Ethanol Blog
Myke Feinman Refine Fuels Reporter

Wednesday 02/06/13

NBB CEO Predicts Biodiesel RIN Values to Split Three Ways

LAS VEGAS (DTN) -- A new program to provide verification of renewable identification numbers would result in a three-tiered price system, according to Joe Jobe, CEO of the National Biodiesel Board.

Jobe, speaking at a press conference with reporters Tuesday afternoon at the 2013 National Biodiesel Conference and Expo at Las Vegas, Nev., said the Environmental Protection Agency's proposed quality assurance program, or QAP, to verify RINs would result in a three-pronged price structure for D4 biomass-based diesel RINs.

The highest value would go to RINs monitored in real time to assure their validity, he said. The second highest value would go for RINs under a second type of QAP with periodic monitoring. Both those QAP RINs would allow obligated parties -- refiners, blenders and importers -- under the Renewable Fuels Standard an "affirmative defense" against purchasing invalid RINs.

Under current law, obligated parties must purchase RINs to show compliance with their RFS renewable fuel blending mandates under a "buyer beware" system. Obligated parties under the current rules must not only pay to replace the invalid RINs but must also pay fines. A new rule was introduced last week by the EPA detailing the QAP verification RIN system. Jobe said the new rule is to be finalized by June.

QAP is voluntary.

The third and lowest value RINs would be RINs purchased without utilizing a third party to verify RINs under QAP.

Since the EPA announced it has uncovered more than 140 million invalid biodiesel D4 RINs in November 2011, the RIN market has been split with large producer's RINs selling at a premium to medium and small producers.

Jobe sees the QAP program eventually erasing the premium for larger producers, saying medium and small producer's biodiesel RINs "will be trusted."

But he sees the three-pronged split evolving with the QAPs and non-audited RINs.

"There will likely be different prices for those different types of RINs," Jobe asserted. "The real-time monitored RINs will be the highest price because they will provide the most protection."

When asked by reporters which types of RINs would be preferred by obligated parties, he said the market will sort that out by itself.

"I tend to think A RINs (real time monitored QAP) will be preferred," Jobe said. "The market will determine that."

He added that since the biodiesel RIN fraud was revealed by the EPA in November 2011, larger producers have not suffered the same market issues that medium and small producers endured.

"The larger producers haven't had much disruption," Jobe said. "These (small and medium producers) have had all the problems."

Jobe believes there may be other invalid RINs yet to be uncovered by the EPA, but most of the fraud is for older RINs sold in 2009 and 2010.

Discounted RIN prices combined with the loss of the $1 gallon tax credit forced many biodiesel plants to be idled in 2012.

Jobe sees the renewing of the tax credit retroactive to 2012 and continuing to the end of 2013 as supporting higher production, idled plants brought back online, and investment in biodiesel blending infrastructure. He would also like to see the tax credit extended beyond 2013.

He projected the industry would produce 1.5 billion gallons of biodiesel this year. The EPA called for 1.28 billion biomass-based diesel gallons be blended into petroleum in 2013. The rest of the biodiesel production this year will be sold under the advanced biofuel carve-out, worth 1.5 D5 RINs per gallon—as opposed to sugar-based ethanol, also an advanced biofuel but worth 1.0 RIN per gallon.

Myke Feinman can be reached at myke.feinman@telventdtn.com

Posted at 11:53AM CST 02/06/13 by Myke Feinman
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