NATSO along with the National Association of Convenience Stores (NACS) and the Society of Independent Gasoline Marketers of America (SIGMA) filed public comments on a proposed regulation that would impose significant reforms on the market for Renewable Identification Numbers (RINs) that would be detrimental to many NATSO members. The proposal is part of a proposed rule that would allow gasoline with 15 percent ethanol to be sold year-round throughout the country.
In the comments, the trade associations, which represent 90 percent of the retail sales of motor fuels, urged EPA to finalize only those aspects of its proposed RIN Market Reform Rule that enhance disclosure requirements and set aside for future reconsideration those aspects that would modify market behavior. RINs are the credits that EPA uses to ensure that refiners satisfy their obligations under the Renewable Fuel Standard (RFS).
EPA’s proposed measures are unnecessary solutions in search of a problem and are designed to artificially lower RIN prices, the associations wrote. [The full comments can be read here.]
"The proposed reforms are based on a false premise, and are inconsistent with explicit statements made by the Agency as well as the Commodity Futures Trading Commission. The proposed reforms presume that RIN markets are structurally flawed and need to be fixed. This is false," the fuel marketers said in their comments.
The Alternative Fuels Council also submitted comments on EPA's proposed RIN market reform stating that the rationale for the proposed RIN market reforms appear to be lacking in substance. The Alternative Fuels Council's full comments can be read here.
The RIN market reform rules generally only apply to D6 (ethanol) RINs, rather than RINs associated with advanced biofuels such as biodiesel. This is a positive development for many NATSO members who are more active in advanced biofuel RINs (such as D4 RINs) than ethanol (D6) RINs.
[NATSO Analysis: EPA Proposed RFS Reform Regulations]
NATSO and the associations expressed serious concern with EPA issuing new regulations that would fundamentally alter market participants’ behavior. In issuing the proposed rule, EPA explicitly acknowledged that it has not seen any “data based evidence” of RIN market manipulation that would necessitate these reforms.
The groups reminded the agency that primary source of volatility and manipulation in RIN markets is uncertainty and opaqueness surrounding small refinery exemptions. Rather than enhance RIN market transparency, the associations said the proposed changes will create chaos in the RINs market, reduce incentives for fuel retailers to incorporate renewable fuels into the fuel supply and depress demand for biofuels.
“The retail fuels market is the most transparent, competitive commodities market in the United States, resulting in fierce price competition. This compels retailers to pass through cost savings to consumers in order to maintain and increase their market share,” the fuel marketing groups wrote. “Any costs that are incurred along the fuel production and supply chain will be passed down to retailers and ultimately will be absorbed by consumers.”
The trade associations urged EPA to mitigate RIN market volatility while incentivizing the blending and sale of more renewable fuels by implementing the RFS in a transparent and predictable fashion. Once EPA obtains data through enhanced disclosure requirements, the agency could assess whether it is necessary to reconsider those provisions that would modify behavior.
The Alternative Fuels Council said its staff experiences in the management and marketing of RINs since 2007 supports EPA's conclusion that no data-based evidence suggesting RIN market manipulation exists today.
"For this reason alone, we strongly suggest that the EPA refrain from regulatory
changes that will dissuade and prevent fuel marketers from blending renewable fuels under the RFS," the Alternative Fuels Council wrote.
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