Ethanol Advocates Worry RIN Reform Proposals Will Derail E15 Expansion

by Jordan Godwin (Oil Price Information Service) With about two months to go before the start of the summer driving season, ethanol advocates are growing increasingly worried that EPA's decision to combine in the same proposed rulemaking changes to how Renewable Identification Number (RIN) credits are trading and a volatility waiver for E15 could threaten the agency's ability to lift summertime restrictions on the sale of the higher ethanol blend by June 1.

At EPA's public hearing here on Friday, a number of Renewable Fuel Standard (RFS) stakeholders expressed opposition to the agency's proposed changes to RINs trading. Iowa Gov. Kim Reynolds, a Republican, even urged the Trump administration to break off the RIN reform package into a separate rulemaking, cautioning that the changes would undermine any boost provided by an E15 waiver.

EPA earlier this year rejected calls from several ethanol groups that it break off proposed changes to how RINs are bought and sold from the RVP issue. The groups argued that combining both would unnecessarily complicate the waiver and jeopardize the agency's ability to issue a final rule before June 1 when sales of the higher E15 ethanol blends are prohibited in many parts of the country without a Reid Vapor Pressure (RVP) waiver.

Growth Energy CEO Emily Skor said that from the outset of the rulemaking process, her group's members agreed that it would make sense to split the proposals into two rulemakings, but that EPA made it very clear that they were given a "very firm direction" from the White House that the E15 expansion and the RIN reform proposals must go hand in hand.

On the possibility of EPA pausing the RIN reform proposals, one source on Monday said he thinks there's a "60/40 chance" the agency scraps the contentious part of the rulemaking because "they won't have a prayer in federal court." The source added that EPA can still likely get E15 done in time for this summer by splitting the rulemaking but added that the E15 waiver will also likely be decided in court.

Skor said the primary concern is that the proposed changes are tilted too heavily in favor of refiners who purchase RINs for RFS compliance rather than pursue expanded blending of biofuels.

EPA said in its proposals released last month that the RIN changes would prohibit certain parties from being able to purchase separated RINs, require public disclosure when RIN holdings exceed specified thresholds, limit the length of time a non-obligated party can hold credits and increase the compliance frequency of the program to quarterly from annually.

The agency said it "takes claims of RIN market manipulation seriously and although we have yet to see data-based evidence of such behavior, the potential for market manipulation is a concern."

Iowa Renewable Fuels Association Executive Director Monte Shaw pointed out in his testimony on Friday that EPA admitted that it has no evidence of RIN market manipulation, "Yet, this proposal wouldmanipulate the RIN market into a grotesque caricature of itself."

"If you adopt RIN procedures that eviscerate the value of RINs, as this proposal does, then you have eviscerated the incentive to expand the use of renewable fuels, which is the main purpose of the RFS," Shaw said. "With no actual market manipulation to address, this proposal reeks of a backdoor attempt to simply rip the heart out of the RFS."

Frank Macchiarola, American Petroleum Institute (API) VP of downstream and industry operations, called the reforms a "solution in search of a problem."

Macchiarola pointed out that EPA has access to every RINs transaction and a memorandum of understanding (MOU) with the U.S. Commodity Futures Trading Commission (CFTC) addressing potential market manipulation.

"Although RINs prices can be volatile, volatility alone is not an indicator of price manipulation or misbehavior," Macchiarola said.

API's members include refiners who have invested in RFS compliance and have expanded blending capacity to meet their renewable volume obligations (RVOs) under the law. READ MORE

Excerpt from CentralMoInfo: Renewable Fuels Association chief Geoff Cooper says EPA's reforms to Renewable Identification Number credits or RINs clearly favor oil refiners. ... Cooper adds that the proposal to allow E15 sales year round also makes it harder for retailers to make the fuel on-site, forcing them instead to buy more expensive blend-stock from a terminal. ... However, Cooper blames not oil refiners, but instead EPA staffers concerned about natural gasoline impurities in E85, for creating an obstacle for retailers. ... Cooper says with the comment period for the rule ending April 29th and the start of summer driving, June 1st, the politics and the clock don't seem to favor the ethanol industry right now. READ MORE