Ethanol industry says fuel-credit surge is bogus, urges probe

Source: By Mario Parker, Bloomberg News • Posted: Thursday, August 4, 2016

Each gallon of biofuel is tracked by a RIN, or Renewable Identification Number. Once a gallon of ethanol or biodiesel is blended with petroleum, a company can keep the RIN to show adherence to the law or trade it to another party that may be short of its requirement. Photo: Associated Press /File Photo / Renewable Fuels Association

Photo: Associated Press /File Photo
Each gallon of biofuel is tracked by a RIN, or Renewable Identification Number. Once a gallon of ethanol or biodiesel is blended with petroleum, a company can keep the RIN to show adherence to the law or trade it to another party that may be short of its requirement.

U.S. ethanol producers say a price surge for credits used in the renewable-fuels market may be bogus and have asked regulators to investigate.

The allegation pertains to the Renewable Identification Numbers (RINs) assigned to every gallon of alternative fuel including ethanol and biodiesel under a federal law that sets annual consumption targets. Companies, including refiners and brokerages, are permitted to sell RINs as a credit to parties that fall short of their requirement to blend the renewables into refined products.

RINs prices that have surged 30 percent since May 18 may be the result of “manipulative practices,” the Renewable Fuels Association, a Washington-based trade group, said in a letter dated Aug. 1 to Commodity Futures Trading Commission Chairman Timothy Massad and Environmental Protection Agency Administrator Gina McCarthy. The association didn’t specify what sort of manipulation it suspects.

The allegations come at a critical time. The EPA has until Nov. 30 to finalize mandated consumption targets for 2017, which would be about three weeks after the U.S. presidential election. Oil industry advocates have claimed that RIN costs add to gasoline prices and have argued that the government should repeal the so-called Renewable Fuel Standard.

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“Their ultimate concern is that a crisis in the RIN market could result in significant” changes to the law, said Andy Lipow, president of Lipow Oil Associates LLC.

Each gallon of biofuel is tracked by a RIN. Once a gallon of ethanol or biodiesel is blended with petroleum, a company can keep the RIN to show adherence to the law or trade it to another party that may be short of its requirement.

Goldman Sachs Group Inc., Jefferies LLC and ClearView Energy Partners LLC are among the analysts that are projecting higher RINs prices through 2017 because they expect the government to increase biofuel consumption targets.

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