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Biofuel Producers Back Renewable Credit Trading Transparency

Submitted by on January 4, 2017 – 12:00 pmNo Comment

by Brian Dabbs (Bloomberg)  Recent criticism of secrecy and alleged manipulation in biofuel credit trading, delivered by a top adviser to President-elect Donald Trump, is striking a chord among ethanol and other renewable fuel producers.

Those producers suggest insufficient credit trading oversight may cause market volatility, leading, at times, to skyrocketing prices with no proper market justification.

The credits, or Renewable Identification Numbers (RINs), can be used by refiners to comply with federal blending mandates for renewable fuels. The prospect of manipulation in the market is making unlikely bedfellows of biofuel producers and independent refiners.

“The role of the speculators is something that has to change,” Monte Shaw, executive director of the Iowa Renewable Fuels Association, told Bloomberg BNA. “A RIN is supposed to be an accounting measure to ensure RFS compliance. [The RFS program is] not intended to create a third party product.”

Wholesale removal of trading is unfeasible, but oversight changes can and should be made, Shaw said.

“In terms of wanting to bring transparency and shine a light on the trading, in order to make this more compliance based and not speculative, conceptually a lot of us would be in favor of this,” said Shaw. “We want [the RFS program] to continue to work, and it could be better.”

Shaw said regulators could modify trading to ensure it is public.

The nationwide Renewable Fuels Association, which has no relation to the Iowa group, made a plea for more trading accountability in a letter in August 2016, following another tumultuous market period in the wake of the 2017 RFS volume proposal.

H. Sterling Burnett, a fellow with the free-market think tank Heartland Institute, told Bloomberg BNA that third-party traders should be eliminated.

Meanwhile, top officials with (Carl) Icahn’s CVR Energy, which operates two non-renewable refineries in Oklahoma and Kansas, say the company is hemorrhaging profits due to RIN price volatility.

But Shaw said CVR has been slow to adjust to a statutory and regulatory regime that has been in place for more than a decade.

“A few independent refineries have simply refused to adapt to the new business, and they’re just complaining. They want someone else to change the rules for them,” he said. “We don’t think it makes sense to punish those who play by the rules and reward those that haven’t. That’s anti-American.”  READ MORE and MORE (Ethanol Producer Magazine)

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