said the rules create a perverse side effect that forces costs on small refineries while yielding billions in profits for companies with ethanol-mixing infrastructure.

“There’s going to be guys going bankrupt,” Mr. Icahn said. “They’re getting killed. The big oil companies like it, not only because they’re making huge windfall profits, but because it will help them become an oligopoly and raise gasoline prices when the small refineries fail.”

A spokeswoman for the American Petroleum Institute, which represents major oil companies along with the rest of the industry, said in response that a focus on this narrower issue is a distraction “from the fundamental issues that demand major RFS reform.” RFS stands for Renewable Fuel Standard, the mandate’s official name.

Mr. Icahn said problems with the standard could be addressed without repealing it if the EPA changes its rules covering which companies are obligated to add ethanol to finished gasoline. He said he was encouraged by the appointment of Mr. Pruitt, whom he expected to address some of the agency’s “absurd” regulations, including those related to ethanol.

Mr. Miller said he had nothing to announce regarding the concerns expressed by Mr. Icahn about the policy.

CVR Energy Inc., whose majority owner is Mr. Icahn, is one of several smaller refineries pushing for the EPA to change a part of the mandate that requires companies that don’t have enough infrastructure to blend ethanol with gasoline, including CVR, to buy credits from companies that can. The latter category includes bigger oil firms that have both refineries and gasoline stations, such as Royal Dutch Shell and BP PLC.

In September, Mr. Trump’s campaign website posted, then quickly removed, a policy statement appearing to back CVR’s argument that the mandate as currently written favors big oil companies over small refineries.

CVR isn’t alone in making that case. Valero Energy Corp., the largest independent refiner in America, has also struggled to meet EPA requirements and spent $370 million on ethanol credits last spring and summer, according to company filings. Valero shares have risen more than 10% since news of Mr. Pruitt’s appointment, and its stock is up nearly 17% since Mr. Trump’s election.

Congress established the ethanol mandate as part of a 2005 energy law and significantly expanded it in 2007, in hopes of reducing carbon emissions and weaning the U.S. from foreign oil. But the EPA, which enforces the mandate, has struggled in recent years to implement it, given the oil boom and lack of biofuels infrastructure, among other factors.

One refining industry executive close to Mr. Trump’s transition team says the president-elect’s political staff thinks the mandate needs to be overhauled, and that the issues Mr. Icahn has raised are a symptom of the policy’s broader problems.

But the EPA’s priorities are initially likely to be elsewhere—repealing rules designed to stem climate change and protect the water supply, for example—leaving it unclear when and how it will tackle the ethanol issue.

Fount: http://www.wsj.com/articles/donald-trump-sends-mixed-signals-on-ethanol-mandate-1481913689