Posts Tagged ‘RFS’

Stakeholder Survey Results

To following graphs summarize the results from a recent stakeholder feedback survey.  These results are being shared with EPA in an effort to assist with proposed changes to the Renewable Fuel Standard.

Let EPA know what you think!

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Educational Series: A Recap of the RFS & RINS

RFS Educational Series Briefing No. 11: A Recap of the RFS & RINS

Written by Clayton McMartin for Televent DTN

Profitability of today’s fuel supplier is impacted by how well they understand the regulations that they operate within. Recognizing this, we have provided a series of briefings to help you better understand the regulatory arena you are operating in today, and that you face tomorrow.

Over the past several weeks we have covered several topics related to the renewable fuel standard (RFS) and the credit known as the Renewable Identification Number (RIN). In this wrap-up briefing we will recap the key points and hopefully tie many of these concepts and principals together, giving you a better understanding of how to profit from your new found knowledge.

In Briefing #1 we started with an explanation of what the renewable fuel standard (RFS) is and learned that it is a mandate for the use of renewable fuels.

Briefing #2 then explained the principal behind the 38-digit Renewable Identification Number (RIN) and the important information that can be found in those digits.

In Briefing #3 we started at the beginning of the supply chain to learn that RINs come from producers and importers of renewable fuels. We then focused our attention to the end of the supply chain in Briefing #4 to see how obligated parties would use RINs to satisfy their obligations.

Since in reality, renewable fuel often moves through numerous parties before reaching the end of the supply chain, we moved our attention in Briefing #5 to how RINs are tracked. We saw how the RIN is carried from one party to the next through the supply chain and how EPA utilizes this information to assure compliance.

Since RINs can exist in two different states, either assigned to physical fuel or separated from fuel, we covered this important subject in Briefing #6. We covered the criteria necessary to separate RINs from the fuel and therefore make them a tradable paper credit.

In Briefing #7, Briefing #8 and Briefing #9 we focused more on the market for RINs, investigating who would want to own RINs for investment purposes, what vintage year RINs are valid and their limitations. And then we moved on finally to the market factors that influence RIN prices.

In our most recent Briefing #10, we took our first high level look at how the advanced renewable fuel standard (RFS2) came to be and how it will bring even more complexities and opportunities to those in the motor fuel industry.

As you recognized, the involvement of government in your business is becoming more prevalent with each coming year. Regulatory changes like we have seen with the renewable fuel standards present challenges but also opportunities for those who take the initiative to learn about the factors impacting their business. These fuel standards are a part of business today and will be well into the foreseeable future.

Click here to download a PDF of Educational Series Briefing No 11: A Recap of the RFS & RINS.

Past briefings are available by clicking here.

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Educational Series: Market Factors Influencing RIN Values

RFS Educational Series Briefing No. 9: Market Factors Influencing RIN Values

Written by Clayton McMartin for Televent DTN

RIN values are affected by a number of factors, ranging from the current year’s mandate of renewable fuel to the level of overall confidence in the marketplace. The following would represent a partial list of contributing factors to the value of a RIN:

  • Transportation cost – The cost to transport ethanol and other biofuels play a key role in the overall RIN value.
  • RFS mandate – The mandated level of renewable fuel, the Renewable Fuel Standard, for the specific year establishes the demand and therefore influences price.
  • Waiver petitions and other uncertainties that await EPA’s ruling have proven to have a dramatic impact on RIN prices.
  • Vintage year – Current vintage year RINs will have more value than RINs from the prior year due to limitations on the use of prior year RINs.
  • Blending Margins – The net economic margin considering petroleum product price, biofuel price, and other blending tax credits has a direct impact on the availability of RINs and consequently the price.
  • RIN failures – Invalid RINs in the market place result in oversupply of RINs and consequently drive the price of RINs down and with it the demand for physical product.
  • Deadlines – The year end deadline and the overall readiness by industry can result in last hour panic and a resulting price increase.

Since the inception of the RFS program, RIN prices have seen a dramatic increase from when RIN trading originally started on Sept. 1, 2007. RIN credits originally traded at 0.25 cents each – primarily because industry did not initially understand the program. RINs have since traded for over 25 cents each, a multiple of 100 times.

FUTURE VIEW: With the impending RFS2 regulations, there will be several types of RINs in the marketplace – each trading at a different price point and in some cases driven by technology specific issues. These future RIN values will be based upon similar factors as described above and as they apply to a specific type of RIN. For example cellulosic RINs (Type C RINs) will have a different value than RINs derived from say corn ethanol (Type R RINs – also known as renewable fuel RINs), due to their availability in the market place.

In fact, due to a special consideration in the 2007 Energy Independence and Security Act (EISA), RINs derived from cellulosic biofuels (Type C RINs), bring a new twist to RIN values. Type C RINs will have a floor price of not less than 25 cents per RIN, and possibly more depending upon the rack price of gasoline in any given year. This is a subject we will explore more in future briefings.

Click here to download a PDF of Educational Series Briefing No 9: Market Factors Influencing RIN Values.

Past briefings are available by clicking here.

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Educational Series: What is the Lifetime of a RIN?

RFS Educational Series Briefing No. 8: What is the Lifetime of a RIN?

Written by Clayton McMartin for Televent DTN

A RIN is generated whenever renewable fuel is produced or imported into the United States, as we discussed in Briefing No. 3 in this Educational Series. Established within the RIN is a vintage year at the time that it is generated. The vintage year is embedded in the RIN number at the time it is produced and can be found in digits two through five. As an example consider the following RIN number:


In this example the RIN has a vintage year of 2008.

According to the regulations a RIN can be used to demonstrate compliance in the year in which it was generated or the year that follows its year of generation. In the case of our example, this 2008 vintage year RIN could be applied to an obligated party’s 2008 obligation or to their 2009 compliance year obligation.

Although a RIN having a vintage year of one year earlier than the current compliance year can be used to demonstrate compliance, there remains a volumetric limitation. This limitation is addressed in Section 80.1127 of the RFS regulations and states that RINs submitted from the prior year vintage cannot exceed 20 percent of the total RIN submission for the current compliance year.

Another important factor to keep in mind is that a 2008 RIN could actually trade up until the last day of February 2010 – two years and two months after its earliest possible generation. The reason for this is the fact that compliance year 2009 reports are not due into EPA until the last day of February and therefore EPA permits the trading of the prior compliance year RINs up until the deadline. In our example, the 2008 RIN would then be automatically expired on March 1, 2010 if it was not already applied to a party’s obligation. More about this later.

The qualification of RINs based on vintage year is an important consideration and should be well understood by anyone electing to trade in this market or otherwise a regulated party under the RFS program.

Click here to download a PDF of Educational Series Briefing No 8: What is the Lifetime of a RIN?

Past briefings are available by clicking here.

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Educational Series: How are RINs Tracked?

RFS Educational Series Briefing No. 5: How Are RINs Tracked?

Written by Clayton McMartin for Televent DTN

The RFS regulations require that accurate records pertaining to RIN activity be maintained and summary reports be submitted to EPA each quarter (1). In principle this is a simple concept; in practice it is much more complex.

As title to product and the associated RINs are transferred from one party to the next the supplier (transferor) is required to generate and deliver documentation to their customer (transferee). As the transferee then sells to their customer, and so on down the line, the same type of documentation is required each time title is transferred. Now that each of these events has been documented, each party is required to keep the records in an organized manner and report to EPA every quarter on their activity. These standardized reports are due two months after the quarter closes (1). EPA staff members can then process the data to track the movement of renewable fuel through the supply chain and determine if all parties are in compliance.

EPA utilizes a post-audit approach to the program, where they gather data pertaining to literally millions of transactions and then process, looking for discrepancies and inconsistencies among the data. The shortcoming of this approach is the fact that possible violations are revealed months after they have occurred, making for considerable challenges in the area of enforcement and overall exposure.

An alternative approach is for companies to voluntarily participate on the renewable fuel registry where they take a proactive approach to RIN tracking and validation. By utilizing a third party verifier, companies are able to manage massive amounts of data on one standardized computing system (2). Through a centralized registry, companies are also able to conduct a more through job of due diligence and minimize ownership issues before they occur. The RIN program is “Buyer Beware” and any liability resulting from title defects fall to the current owner.

(1)Future View: As discussed in Briefing #2, the reporting frequency will increase under RFS2, first to monthly then to within three days of the transaction.

(2)Future View: EPA has proposed a centralized and closed system for clearing RIN transactions known as the EPA Moderated Transaction System (EMTS). EPA has stated that they hope to bring increased confidence to the marketplace with EMTS – schedule to go into effect in 2011. More details will be provided about EMTS in future briefings.

Click here to download a PDF of Educational Series Briefing No 5: How are RINs Tracked?

Past briefings are available by clicking here.

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RIN Credits, Ethanol Blending and the 800-pound Gorilla

RIN Credits, Ethanol Blending and the 800-pound Gorilla

By: Ron Kotrba
From the April 2009 Ethanol Producer Magazine


Renewable energy credit prices are on the rise as ethanol blend economics remain poor and the year-end reporting date looms. EPM talks with Clayton McMartin, president of Clean Fuels Clearinghouse, about renewable identification number credits, industry consolidation, and the oil industry’s 800-pound gorilla, Valero Energy Corp., which can no longer be ignored.

The 800-pound gorilla in the room finally announced itself in early February. For months, speculators have been trying to figure out which ethanol companies will buy out which ethanol plants during this period of crushing economic recession and potential ethanol industry consolidation. Aside from food companies, what other industry made record profits in 2008 and could logically purchase distressed ethanol production facilities? The oil refiners—they who are obligated to blend ethanol into their supplies as mandated under the federal renewable fuels standard (RFS). On Friday, Feb. 6, VeraSun Energy Corp. “took out the trash”—that’s public relations lingo for releasing bad news on a Friday, with the understanding that there will be little coverage of it until at least Monday. The same day, VeraSun issued a press release titled, “VeraSun Energy Obtains ‘Stalking Horse’ Bid From Valero for Five Facilities; Files Motion Seeking Authority to Sell Substantially All Assets by March.” Read the rest of this entry »

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EPA rolls out RINs Moderated Tracking System

EPA Rolls Out RINs Moderated Tracking System

By: Ron Kotrba
From the March 2009 Web Exclusive Ethanol Producer Magazine


The U.S. EPA held a Webinar on Feb. 25 to explain its development of a Moderated Tracking System that will accurately and securely track renewable identification number (RIN) credits.

A RIN is a 38-character numeric code that’s generated by the producer or importer of renewable fuel; it represents gallons of renewable fuel produced/imported and is assigned to batches of renewable fuel that are transferred (change of ownership) to others. RINs are valid for the calendar-generated, or the following year.

RINs currently apply to the ethanol industry; however beginning in 2010 RINS will also apply to the biodiesel industry.

The EPA is developing MTS to track the generation, distribution and sale of RINs as a way to help accurately enforce the mandates under the renewable fuels standard enacted in the Energy Independence & Security Act of 2007. The market-based renewable fuels registry RINSTAR has been working with the EPA to help develop a federal register through which all RIN transactions would flow to ensure accurate and honest reporting. Read the rest of this entry »

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Spot Ethanol Prices Flat as Supply, Demand in Balance

Spot Ethanol Prices Flat as Supply, Demand in Balance

By: George Orwel
February 2009 DTN Refined Fuels


NEW YORK (DTN) — Spot ethanol prices rose slightly on Friday from the levels seen Thursday, but there wasn’t much change for the week as traders weighed lower corn prices against higher gasoline values.

In fact, in the ethanol swaps market, prices came off about 3cts, driven largely by the weaker corn market. But physical cargoes of ethanol for late January to early February delivery to Chicago traded at $1.57 and $1.59 gal, reflecting a session gain of 2cts and up 1.5cts for the week.

In the New York Harbor, physical cargoes traded 3cts higher for the session and 1.5cts higher for the week. Houston prices were discussed between $1.68 and $1.70 a gal, although no trade was reported. In the West Coast, most of the discussions on cargoes going to Las Vegas and a few to Phoenix, Ariz., with just a few to California. Read the rest of this entry »

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RIN Registry, Trades, Prices Continue to Grow

RIN Registry, Trades, Prices Continue to Grow

By: Ron Kotrba
January 2009 Ethanol Producer Magazine Web exclusive post Feb. 2, 2009


Clayton McMartin, president of Clean Fuels Clearinghouse and the RINSTAR renewable fuel registry, was a guest on Bob Taylor’s live webcast show Jan. 27. Prior to the interview, more than 200 questions were submitted for McMartin to answer.

A year ago, McMartin said RINSTAR’s member companies totaled approximately 25, and since then, the registry has grown to include more than 140 members. In 12 months, RINSTAR has validated more than 500,000 trades, and renewable identification number (RIN) prices have gone from the 2 to 3 cent range to 15 cents on the market. “Most importantly, we’ve helped companies throughout the industry profit from this emerging market,” McMartin said.

Taylor placed the submitted questions in one of four categories: general program, compliance and penalties, the new renewable fuels standard (RFS2) and renewable fuels standard 1.5 (RFS1.5), and the economy and marketplace. Taylor then chose questions to ask McMartin during the one-hour show based on frequency. Read the rest of this entry »

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DJ Trading Of RIN Credits Increases As Ethanol Production Slows

Trading Of RIN Credits Increases

By: Ian Berry
From January 2009 Dow Jones Newswires


CHICAGO (Dow Jones)–Prices for a newly created renewable fuels credit have spiked recently, as refiners decide the credits make better economic sense than purchasing ethanol itself.

The credits, called renewable identification numbers, or RINs, started out trading at less than a penny after their 2005 creation, but now are at 12 to 13 cents for 2008 credits, having climbed during the past couple of weeks. The credits are administered by the Environmental Protection Agency as a way of tracking renewable fuel production.

The EPA had expected that production of renewable fuel would exceed the federal fuel mandate requirements “by a large margin,” creating a surplus of RINs “for at least the first few years of the program” and preventing a shortage, according to the agency’s Web site. But with ethanol plants closing or cutting back production, some analysts say the production could soon fall behind the mandate, which for 2009 is 11.1 billion gallons. Read the rest of this entry »

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