EPA: No sign of undue influence on RIN market

OREANDA-NEWS. July 09, 2015. New information on who participates in the US biofuel credit market suggests there is little influence on the market by outside traders.

But a lack of detail kept data published yesterday by the US Environmental Protection Agency (EPA) from offering any definitive conclusions.

"I think it's probably an oversimplification," said Renewable Fuels Association (RFA) senior vice president Geoff Cooper.

The EPA for the first time gave more detail on the sellers and holders of credits refiners and other obligated parties use to comply with US biofuel blending mandates. The information was published in response to a Freedom of Information Act request.

Renewable identification numbers (RINs), markers that represent biofuel blended into the US transportation fuel supply, trade an average 1.8 times before reaching obligated parties, according to the EPA data. That's consistent with RINs traveling from biofuel producers to blenders and on to refiners required to gather them under the Renewable Fuel Standard (RFS), the agency said. RINs averaged one trade between obligated parties, according to the data.

Refiners grumbled in 2013 that traders outside the compliance system were driving up the cost of RINs as they searched to explain soaring price increases that year. Prices for the credits climbed from 7?/RIN early that year to more than \\$1/RIN by mid-March.

EPA does not definitively rule out outside traders in a discussion of the data.

"The data we are providing now is aggregated, and as a result does not provide detailed information on the make-up of non-obligated parties," said Ben Hengst, the associate director of the agency's office of transportation and air quality.

But four years of EPA data suggests little change in the overall pattern of biofuel producers creating the fuel and selling it to blenders, who in turn sell RINs to obligated parties, the agency said.

"The pattern of RIN sales for non-RVO parties remains consistent at 1.8 RIN sales on average for 2011, 2012, 2013 and 2014," the agency said.

EPA must annually set rising volumes of ethanol, biodiesel and other biofuels that must be blended into the US fuel supply. Refiners, fuel importers and other companies producing conventional fuels for the US market must ensure the volumes are met each year.

But the US fuel system has largely fragmented from the days of integrated fuel refining, wholesale and retail powerhouses. Merchant refiners including Valero, PBF Energy and Delta Air Lines subsidiary Monroe Energy do not operate blending businesses with sufficient capacity to handle all of the refiners' production. The RFS allows for the trade of RINs generated by blending biofuel.

American Fuel and Petrochemical Manufacturers, one of the major refining trade groups, had no comment on the data. RFA, the ethanol industry trade group, was disappointed the data lumped blenders and renewable fuel producers in with the potential outside traders that had so concerned refiners. More granular data could have better refuted that complaint and improved transparency in the RINs market, Cooper said.

"We certainly are going to ask that they maybe go a bit deeper with their next round of this data," Cooper said. "I think it's in the public interest and in the interest of the regulated and affected parties to have better visibility over what's happening in this market."