Platts clarifies change to California rail car ethanol assessments

S&P Global Platts would like to provide further clarity to the upcoming change to its North California rail car ethanol assessment, which is to take effect April 1, 2020.

Platts initially proposed this change in a subscriber note published December 18, 2019, and published a decision note January 13. The decision note is available here: https://www.spglobal.com/platts/en/our-methodology/subscriber-notes/01.

Platts had initially planned to update its North California rail car ethanol assessment to reflect ethanol with a carbon intensity (CI) of 70. It currently reflects ethanol with a CI equal to the annual gasoline standard as set by the California Air Resources Board.

Following further feedback from the market, Platts has now decided to keep publishing a North California rail car ethanol assessment that reflects the gasoline standard CI. The ethanol assessment at the gasoline standard CI would reflect a gallon of ethanol without the generation of carbon credits under the California Low Carbon Fuel Standard. In addition, Platts will launch a separate North California 70 CI rail car ethanol assessment that reflects material with a CI of 70.

Both assessments would reflect a minimum volume of 145,000 gallons, or five rail cars, of ethanol that is delivered into the Richmond, Stockton, McClellan Park and Sacramento terminals in northern California.

CHANGE IN ASSESSMENT TIMING: In addition, further market feedback has indicated that there is sufficient time to nominate this-week shipment from Monday through Thursday. As such, Platts would like to clarify that from Monday through Thursday, both the existing North California rail car ethanol assessment and the new North California 70 CI rail car ethanol assessment will reflect this-week-shipment (TWS), while on Friday, both assessments would reflect next-week-shipment (NWS).

As stated previously, Platts would expect the buyer to provide nomination destination to the seller by close of business on Thursday of the shipment week. The seller will provide a bill of lading to the railroad by end of day Saturday of the shipment week.

MOC ASSESSMENT PROCESS: Platts will publish bids, offers and trades for both the gasoline standard CI North California rail car ethanol assessment and the North California 70 CI rail car ethanol during the Platts Market on Close assessment process.

Platts understands that ethanol delivered into Northern California by rail reflects material with a range of CI values. Therefore for any trades published in the Market on Close assessment process for the North California 70 CI rail or the gasoline standard CI rail ethanol Platts would expect buyers and sellers to apply a value normalization based on the CI of the ethanol physically delivered. For example, if a seller delivers ethanol that has a CI value lower than stated CI basis of the traded reference, Platts would expect buyers to use a value per CI point calculation to compensate the seller for the difference in quality, and vice versa if the CI was higher.

Platts may publish pricing information for Northern California rail car ethanol with different CI levels, but these would be normalized back to the 70 CI reference level.

In the absence of pricing information for the gasoline standard CI North California rail car assessment, Platts would value it based on its North California 70 CI rail car ethanol assessment and daily published Carbon Intensity ethanol CI value per point which uses the LCFS carbon credit and the energy density of denatured ethanol at 81.51 MJ/gallon.

Please send any further feedback or questions to americas_ags@spglobal.com and pricegroup@spglobal.com.

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