Surging D3 RINs prompts Argus assessment

OREANDA-NEWS. February 02, 2016. The nacent market for D3 cellulosic RINs is becoming more active than many in the industry expected when it was first revealed just two years ago, as EPA-approved biogas continues to enter the on-road transportation market.

The surge in activity has prompted Argus to begin assessing D3 biofuel RINs for the 2013-2016 vintages starting 1 February.

Generation of D3 RINs broke new records five times during 2015, bringing total production to over 128mn RINs against a 2015 mandate of 123mn USG. This marks the first time that cellulosic biofuel production will have satisfied the mandate set by the EPA under the Renewable Fuel Standard (RFS).

The surplus RINs production has market players questioning the need for a cellulosic waiver credit (CWC), which lets obligated parties meet their cellulosic biofuel obligation by purchasing an advanced biofuel D5 RIN along with a CWC at a price set by an EPA formula.

The 2016 CWC has buoyed prices for 2015 D3 RINs since its value was set in mid-November 2015. Just one month after the announcement, 2015 D3 RINs had gained 20?/RIN to \\$1.2675/RIN, or 89pc of the value of a CWC and D5 RIN at the time. After kicking off 2015 at 76pc of CWC/D5 value, owners of 2015 D3s are now able to recover more than 95pc of CWC/D5 value as a result of the steeper 2016 CWC price.

The 2016 D3 RIN has also been on the rise. Since the first forward trades took place in late October at \\$1.33/RIN, prices have climbed nearly 28pc. The current year vintage credits were last done at \\$1.68/RIN and are now valued at \\$1.70/RIN, or 82.5pc of CWC/D5 value.

Argus' decision to begin the new D3 biofuel RINs assessment on 1 February follows a thorough consultation of market participants and stakeholders. Argus validated dozens of D3 credits over the course of the 2015 calendar year, while heard trades, bids, offers and other market information aided price discovery and transparency. Argus strives to be a leader in RINs and biofuels price discovery by providing market-based solutions to market-based problems.