Regulation of Fuels and Fuel Additives: Renewable Fuel Standard ...

important. As a result, we do not believe that this alternative approach is most
appropriate.
c. First Purchaser
As under our proposed approach, in this alternative the renewable fuel producer
would be required to assign a RIN to every batch of renewable fuel and to transfer that
RIN with the batch. However, the first party in the distribution system to take ownership
of the batch would have the right to separate the RIN from the batch. This means that
any non-obligated party that purchased the renewable fuel from its producer would be
able to separate the RIN and to transfer it independently from the batch.
The advantage of this alternative approach, as compared to our proposal, is that it
would remove control of the sale of RINs from the producers. However, the concern
raised by refiners about the exercise of market power in the RIN market remains because
only five companies today manage the majority of ethanol marketing in the U.S. With
such a small number of companies, any one could exert a controlling influence on the
RIN market. In addition, many large producers operate as marketers for other smaller
producers, allowing some producers to be the first purchaser. As discussed for the
previous alternative, we believe that we should design the RFS program to function
smoothly under any future market scenario, including ones different from those forming
the basis of the current EIA projections. Thus we believe that the concern about
marketers exercising market power in the RIN market is still important, and as a result we
do not believe that the first purchaser approach offers significant advantages over our
proposed program.
d. Owner At Time Of Blending
An alternative approach to our proposed option of allowing obligated parties to
separate RINs as soon as they gain ownership would prohibit all parties from separating a
RIN from a batch of renewable fuel until the batch had actually been blended into
gasoline or diesel. The obligated party could retain the RIN as soon as it gained
ownership of the batch, but could not transfer the RIN or use it for compliance purposes
until the renewable fuel that it represented was actually blended into gasoline or diesel.
Thus, a RIN could be separated from the batch of renewable fuel to which is has been
assigned only at the time of blending, and whomever owns the batch at the time of
blending would also have the right to separate the RIN and use or transfer it.
Although we based our proposed program design on the expectation that all
renewable fuels will eventually be consumed as fuel, primarily through blending with
conventional gasoline or diesel, this alternative approach would provide direct
verification of blending. However, we do not believe that this is necessary in order to
provide an enforceable program, and in fact it would create an additional and unnecessary
burden for blenders.
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