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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We request comment on the valid life <strong>of</strong> RINs, including our proposed approach in<br />
which RINs would be valid for the year generated or the following year, <strong>and</strong> the alternative<br />
approaches in which RINs would be valid for more or less time than under our proposal.<br />
c. Cap On RIN Use To Address Rollover<br />
As described in Section III.D.3.b above, we are proposing that RINs be valid for<br />
compliance purposes for the calendar year in which they were generated or the following<br />
year. We believe that this approach is most consistent with the Act's prescription that credits<br />
be valid for compliance purposes for 12 months as <strong>of</strong> the date <strong>of</strong> generation. Our proposed<br />
approach is intended to address both the risk taken by producers expecting a guaranteed<br />
dem<strong>and</strong> to cover their exp<strong>and</strong>ed production capacity investments <strong>and</strong> the risk taken by<br />
obligated parties who need a guaranteed supply in order to meet their regulatory obligations<br />
under this program.<br />
However, the use <strong>of</strong> previous year RINs to meet current year compliance obligations<br />
does create an opportunity for effectively circumventing the valid life limit for RINs. This<br />
can occur in situations wherein the total number <strong>of</strong> RINs generated each year for a number <strong>of</strong><br />
years in a row exceeds the number <strong>of</strong> RINs required under the RFS program for those years.<br />
The example below illustrates the issue.<br />
Required<br />
under RFS α<br />
Table III.D.3.c-1<br />
Example <strong>of</strong> RIN rollover issue (billion RINs)<br />
Available RINs Compliance Determination<br />
RINs<br />
generated β<br />
Excess<br />
Previous Year<br />
RINs<br />
Additional RINs<br />
needed<br />
New excess<br />
RINs generated<br />
2007 4.7 5.2 0.5 0.0 4.7 0.5<br />
2008 5.4 6.0 0.6 0.5 4.9 1.1<br />
2009 6.1 6.9 0.8 1.1 5.0 1.9<br />
α Equivalent to the required volumes shown in Table I.B-1<br />
β One possible production volume scenario based on EIA projections in their Annual Energy Outlook 2006<br />
In this example, there are 0.5 billion more RINs available for compliance year 2007 than are<br />
needed to comply with the RFS program requirements. Since these RINs are not used in the<br />
year in which they are generated (2007), they can be used for compliance purposes in the<br />
following year (2008). If they are not used in 2008, they will expire.<br />
In 2008, 0.6 billion more RINs come into existence than are needed to meet the 2008<br />
requirements. This should mean that there are 0.6 billion more RINs available than are<br />
needed to comply with the RFS program requirements for 2008, <strong>and</strong> thus 0.6 billion RINs<br />
should be carried into 2009. However, since there are also 0.5 billion RINs available from<br />
the previous year which can be used for compliance purposes in 2008, this permits the<br />
generation <strong>of</strong> 0.5 new excess RINs in 2008 if all the 2007 RINs are used to demonstrate<br />
compliance in 2008. Thus there are in fact 1.1 billion excess RINs generated in 2008 rather<br />
than only 0.6 billion, <strong>and</strong> they can all be used for compliance purposes in 2009. In summary,<br />
the excess RINs from 2007 were used to generate new excess RINs in 2008, <strong>and</strong> in effect<br />
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