SUBSCRIBER NOTE: Platts proposes Calif. ethanol assessments with 69.95 and gasoline standard CI

S&P Global Platts proposes effective May 4, 2017 to update its California Ethanol Prompt assessments.

This follows a move by the California Air Resources Board (CARB) to review ethanol pathway applications of both new and legacy pathways. The review gave new Carbon Intensity scores to the fuel pathways, where the fuel pathway carbon intensity (CI) consists of the sum of the greenhouse gases emitted throughout each stage of the ethanol's production and use. CI is expressed in grams of carbon dioxide equivalent per megajoule (gCO2e/MJ).

CARBON INTENSITY

Platts will assess ethanol basis the North California Terminals that represents a Carbon Intensity of 69.95 gCO2e/MJ and a basis South California Terminals assessment that also represents Carbon Intensity of 69.95 gCO2e/MJ.

The 69.95 CI level is based on the average ethanol CI that was consumed in California over the second quarter of 2016 and as published in CARB's LCFS reporting tool quarterly fuel use summary on January 23, 2017. Platts proposes to review the average CI of ethanol imported/consumed in California on an annual basis.

Platts will take into consideration transactable market information such as bids, offers and trades that do not have a 69.95 CI and normalize them back to the assessment reference CI level. This normalization may reflect a calculated valuation of the differences in Carbon Intensities between the market values received and the assessed reference ethanol CI of 69.95 as well as taking into account the value of the carbon credits under the Low Carbon Fuel Standard (LCSF) as defined by CARB and as assessed by Platts.

Platts will also publish ethanol with the same basis with a CI that reflects the annual gasoline CI standard published by CARB. That standard will change annually based on CARB's scheduled changes to the standard.

In the absence of transactable market information for the gasoline standard CI ethanol, including bids, offers and trades, Platts will calculate the value of gasoline standard CI ethanol using a normalization process that takes into account the different CI levels and LCFS carbon credit values using the following carbon intensity formula.

CARBON INTENSITY FORMULA

To find how many credits were generated from reported transactable data, the quantity of LCFS Carbon Credits in metric tons for reported transactable data is equal to the annual gasoline standard CI in grams of carbon dioxide equivalent per megajoule as set by CARB minus the CI of the ethanol indication reported, then the result is multiplied by the energy density of ethanol, which is 81.51 megajoules per gallon, then divided by 1 million, a factor that converts from grams of carbon dioxide equivalent to metric tons.

To find the value difference between the reported CI ethanol published by Platts and the gasoline standard CI ethanol, multiply the result of the LCFS credit formula by the front quarter value of LCFS carbon credits as published daily by Platts, under the code AAXYA00.

For example: Platts heard a 79.9 CI ethanol trade basis North Terminal California at 162.00 cents/gal, the annual gasoline standard CI is 95.02. * 95.02 minus 79.9 gives 15.12 * 15.12 multiplied by 81.51 (energy density of ethanol) gives 1,232.431 * 1,232.431/1,000,000 gives 0.001232431 mt

The value of LCFS carbon credits for Q1 published by Platts on the corresponding day was $100/mt.

* 0.001232431 mt multiplied by 100 gives 12.32431 cents/gallon

The 79.9 CI ethanol trade at 162.00 cents/gal can then be normalized by 12.3243 cents/gal to give 149.6757 cents/gal; this is an equivalent value for a 95.02 CI ethanol trade.

VOLUME

Platts will continue to reflect a volume of 800 barrels, or 33,600 gallons, representing one single rail car. The basis North California assessment will include the Gardena, Wilmington and Carson terminals. The basis South California assessment will include the Richmond, Selby terminals.

TIMING

Platts proposes to change the Ethanol South California Rail Prompt and Ethanol South California Rail Prompt assessments to reflect a This-Week-Shipment (TWS) and Next-Week-Shipment (NWS) system of delivery. From Monday through Wednesday, the timing of the assessment will be This-Week-Shipment (TWS); on Thursday and Friday, the timing of the assessment will reflect Next-Week-Shipment (NWS).

For example, on February 1, 2017, the loading time of February 2-3 loading. On February 2, 2017, the loading time will reflect February 6-11.

FEEDBACK PERIOD

Platts welcomes all feedback and questions on the proposed assessment through to March 3, 2017. Please send all questions and feedback to america_ags@spglobal.com with CC to pricemethodology@spglobal.com. For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing. Platts will consider all comments received and will make comments not marked as confidential available to the public upon request.