EPA proposes RIN market changes: Update

Adds details from the proposed rule.

US refiners and fuel importers must prove compliance with federal fuel blending laws more frequently and in an associated credit market with fewer participants under proposals made today by the Environmental Protection Agency (EPA).

Restrictions the agency proposed today would limit trading of compliance credits associated with ethanol by companies not obligated to prove each year that the US has met federal targets for renewable fuel blending. EPA paired the rule with an expansion to year-round sales of 15pc ethanol blends of gasoline sought by US ethanol producers.

Blenders and refiners that sell credits called renewable identification numbers (RINs) used to prove compliance warned the changes upend the compliance market and punish companies that invested to meet the mandates. Ethanol trade groups consider the rule a critical expansion of access to the domestic fuel supply. Refiners have warned that EPA lacks the authority to make this change and plan to challenge the rule in court.

Refiners, importers and certain other companies must each year ensure that minimum volumes of renewables blend into the gasoline and diesel they add to the US transportation supply.

EPA would prohibit certain companies not facing those obligations from buying RINs, limit how long they may hold the credits and require disclosures when a party acquires a certain volume of RINs. Obligated parties, who today almost all prove compliance once a year, would be required to submit RINs to the EPA on a quarterly basis.

EPA administrator Andrew Wheeler said yesterday at the IHS-CERAWeek conference in Houston that the rule sought a fair, less volatile market for the compliance credits.

"We want to keep the RIN prices low and stable, and to quit having the wild fluctuations in the market," Wheeler said.

Gary Heminger, chief executive of the 3.1mn b/d US independent refiner Marathon Petroleum, cast doubt today on how effective the rule could be at addressing that volatility ahead of its publication.

Limits on D6 RINs

The proposed rule focused almost entirely on fuel blending related to ethanol, rather than the biodiesel associated with truck stop operators. The agency will take public comment on the rule until 29 April. EPA plans a 29 March public hearing but has not yet set a location.

Obligated parties that acquire 450mn RINs — or 3pc of the annual ceiling for conventional blending — and hold at least 30pc more of the RINs than needed to meet their own annual requirements would need to declare the holding in a quarterly update.

Obligated parties would also need to submit quarterly total RIN retirements of at least 80pc of the company's produced or imported gasoline and diesel for that quarter. EPA proposed no changes to allowances that obligated parties could carry over 20pc of their unused RINs or the two-year lifespan of the credit. But an obligated party that fell short of the quarterly requirement would not be allowed to have a deficit the next year.

Non-obligated parties not operating on behalf of an obligated company would no longer be allowed to purchase ethanol RINs. And the companies could no longer hold conventional ethanol RINs longer than one quarter.

The proposal also puts forward instructions by President Donald Trump last year to allow the year-round sale of E15. Ethanol groups and supporting legislators have lobbied hard to expand the sale of the blend, which in certain markets fails to meet summer fuel clean air standards. EPA proposes to change its interpretation of the law to treat gasoline blends with at least 10pc ethanol as substantially similar to E10.

Wheeler, pressed on the rulemaking ahead of his confirmation last month, had warned that the December and January government shutdown had made meeting a summer driving season deadline more difficult.