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