RIN prices rise after court strikes down some SREs

Houston — Prices from Renewable Identification Numbers rose sharply in early trading Monday after a US federal appeals court struck down three small refinery exemptions.

D6 ethanol RINs for 2019 traded at 11.25 cents/RIN in early trading, up from 9 cents on Friday. RINs for 2019 can be used to satisfy up to 20% of a fuel refiner or importer's blending obligation, under federal rules.

The ruling could dramatically alter the way the Environmental Protection Agency issues the exemptions, which allow small refineries to ignore federal biofuel blending rules.

The 10th District Court of Appeals in Denver on Friday vacated small refinery exemptions the EPA granted to HollyFrontier Cheyenne Refining, HollyFrontier Woods Cross Refining and Wynnewood Refining. In its ruling, the court said that exemptions could only be granted to refineries who had been granted such exemptions in the previous year.

"Because an 'extension' requires a small refinery exemption in prior years to prolong, enlarge or add to, the three refinery petitions in this case were improvidently granted," the court said in its decision. "We remand these matters to the EPA for further proceedings consistent with this opinion."

Under EPA regulations, small refinery exemptions allow refineries with a capacity of 75,000 b/d or less to ignore federal rules that require oil refineries to blend a mandated amount of renewable fuels into US transportation stocks, if the refinery could prove that complying would be a "disproportionate economic hardship". The rules are part of the federal Renewable Fuel Standard.

Prior to the 10th district's ruling, no court had held that an exemption had to be an extension of an existing exemption. If the ruling stands, S&P Global Platts Analytics estimates that at least 64 small refinery exemptions were granted improperly. Consequently, 3.2 billion RINs were exempted.

The EPA issues RINs to track renewable fuel usage throughout the supply chain. Refiners and importers -- called obligated parties -- use them to show the EPA that they have fulfilled their mandated government use of renewable fuels. If the obligated party has not used enough physical product, it can buy RINs to satisfy the quota.