NACS, Fuel Marketers, Comment on EPA’s RIN Market Proposal

May 01, 2019

Print This Article Share it With Friends

(National Association of Convenience Stores) ...(P)roposed RIN Market Reform regulations are unnecessary solutions in search of problems, and that EPA should finalize only those aspects of the proposal that enhance disclosure requirements and set aside for future reconsideration those aspects that would modify market behavior.

The trade associations Monday filed public comments in response to EPA’s proposed rule that would allow E-15 to be sold year-round subject to certain restrictions and also impose significant reforms in the market for Renewable Identification Numbers (RINs), which are the credits that EPA uses to ensure that refiners satisfy their obligations under the Renewable Fuel Standard (RFS). The associations told EPA that if finalized, the proposed rule would inject significant instability into the RIN market and suppress demand for renewable fuels.

"The proposed reforms are based on a false premise and are inconsistent with explicit statements made by the agency as well as the Commodity Futures Trading Commission. The proposed reforms presume that RIN markets are structurally flawed and need to be fixed. This is false,” the associations, which represent more than 90% of retail fuel sales, said in comments filed with the agency.

...

EPA explicitly acknowledged that it has not seen any “data-based evidence” of RIN market manipulation that would necessitate these reforms.

The groups reminded the agency that the primary source of volatility and manipulation in RIN markets are dubiously sourced media reports and uncertainty and opaqueness surrounding small refinery exemptions. “This has led to a situation where political rumors and media speculation about agency policy decisions have seemingly overtaken market fundamentals for purposes of RIN Valuation....All of this uncertainty has introduced volatility and risk into the RIN market, thereby benefitting the same anti-RFS entities that have urged the agency to explore the RIN market reforms associated with this proposal.”

“As EPA finalizes the priroposal, the associations encourage the agency to be guided by the principal of ‘symmetry.’ For example, any disclosure obligations imposed upon RIN-long obligated parties must apply in a fully parallel fashion to RIN-short obligated parties,” the associations wrote. “Neither position is more or less ‘manipulative’ of the market than the other.” READ MORE

New issues emerge from familiar topic as EPA closes E15, RIN market comment period (Agri-Pulse)

Comments on RINs Changes Mixed: E15 Public Comment Period Closes as Clock Ticks Toward Driving Season (DTN Progressive Farmer)

Iowa Ag Secretary Voices Support for Year-Round Use of E15 (Crop Life)

NEBRASKA ETHANOL BOARD URGES EPA TO FINALIZE YEAR-ROUND E15 RULE (KTIC/Nebraska Ethanol Board)

IRFA Iowa Renewable Fuels Association : Keeping Trump's E15 Promise Should Not Break Trump's RFS Promise (Market Screener/Iowa Renewable Fuels Association)

IER Comment on proposed Modification to Fuel Regulations: Provide Flexibility for E15 (Institute for Energy Research)

SEMA Opposes EPA Proposal to Permit Year-Round Sales of E15 Gasoline (Specialty Equipment Marketing Association)

Trump E15 Proposal Illegal, Will Harm Wildlife (National Wildlife Federation)

RFA “STRONGLY SUPPORTS” EPA PROPOSAL TO ALLOW YEAR-ROUND E15 (News Dakota)

NBB opposes RIN reform proposals, supports opening market to E15 (National Biodiesel Board/Biodiesel Magazine)

Farmers Union Enterprise Wants The EPA To Approve Higher Ethanol Blends (WNAX; includes AUDIO)

Push continues for E15 as June looms (Ohio's Country Journal)

Farm Bureau to EPA: Year-Round E15 Sales Would Benefit Farmers, Consumers Alike (American Farm Bureau Federation)

NMMA spearheads anti-ethanol campaign at EPA hearing (The Log; California's Boat and Fishing News)

NCC Says E15 Waiver Will Harm Chicken Producers; Asks for RFS ‘Off-Ramp (National Chicken Council)

Excerpt from DTN Progressive Farmer: The ethanol industry made a push for E15 and is unified against credits reform, while refining interests said little about E15 while calling for reform.

EPA said it intends to finalize the rule in time for the summer driving season starting on June 1, though ethanol industry officials have concerns that the deadline will not be met. In addition, there's concern the proposed reform for Renewable Identification Numbers, or RINs, could ultimately doom the E15 portion of the rule.

EPA proposed a number of reforms, including prohibiting certain parties from being able to purchase separated RINs, requiring public disclosure when RIN holdings exceed specified thresholds, limiting the length of time a non-obligated party can hold RINs, and increasing the compliance frequency of the program from annually to quarterly.

...

NCGA said obligated parties to the Renewable Fuel Standard have had more than 10 years to comply with the law.

"Although many have made compliance adjustments, others have not," the group said. While some obligated parties have raised concerns about higher RIN values, EPA, in numerous reviews such as annual RFS volume rulemakings, has repeatedly concluded RIN values do not have an economic impact on refiners."

NCGA said the agency should implement "additional market monitoring capabilities" before undertaking any RINs reform.

"Beginning with enhanced data systems and data collection, EPA could then better assess whether RIN market manipulation is occurring," NCGA said. "By diagnosing a problem before proposing solutions, EPA would be in a better position to support transparency and function in the RIN market.

"Rather than increasing transparency, EPA's proposed reforms tilt the playing field in the RIN market in ways that discourage biofuels blending. The RIN marketplace exists to offer compliance flexibility for meeting parties' RFS obligation -- an obligation to blend biofuels."

...

On E15, NCGA said the cost to retailers to add E15 is "often exaggerated."

According to "The Petroleum Equipment Institute and the USDA, most stations can upgrade their hanging hardware and dispensers, adding E15 capability for as little as $1,000," NCGA said. "Converting current fuel positions costs even less."

COMPLIANCE COSTS

The agency is working on the rule at a time when RINs prices are low. In addition, EPA has said refining companies recover the costs of RINs by increased prices at the pump. Despite that, the reform proposal came about in response to refining interests' concerns about costs and price volatility.

...

The Commodity Futures Trading Commission, or CFTC, could find no evidence of RINs market manipulation. However, the CFTC said market data available is inadequate to make a definitive determination.

"We believe EPA's proposed RIN market interventions could create the very market distortions they are intended to remedy and should not be included in the final rule," Growth Energy said in a summary of its comments.

"We believe that the proposed quarterly and asymmetrical compliance mechanisms, along with proposed limits on RIN market participation, would reduce market liquidity and increase incentives for parties to 'game' the system to gain an unfair price advantage."

...

The American Coalition for Ethanol said the RINs reforms would have the "effect of reducing liquidity in the RIN market, consolidate power in the hands of certain oil refiners, and limit fuel wholesalers, blenders and retailers from using RIN value to sell higher blends of ethanol.

"Taken together, the RIN reforms constitute a poison pill which is incompatible with the goal of making E15 available to consumers year-round." READ MORE

Excerpts from Market Screener/Iowa Renewable Fuels Association: IRFA Executive Director Monte Shaw emphasized that EPA would, if the good parts of the proposal are finalized, establish a reasonable, intellectually-consistent, legally-defensible solution for year-round E15 access.

'Loudly and clearly, I want to thank President Trump for directing the EPA to begin this process and to EPA leadership for including in this proposal many of the best pathways and justifications for allowing year-round E15 sales,' Shaw said.

However, the rule's four proposals to radically alter RIN regulations would undermine the incentive to blend renewable fuels, thereby breaking Trump's promise to protect the RFS. Shaw described one proposal that would put a time limit on how long retailers could hold RINs, essentially putting 'a gun to the head of Iowa's retailers' and forcing them to dispose of their RINs in a 'fire sale.'

'If EPA adopts RIN procedures that eviscerate the value of RINs, as this proposal does, then the Agency has 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.'

IRFA's comments concluded by highlighting the damage small-refinery exemptions (SREs) inflict on the value of RINs and the effectiveness of the RFS. Shaw emphasized that with RINs sales recorded below 10 cents during large parts of the last seven months, 'economic harm' exemptions from the RFS are clearly not justified.

'Given the current market circumstances, granting any of the pending 2018 SRE requests would fundamentally undermine the RFS and break President Trump's promise to protect the 15-billion-gallon RVO for conventional ethanol in the RFS,' he said. 'We urge the EPA to end RIN market manipulation via unjustified SREs and to put the RFS back on track by denying the 2018 SRE requests.' READ MORE

Excerpts from Institute for Energy Research: If as EPA contends, the 1990 CAA amendments codified existing EPA regulations, then the “10 percent” referred to in (h)(4) must refer to a ceiling of 10 percent, given that is what regulations were at the time. In its own proposed rulemaking, EPA therefore confirms that the intent of Congress when the 1990 amendments were passed was to set 10 percent as a ceiling. That EPA now wishes to change its regulations in this area does not retroactively change what Congress believed it passed in 1990. The statute does not read, “Whatever blend of ethanol EPA determines appropriate.” It reads 10 percent. Congress must have meant something by that 10 percent. EPA’s longstanding understanding of this provision is that it meant a codification of the 10 percent limit, an understanding that EPA admits in this proposed rule.

If EPA admits that the 1990 CAA amendments codified the existing 10 percent waiver threshold, then that is the end of the discussion. By codifying those regulations, Congress superseded the agency’s regulatory discretion. EPA’s proposal to alter those preexisting regulations is irrelevant to the discussion of what the text of the statute clearly states.

EPA asserts an entirely new, unilateral authority to waive RVP regulations.

In this proposed rule, EPA effectively reads the waiver provision from 42 U.S.C.7545 (f)(4) (hereafter (f)(4)) essentially as a blanket waiver from RVP regulations. Under this proposed interpretation, EPA can by its own determination approve any blend of ethanol in gasoline through (f)(4), because EPA asserts in this proposed rulemaking that an (f)(4) waiver automatically creates a waiver from RVP limitations. In order for this interpretation to be correct, EPA must be claiming that Congress intended for (f)(4) to effectively mean that RVP limitations do not apply to ethanol blends. To so state this is to show that EPA’s interpretation is obviously incorrect, if Congress meant to exempt ethanol blends from RVP limitations, it could have and would have plainly said so. Instead, Congress only included granted a waiver to a certain kind of ethanol blend. This reference must mean something, however the current proposed interpretation by EPA asserts that Congress did not mean what it plainly said.

Indeed it is not clear why EPA stops at E15. Under this proposed interpretation, all ethanol blends could receive the RVP waiver, subject only to an (f)(4) waiver approval. READ MORE