RINs and Renewable Fuel Standard
Congress created the Renewable Fuel Standard (RFS) program to reduce greenhouse gas emissions and expand the nation’s renewable fuels sector while reducing reliance on imported oil.
This program was authorized under the Energy Policy Act of 2005 and expanded under the Energy Independence and Security Act of 2007. As part of the program, EPA sets volume requirements on how much fuel has to be blended into the industry.
The information on our website is focused on market available liquid alternative fuels, however, RINs can be generated from other sources of alternative fuel as well such as biogas, for example.
What Are RINS?
RINs (renewable fuel identification numbers) are credits created when EPA-registered renewable fuel producers make a wet gallon of biofuel. This includes biodiesel (D4 RIN) and ethanol (D6). The RIN is transferred downstream with the gallon to the blender. Once the gallon has been blended with diesel or gasoline for transportation, heating oil or jet fuels, the blender can sell the RIN credit to the obligated parties.
The EPA has mandated that “Obligated Parties” (refiners, importers or reformulators) meet certain renewable fuel volume obligations (RVOs) based on their production and/or gallons imported. Obligated parties that do not make or blend renewable fuels to meet the mandate must purchase RINs from those that do blend renewable fuels.
Every gallon of biofuel produced by the biofuel producer has a RIN. The producer must generate a RIN and “assign” it to wet gallons (assigned RINs are referred to as “K1” RINs). In the case of biodiesel for example, EPA -registered biodiesel producers can generated 1.5 RINs for each gallon produced.
Once the gallon of biofuel is blended with diesel or gasoline for transportation, heating oil or jet fuels, the blender can “separate” and sell the RIN credit to an obligated party (separated RINs are referred to as “K2” RINs.) EPA tracks all RIN transactions in the EPA Moderated Transaction System (EMTS). EMTS documents when the RIN is generated, when the blender received the fuel and RINs as well as when they blended it (resulting in the separation of the RIN from the fuel) and finally when and to whom the separated RINs are sold to. RINs are fungible and may not represent the actual gallon a blender is buying.
Who is Affected by the RFS?
There are several players in the RFS. The first is the producer who is producing renewable fuel. Producers must register with the EPA and work with engineers to ensure their production process, feedstock, and renewable fuel meets requirements. The biofuels producer, marketer, or supplier sells to a biofuels blender that has to be registered with the EPA and IRS. The renewable fuel blender takes the biodiesel and blends it with diesel to make a B5-B20 blend. The blender may then sell the RINs to an obligated party who must meet their annual renewable fuel volume (RVO) obligations.
What are SREs?
Small Refinery Exemption – a waiver that is granted by the EPA that allows refineries in the US to be exempt under the Renewable Fuel Standard volume obligations. ( The RFS Simplified: 2 minute listen).
What constitutes a small refinery?
Capacity of 75,000 barrels per day or less
How does a small refinery apply for an SRE?
The small refinery as defined above would need to show to EPA that compliance with the RFS would cause them to suffer a disproportionate economic burden.
Why do SREs matter?
- Impact on Renewable Fuel Demand – if SREs are granted, less parties are required to buy RINs for their obligation.
- Market Distortion and Blender Uncertainty: reducing the demand for RINs, lowering the market price and therefore making it less financially viable for marketers to blend and/or invest in infrastructure.
- Undermines the goals of the RFS: SREs decrease the demand of renewable fuels and therefore can potentially undermine promoting reduction in GHG emissions.
How many exemptions are pending now?