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

As discussed in Section III.D, it is not necessary to track renewable fuels all the
way to the point of blending because we can confidently treat production volumes as an
accurate surrogate for consumption. This fact provides the basis for our proposed
program, and could also be used in support of the alternatives described previously. If
verification of blending were required before a RIN could be separated from a batch, both
obligated parties and blenders would be subject to additional recordkeeping and
paperwork burdens. The Agency would be compelled to enforce activities at the blender
level, adding about 1200 parties to the list of those subject to enforcement under our
proposed program.
By requiring refiners to wait until renewable fuel is blended before they can
separate the RIN, this alternative approach could limit the potential for one refiner to
purchase large volumes of renewable fuel with the intent of separating the RINs and
exercising market power in the RIN market. However, we do not believe that this
represents an advantage to this alternative since it could not occur under our proposed
program either. There are no geographic limitations to RIN transfers within the 48
contiguous states, so obligated parties that need RINs can purchase them from any refiner
who has an excess. In addition, RINs that have been separated from their assigned
batches by oxygenate blenders represent an additional safety valve in the RIN market,
providing additional assurances that no one refiner could exercise market power in the
RIN market, thereby demanding an unreasonably high price for them.
For these reasons, we do not believe that requiring renewable fuel to be blended
into gasoline or diesel before a RIN could be separated from the batch would provide any
significant advantages over our proposed program. However, we request comment on
this alternative approach.
e. Blender At Time Of Blending
Although we have concluded that production volumes are an accurate surrogate
for consumption, thus eliminating the need to measure renewable fuel volumes at the
point of blending into gasoline or diesel, an alternative approach would do just that.
In this alternative program approach, RINs would not be generated by the
producer of the renewable fuel and assigned to batches. Instead, blenders would keep
detailed records of the volumes of renewable fuel that they blended into gasoline or
diesel, and would generate credits for those volumes. Blenders would be considered
obligated parties, but their obligation would be considered as zero percent to avoid
redundant obligations (i.e. to avoid the blender being responsible for blending renewable
fuel into gasoline for which a refiner or importer also has an RFS program
responsibility). Thus they would generate credits which could then be sold to a refiner or
importer who needs it for compliance purposes.
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