Ethanol association calls for RIN trading investigation

OREANDA-NEWS. August 03, 2016.  Traders of credits essential to US biofuel mandates could be distorting the market to stoke support for a repeal of the program, biofuels trade group Renewable Fuels Association (RFA) has warned federal agencies.

Prices for renewable identification numbers (RINs) used to prove compliance with the mandates have soared to their highest sustained levels in three years, provoking refiners facing rising compliance costs to renew calls to change or scrap the Renewable Fuel Standard (RFS). Refining executives have in quarterly earnings calls increased criticism of the program, with one last week calling for a Commodity Futures Trading Commission (CFTC) or Federal Trade Commission (FTC) investigation into the system.

US Environmental Protection Agency (EPA) officials should use a new information-sharing agreement with the CFTC to study why RIN prices appeared more expensive than fundamentals would support, RFA chief executive Bob Dinneen said in a letter dated yesterday.

"Indeed, the spike raises renewed questions about potential manipulation of the market by entities who may believe the specter of higher RIN prices supports their political efforts to repeal or reform the RFS," Dinneen said in the letter.

The CFTC does not comment on potential investigations. An EPA representative could not be immediately reached for comment.

Mandates require refiners, importers and other companies adding to the US transportation fuel supply each year ensure rising volumes of renewable fuels enter the mix. Obligated companies show compliance by submitting RINs representing gallons of biofuel blended into gasoline or diesel to the EPA. Companies that do not perform their own blending, including Valero and other major US independent refiners, must purchase the credits from companies that do.

The unrestricted nature of RINs trading and limited transparency has raised concerns about the market. EPA entered into an agreement with the CFTC in March to use that agency's expertise in managing the RIN market. A frustrated Jack Lipinski, chief executive of midcontinent refiner CVR Energy, said last week the CFTC or FTC needed to investigate a "contrived" market for which the company had little relief.

But calls for legislative attention have been much more common this earnings season. Marathon Petroleum, PBF Energy and Valero all renewed calls for repeal or reform to the mandates. Valero and PBF have also supported changing who faces the compliance burden under the RFS to affect refineries less, a proposal the RFA opposes.

"We're not going to give up the fight," Valero chief executive Joe Gorder said last week. "We'll continue to push it, both from a regulatory and a legislative perspective, and then from an operating perspective."