SUBSCRIBER NOTE: Platts to revise Chicago ethanol terminal methodology June 3

S&P Global Platts has decided to revise the methodology for its Ethanol Chicago (terminal) assessment, with effect from June 3, 2019, to better reflect offtake optionality at the Kinder Morgan fungible ethanol system.

The basis of this assessment would remain Intertank Transfer (ITT) and would reflect the Kinder Morgan Argo and Chicago fungible system, which includes the Argo and Chicago (Stony Island) terminals. As of June 3, Platts will update the Platts Ethanol Chicago (terminal) assessment to reflect other offtake options at the terminals such as barge, rail and truck. For any trades reported to Platts from that date, sellers would commit to providing other offtake options.

Platts initially proposed this change in a subscriber note published February 21 (https://bit.ly/2ZjlL1N) In that initial note, Platts proposed an implementation date of May 1, which in response to market feedback will now be June 3.

Under the change, the option to take delivery of product other than by ITT at the Kinder Morgan terminals will be at the buyer's option, and all incremental costs associated with the chosen offtake option would be borne by the buyer. A seller should not unreasonably withhold any offtake option, and any associated costs for non-ITT offtake options must be demonstrably reasonable and typical.

Platts understands that typical barge loading costs at the Kinder Morgan fungible ethanol system are about 1.5-2.5 cents/gal. Any deviations from this norm would be subject to review.

LATE PERFORMANCE: Platts is aware that physical conditions regarding logistics which are beyond the control of the seller or buyer may result in issues such as late loading. Platts only recognizes bids, offers and transactions where no party claims a right to unilaterally cancel a transaction. If a transaction becomes difficult, the party causing the issue must seek resolution including alternative loadings, qualities, dates or book outs.

A party deemed to have underperformed or not performed under the original contract is expected to compensate the affected party. In almost all circumstances, the compensation is not, and should not be due to a flat price change, but should include parameters such as backwardation, logistics, and the inconvenience for the buyer in the case of a seller not performing, or contango, logistics and the inconvenience for the seller in the case of a buyer not performing. Compensation should not include consequential costs. Such adjustments should be fair and in line with market practice, and should be reciprocal in the event that the inverse situation occurs in the future.

NOMINATION GUIDELINES: For offtake via barge, a buyer should nominate a three-day loading period within the 5-15 day assessment laycan as well as a performing vessel, at least five calendar days prior to the first day of the three-day loading period, subject to terminal acceptance. The seller should nominate a loading terminal at least 48 hours prior to the first day of the three-day loading period.

If a buyer chooses to take delivery of product via truck, the buyer should nominate a specific lifting date at least one calendar day prior. This is in line with current stated nomination guidelines for ITT. For offtake via rail, a buyer should nominate a lifting date at least five calendar days prior.

For all nominations, there will be an end-of-day time cutoff of 15:00 CT (16:00 ET). Any nomination provided after this time would be considered as being for the next day.

MOC INCREMENT CHANGE: In addition, Platts will also revise the standards of incrementability for its Ethanol Chicago (terminal) assessment during the Market on Close assessment process, to better reflect current trading and pricing granularity.

From June 3, bids and offers may be improved by a maximum of 10 points per 15 seconds, from the current 25 points per 30 seconds. All other timing and incrementability standards will remain unchanged. Platts may notify the market of any adjustment to the standard increments in the event of market volatility or a disruptive event.

All other aspects of the pricing methodology for the Ethanol Chicago (terminal) assessment would remain the same, including the specification, volume, timing and RINS transfer mechanism.

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