Educational Briefing Series
Article No. 6
How Do RINs Become Separated?
Author: Clayton McMartin
When renewable fuel is produced a RIN is assigned to each gallon. According to the regulations, these assigned RINs can only be transferred along with renewable fuel. The RINs can not move independent of renewable fuel until such time that the associated fuel is blended into finished petroleum products or purchased by an obligated party, such as a refiner. An assigned RIN can be identified by the first number in the RIN which will be the numeral 1. An example of an assigned RIN is:
12008480270076000011020003994400048031 (K code = 1)
In principal, as the renewable fuel is placed into the retail market along with petroleum products, the RIN is then separated from the fuel. In practice the rules read that obligated parties, such as refiners and importers of gasoline, and those who blend renewable fuel with finished gasoline, such as splash blenders and oxygenate blenders, are required to separate the RIN from the fuel. A separated RIN is easily identified by the first numeral being a 2. An example of a separated RIN is:
22008480270076000011020003994400048031 (K code =2)
At this time in the RIN’s life it becomes a renewable fuel credit, no longer associated with the physical product. In essence the RIN is now a paper credit that can be traded between and amongst any parties that are registered with EPA to participate in the RFS program. Ultimately the separated RIN will be used by an obligated party such as a refiner or importer of gasoline in the United States. These obligated parties demonstrate compliance through the submission of RINs to EPA at the end of each compliance year.
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Educational Briefing Series
Article No. 5
How Are RINs Tracked?
Author: Clayton McMartin
The regulations require that activity pertaining to RINs be tracked and reported to EPA each quarter. In principle this is a simple concept; in practice it is much more complex.
As title to product and the associated RINs are transferred from one party to the next the supplier (transferor) is required to generate and deliver documentation to their customer (transferee). As the transferee then sells to their own customer, and so on down the line, the same type of documentation is required each time title is transferred. Now that each of these events have been documented, each party is required to keep the records in an organized manner and report to EPA every quarter on their activity. These standardized reports are due 2 months after the quarter closes. EPA staff members can then process the data to track the movement of renewable fuel through the supply chain and determine if all parties are in compliance.
EPA engages an audit approach to the program where they gather data pertaining to literally millions of transactions and then process and look for discrepancies among the data. This approach could best be categorized as post audit activity, revealing violations months after they have occurred.
Alternatively companies participate on the Renewable Fuel Registry, taking a proactive approach to RIN tracking and validation. Through automated processes, product transfer documents (PTD’s) and RIN Certificates™ are transmitted from supplier to customer in an immediate and electronic manner. Data is transmitted directly to the customer’s electronic account, where they can manage future transfers if they care to. Since the registry is a real-time data base, RINs are validated and tracking instantaneously. The proactive approach has the benefit of minimizes future audits and costly violations for those participating on the Registry.
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Educational Briefing Series
Article No. 4
How Are RINs Used?
Author: Clayton McMartin
Ultimately RINs are used to demonstrate compliance by what EPA calls an obligated party. An obligated party is a company that refines crude oil and produces finished gasoline. By far the biggest portion of obligated parties are refiners, such as Exxon-Mobil, Conoco-Phillips, Valero, BP, Shell, and Chevron to mention some of the biggest. Other companies that fall under the RFS obligated party classification would be importers of gasoline into the U.S. as well as companies that buy petroleum intermediates and blend at facilities like terminals.
Each of these obligated parties is then bound by the RFS to use their pro-rata share of renewable fuel. Recalling that the RFS is really a percentage established each year (see What is the RFS?), the company multiplies their on-road gasoline production times the RFS to determine their obligation. This is called their RVO or renewable volume obligation.
Obligated parties demonstrate to EPA that they have met or exceeded their RVO by the submission of RINs each year. These RINs can be acquired through the process of purchasing and blending renewable fuel into their own pool of petroleum products or by acquiring RINs from another party that has blended renewable fuel in excess of their RVO and is willing to sell their RINs to the obligated party. As you can see, central to the RFS program are provisions for credit banking and trading, with the RIN serving as the paper credit for this purpose.
FUTURE VIEW: Under the RFS2 the RVO will be changing to encompass 4 separate standards. Beginning in 2009 the standards will apply to Biomass-Based Diesel, and Cellulosic Biofuel. These two combine with other advanced biofuel types to establish the third Total Advanced Biofuel standard. And finally each of these individual standards then combine with grain derived ethanol to establish the fourth overall Total Renewable Fuel Standard. EPA is working on the proposed rule now – more details to follow.
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Educational Briefing Series
Article No. 3
Where Do RINs Come From?
Author: Clayton McMartin
RINs are generated as a result of the production or importation of renewable fuel into the United States. The RINs serve as identification numbers for each gallon of renewable fuel placed into commerce, allowing EPA to monitor the movement and use of renewable fuel in the marketplace.
The assignment of RINs, contrary to what some believe, is not conducted by EPA. Instead RINs are assigned by the producer or importer in accordance with the rules found in the renewable fuel standard program. Section 80.1126 provides all of the details necessary for a producer or importer to assign RINs to their product.
With the exception of producers who produce less than 10,000 gallons per year, and importers who import less than 10,000 gallons per year of renewable fuel, it is mandatory that RINs be generated and delivered as the renewable fuel is placed into commerce.
The process of generating the RIN is really one of the easiest steps in the program. A producer simply needs to gather the required data pertaining to their entity, facility, and product type. Then as fuel is produced or imported a unique batch number for the applicable year and the total volume of RINs are added to the 38 digit series resulting in the parent batch RIN. The renewable fuel registry handles this process for its participating producers by requiring only two pieces of data, the volume of fuel and denaturant content in the case of ethanol.
FUTURE VIEW: The impending implementation of the Energy Independence and Security Act of 2007 and the associated RFS2 program will bring fundamental changes to the way producers and importers assign RIN numbers to product. With specific requirements for each product type, it is conceivable that a single facility will produce two or more types of RIN numbers. More details about EISA, RFS2 and how this law and impending regulation will impact commercial operations are available at the RINSTAR Renewable Fuel Registry.
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Educational Briefing Series
Article No. 2
What is a RIN?
Author: Clayton McMartin
RIN is the acronym for Renewable Identification Number. Under the Federal government’s renewable fuel standard (RFS) a RIN is assigned to every gallon of biofuel produced or imported into the United States . Comprised of 38 digits, the RIN serves effectively as a serial number which is tracked throughout the renewable fuel supply chain, from the point of production to the point at which the fuel is placed into retail.
Imbedded within the 38 digit RIN is the following information:
- Status of the RIN as far as being tradable as a separated credit (more on this later)
- The year the fuel was produced, also referred to as the vintage
- Who produced or imported the renewable fuel
- Where it was produced or imported into the U.S.
- What kind of fuel, ethanol, biodiesel, etc.
- Its equivalence value (more on this later)
- How it is derived, either from grain or cellulosic technologies
- And the total number of Gallon-RINs assigned to a batch of renewable fuel
As an example of a RIN consider the following:
12008480270076000011020003994400048031
RINs are used to track renewable fuel at every link of the supply chain. The process starts when renewable fuel is produced or imported and continues as the fuel is transferred from supplier to customer and so on. Once the renewable fuel is placed into the retail market the RIN is separated from the fuel and then serves as a credit which can be traded from one party to another, similar to other environmental credit trading programs. Ultimately the RIN is used to demonstrate to EPA that a party has met their particular obligation under the RFS as the RIN activity is reported by every party in the supply chain on a quarterly and annual basis.
More details about the RIN number can be found in section 80.1125 of the Regulation of Fuels and Fuel Additives: Renewable Fuel Standard Program; Final Rule.The regulations are available at EPA’s website at the following URL address: http://www.epa.gov/otaq/renewablefuels/rfs-finalrule.pdf
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Educational Briefing Series
Article No. 1
What is the RFS?
Author: Clayton McMartin
The RFS is the Nation’s Renewable Fuel Standard. The RFS was established as a result of the 2005 Energy Policy Act (EPACT) and went into effect on September 1, 2007. Fundamental to the RFS is the mandated use of renewable fuels, such as ethanol and biodiesel, across all of the United States .
The first year of the RFS required that a minimum of 4.7 billion gallons of renewable fuel, prorated to the months September through December, be blended into the Nation’s on-road gasoline and diesel fuels. The actual RFS is expressed as a percentage, based upon the American motorist’s fuel use in any given year. In 2007 the RFS value was 4.02% of the nation’s total on-road gasoline consumption. Working together with the Department of Energy, EPA is required to calculate and publish the RFS by November 30th of each preceding year.
A new RFS, known as RFS2, was enacted into law beginning in 2008 with the 2007 Energy Independence and Security Act (EISA), and signed by President Bush on December 19, 2007. The New RFS2 nearly doubles the 2008 value to 7.76%, or 9.0 BGY, and increases the mandated volume on an increasing schedule to 36 billion gallons per year by 2022. The rule making process is underway now with EPA, and according to the present schedule the final rule for RFS2 is required by December 19, 2008 and will be effective January 1st of 2009.
In our next article we will investigate the renewable identification number, also known as the RIN. For additional information about the nation’s renewable fuel registry, visit www.RINregister.com or call (575) 377-3369.
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