RINs: Fixing the System
By Samantha Oller on Nov. 16, 2016RIN prices have hit a three-year high, placing enormous cost pressures on merchant refiners. While many agree that the RIN system and the RFS could work more efficiently, they disagree on the best approach. What follows are a few of the proposed fixes.
The fix: Redefine the obligated party
Proponents: Merchant refiners such as Valero, HollyFrontier and CVR Refining; American Fuel & Petrochemical Manufacturers (AFPM); Small Retailers Coalition
The details: Redefine the obligated party under the RFS from refiners and importers to the owner of gasoline or diesel fuel at the rack—those doing the blending. This would encourage rack sellers to maximize their blending and marketing of renewable fuels, and invest in blending infrastructure. And it would even the playing field among large and small fuel retailers.
Why not: This option would shift the regulatory burden to fuel retailers that have earned positions at the rack through their own investments. It could also neutralize the RIN market.
Notable quote: “Moving the point of obligation would only add complexity to an already complex program.” —Frank Macchiarola, downstream group director, American Petroleum Institute
The fix: Blend in more ethanol
Proponents: The Renewable Fuels Association, Clean Fuels Development Coalition
The details: Petroleum industry groups and the EPA recognize a blend wall—that the U.S. motor-fuel pool has absorbed as much biofuel as possible under current demand. However, ethanol proponents argue that this is an artificial barrier, that most vehicles on the road can safely use higher blends of biofuels. Greater blending and offering ethanol blends such as E15 and E85 would remove pricing pressure on RINs.
Why not: Demand for E15 and E85 is not sufficient for the investment that would be required to handle higher ethanol blends.
Notable quote: “The fact that there aren’t more fuels going into the fuel mix is not a function of oil company resistance or retailer hesitance. It is simply that we have insufficient demand and not the right infrastructure.” —Tim Columbus, partner, Steptoe & Johnson LLP
The fix: Cap ethanol blending
Proponents: American Petroleum Institute, AFPM
The details: Legislation introduced by Rep. Bill Flores (R-Texas), Peter Welch (D-Vt.), Bob Goodlatte (R-Va.) and Jim Costa (D-Calif.) would cap the RFS blending mandate at no greater than 9.7% of the total volume of gasoline the EIA projects to be sold in the United States in a calendar year. This would address obligated parties having to meet blending quotas that don’t necessarily match demand, and prevent consumer misfueling.
Why not: It would destroy progress the RFS has made in reducing U.S. dependence on fossil fuels, and reduce consumers’ fuel choices.
Notable quote: “Attempts to rewrite the RFS would only yield higher consumer costs, new burdens on small businesses and fewer renewable options at the pump. ... Refiners can blend more renewable biofuels and profit in doing so, or choose not to and purchase the credits necessary to comply with the law.” —Emily Skor, CEO, Growth Energy