SUBSCRIBER NOTE: Platts clarifies changes to Chicago ethanol terminal methodology

S&P Global Platts would like to provide further clarity on changes to its Ethanol Chicago (terminal) assessment methodology, which will take effect June 3, 2019.

Platts initially proposed this change in a subscriber note published February 21, and then published a decision note April 17. The latter is available here: https://www.spglobal.com/platts/en/our-methodology/subscriber-notes/041719-platts-to-revise-chicago-ethanol-terminal-methodology-june-3

INCREMENTAL COSTS: Following further feedback from the market, Platts would like to provide further definition on expected incremental costs for offtake via options other than Intertank Transfer (ITT), which remains the basis of the Ethanol Chicago (terminal) assessment.

Platts expects incremental costs, which would include throughput fees for physical offtake, to be around 2.5 cents/gal for barge loading, and 1.5 cents/gal for rail loading and offtake via truck at the Kinder Morgan fungible ethanol system presently.

These costs may be subject to change due to market conditions; any such change in costs for transactions published during the Platts MOC process may be subject to review by Platts, and must be demonstrably reasonable and typical.

SELLERS' RIGHT TO REASONABLY REJECT OFFTAKE NOMINATION: Under the methodology change, the option to take delivery of product other than by Intertank Transfer (ITT) at the Kinder Morgan terminals will be at the buyer's option, and a seller should not unreasonably withhold any offtake option.

Sellers for transactions published during the MOC process should ensure that they make best efforts to seek terminal dates that meet the reported transaction laycan. 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. If it becomes clear that it is not possible to secure offtake of product within the 5-15 day assessment laycan via the means nominated by the buyer, the buyer should seek resolution to perform on the transaction via other means, including alternative offtake mechanisms and bookouts.

In addition, since offtake via rail at the Kinder Morgan ethanol fungible system is available only at the Chicago (Stony Island) terminal, if there is insufficient product at that terminal, a seller may reasonably reject an offtake nomination via rail.

DEMURRAGE: Platts understands that ethanol trades that involve barge loading at the Kinder Morgan fungible system typically include a public dock clause. For transactions published in the MOC process, sellers should ensure that they seek terminal dates that meet the reported transaction laycan and have product available for said laycan. In the event that terminal dates do not meet the reported transaction laycan, the availability of which neither the buyer or seller have control over, the public dock clause would apply. Platts understands the under the commonly used public dock clause for barges loading ethanol at the Kinder Morgan fungible system, laytime commences when the vessel is at the dock.

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.