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

3. Distribution Of Separated RINs
Once a RIN is separated from a batch of renewable fuel, it would become freely
transferable. Each RIN could be held by any party, and transferred between parties any
number of times. This approach would apply to extra-value RINs (RINs generated based
on Equivalence Values greater than 1.0) as well as standard-value RINs.
We are not proposing to limit the number of times that a RIN could be transferred,
nor the types of parties that could receive or transfer RINs. However, this approach
would be unique among EPA’s fuel regulations. For all previous motor vehicle fuel
credit trading programs we have allowed only refiners and importers to transfer credits,
and have limited the number of times credits could be transferred to one or two transfers.
This includes, for example, the credit trading programs for reformulated gasoline and
gasoline sulfur. These limitations were included to make the credit trading programs
enforceable by making the transfer of credits, from the credit generator to the credit user,
shorter, and populated only by the refiners and importers who were obligated to meet
those standards. These approaches also helped to ensure the validity of credits by
limiting the sources of credits to companies that the obligated parties know to be reliable
business partners. A recent report provided to the Agency by the American Petroleum
institute also provides support for limiting RIN trading to obligated parties 35 . Therefore,
we are seeking comment on limiting the number of trades and limiting the trades to only
occur between obligated parties even though we are not proposing to do so here.
For the RFS program, we believe that there is a need to provide for this more
open trading, and that it can occur without unduly sacrificing the enforceability of the
program or increasing its oversight burden. As described earlier, the RFS program is
unique in that obligated parties are typically not the ones producing the renewable fuels
and generating the RINs, so there is a need for trades to occur between obligated parties
and non-obligated parties. By prohibiting anyone except obligated parties from holding
RINs after they have been separated from a batch, we might be making it more difficult
for those RINs to eventually be transferred to the obligated parties that need them. This
is especially important in the case of the RFS program, because the program must work
efficiently not only for a limited number of obligated parties, but a number of nonobligated
parties as well. A potentially large number of oxygenate blenders, many of
which will be small businesses, will be looking for ways to market their RINs.
Furthermore, in some cases renewable fuel producers will also have RINs (in particular,
extra-value RINs) that can be marketed. Allowing other parties, including brokers, to
receive and transfer RINs may create a more fluid and free market that would increase
the venues for RINs to be acquired by the obligated parties that need them.
We believe we can ensure the enforceability of the program despite opening up
trading to non-obligated parties and allowing multiple trades. The RIN number, along
with the associated electronic reporting mechanism, should allow us the ability to verify
the validity of RINs and the source of any invalid RINs. Since all RINs generated,
35 Montgomery, David W., "Recommendations for a Trading Program Which Will Comply with the
Renewable Fuel Standard," CRA International, Inc. May 25, 2006.
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