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dan45mcc

Ethanol Rins Trading at 85 cents

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My understanding of the RINs is a bit foggy... but would this possibly be a good way for a large company (like Kum & Go) who prices e85 competitively and moves large volumes... to "buy RINs" from parties where selling ethanol is not as profitable/marketable as in the midwest/ don't want to sell ethanol...

 

In essence, folks that don't want to blend ethanol, would pay to transfer that obligation to folks that DO want to...  so Gasbuddy / dinofuel folks could pay a premium to burn "ethanol free" gas, and that premium would go to make my "85% ethanol" fuel cheaper?  ;D 8)

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BTW..Excellent Article on RINs

 

 

RINs Primer

RINs Primer

The system is built upon U.S. EPA regulations to administer the RFS. There are four main players who all register with the EPA: the ethanol producer, the blender, the broker and the obligated party. Speculators may also register to trade in RINs. The EPA provides an online reporting program––the Moderated Transaction System (EMTS)––that generates and tracks RINs as the transactions occur. But beyond the EMTS, a system has evolved in the five years since the Energy Independence and Security Act was passed in 2007 and EPA published its rules in 2010. 

 

The ethanol producer's role in RIN generation is basic: produce the physical gallons and fill in the required information to generate the RINs in the automated EMTS system. That information becomes part of the shipping documentation as the product moves into the marketplace. In practice, many ethanol producers don’t actually handle RINs at all, but hand off the task to their ethanol marketers and the independent firms providing RINs tracking services.

 

RINs follow the physical gallons through the distribution system until the ethanol is blended into gasoline, at which  point the RINs are separated and used by the blender, if it is an obligated party, to meet its renewable volume obligation (RVO). If that blender has excess RINs, they can be banked and, up to 20 percent carried into the next year. Or, excess RINs can be sold. Blenders are not necessarily obligated parties, however, and many separate RINs and offer to sell them privately or in one of the trading platforms offered by brokerage firms. 

 

Obligated parties in this system are domestic refiners, importers and downstream parties who make finished gasoline or blendstocks. Still proposed as of late March, the EPA’s 2013 RVO for D6 RINs for conventional renewable fuels was 9.63 percent of the gasoline handled by obligated parties. Corn ethanol makes up the vast majority of this classification. Other fuels can generate D6 RINs, but are generally used to meet the mandates for renewable diesel or advanced biofuels.

 

Obligated parties that need to demonstrate compliance with their RVO can buy and blend physical gallons of ethanol or buy separated RINs. The RINs market is unregulated and private, although all parties involved in buying and transferring RINs are registered with the EPA. A number of brokers provide trading services and their associated market-analysis services report bids and offers on a daily basis. 

 

Underlying the basic description, though, is a trading system lacking the transparency and rules that are in place for other commodities. In corn trading, for example, the Chicago Board of Trade handles the corn futures trading that is the benchmark for cash bids posted by thousands of corn buyers on boards and websites on a daily basis. There are CBOT limits to daily price moves and the volume traded each day is reported as are the ongoing and closing prices. Commercial traders using the market for hedging and speculators providing needed liquidity all have rules to follow. A large number of analysts follow trends in the volumes of data that is publicly available and the active participation, or lack of, from commercial and noncommercial traders is the fodder of daily market reports. The RINs market has mimiced that structure, but without many of the rules and little transparency. That will soon change, however, as the CME Group announced in early April that it will offer three RINs contracts on the NYMEX starting in late May........

 

...............................

 

Ethanol Response

As RINs prices rose rapidly, the American Petroleum Institute, the American Fuel & Petrochemical Manufacturers association and individual oil industry executives warned that gasoline prices would need to rise to cover the increased cost of RINS. Estimates of 10 cents per gallon were reported in the media, indicating some expected the entire cost to be passed through to the consumer. RINs became one more part of their argument to modify or end the RFS.   

 

The ethanol industry organizations, the Renewable Fuels Association, Growth Energy, the American Coalition for Ethanol and the recently formed coalition, Fuels America, as well as individual producers, kicked into high gear to explain the complex issues and provide documentation to support the ethanol industry’s point of view. In multiple news conferences, statements, blogs and reports, the industry laid out its basic position:

 

• The oil industry, in dragging its feet on implementing higher blends such as E15 or E85, has brought the blend wall situation on itself.

 

• It is entirely possible to blend more ethanol. There is no shortage of ethanol nor of ethanol capacity to produce more ethanol, and thus, more RINs. And, with ethanol trading 50 to 60 cents per gallon less than gasoline, more should be blended to save consumers money.

 

• There are 2.5 billion unassigned RINs going into 2013, more than enough to cover any deficits for the compliance reports due in February 2014. 

 

• The oil industry originally helped design and openly supported the open market RINs mechanism for the flexibility that RINs credits would provide in showing compliance.

 

• High gasoline prices are being driven by the record profits of the oil companies, with profits of more than $1 per gallon.

 

Read the Full article.. http://www.ethanolproducer.com/articles/9753/ethanol-rins-market-explodes

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It is a good deal for an ethanol plant that blends E85 for local delivery. Could make ethanol that is selling in the mid $2's actually look like over $3. The local ethanol plant has a 60 cent positive basis on corn today, although it doesn't sell any E85 out the door like another small plant that does blend some.

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