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Feature: Could a RINs Market Probe Fuel RFS Reforms?

Submitted by on August 25, 2016 – 5:37 pmNo Comment

by Brian Scheid and Herman Wang (Platts)  Growing pressure for a federal probe of the opaque market underpinning the Renewable Fuel Standard could bolster efforts to dramatically reform the landmark biofuels policy.

Earlier this month, billionaire investor Carl Icahn sent a heated, 11-page letter to top officials at the US Environmental Protection Agency, arguing that the foundation of the RFS they were charged with administering was broken and rife with scheming.

Icahn’s letter, while it never mentions manipulation specifically but repeatedly calls the RIN market “rigged,” is one the latest charges casting suspicion on the market for RINs. Those charges have come from both vocal supporters and opponents of the RFS.

Early this month, for example, the Renewable Fuels Association, arguably the RFS; most vocal proponent on Capitol Hill, asked the EPA and the Commodity Futures Trading Commission to investigate “irregular activity and volatility” in the market for RIN credits.

The EPA and CFTC should determine “whether certain parties may be exerting undue influence on prices or otherwise engaging in manipulative practices,” the RFA wrote in its August 1 letter to the EPA and CFTC, questioning why RIN prices had risen 30% since the EPA released its proposed 2017 blending mandates.

Lafferty (Susan Lafferty, a partner with Sutherland and a member of the law firm’s energy practice group) said that a memorandum of understanding agreed to in March by the EPA and CFTC on information sharing in the renewable fuel and related markets would likely make such an investigation easier. Such an investigation would likely include an examination of aggregated RIN information and special calls with companies active in the RIN market.

Timothy Cheung, a vice president at ClearView Energy Partners, said that high RIN prices could motivate RFS reform more than any other factor.

The structure of the RFS has “enabled speculators to drive up RIN prices, which really distorts the markets,” Gorder (Joseph Gorder, Valero’s chairman, president and CEO) said. “And it facilitates opportunities for RIN fraud, which we’ve seen a fair the amount of.”  READ MORE

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