Platts proposes to launch basis 70 CI North California ethanol assessments

• Proposed new assessment for North California Rail Car ethanol with 70 CI
• New price of Carbon Intensity per point proposed
• Proposed discontinuation of existing South California, North California ethanol prices

S&P Global Platts proposes to start assessing North California Rail Car ethanol with a carbon intensity (CI) of 70, and discontinue its existing California Rail Car ethanol prices, effective April 1, 2020, to better reflect where the bulk of spot market activity occurs.

Platts has observed that spot market liquidity for rail car ethanol in California has concentrated on ethanol with a CI in the high 60s-low 70s in recent years. In addition, an analysis of quarterly data from the California Air Resources Board in 2018-2019, also suggests that domestic ethanol, excluding imports, has averaged around a CI of 70.

The proposed new assessment 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.

The assessment Monday through Wednesday would reflect this-week shipment, while the assessment Thursday and Friday would reflect next-week shipment.

Platts is also seeking feedback on typical nomination procedures in this market such as when the buyer nominates the final terminal. Platts understands that the seller will provide a bill of lading to the railroad by end of day Saturday of the shipment week.

Platts will publish bids, offers and trades for California Rail Car ethanol with different CI levels, but these may be normalized to the reference CI of 70 for assessment purposes.

Platts is proposing to publish this new assessment as both a flat price and as a differential to the Platts Ethanol Chicago front-month derivative in cents/gallon.

NEW CARBON INTENSITY VALUE

In addition, Platts is also proposing to launch a price that values each point of carbon intensity (CI) for ethanol under California's Low Carbon Fuel Standard.

The assessment would support normalization as needed for the proposed new Northern California Rail Car ethanol assessment and provide clarity for market participants regarding the cost variations between different sources of ethanol.

This would be calculated daily using the Platts daily assessment of front-quarter California LCFS credits and the energy density of denatured ethanol, as published by the California Air Resources Board.

DISCONTINUATION OF EXISTING CALIFORNIA RAIL CAR ETHANOL PRICES

As a result, Platts is proposing to discontinue its existing delivered North California and South California ethanol rail assessments which reflect a CI equal to the annual gasoline standard, effective April 1, 2020.

Spot activity around non-obligated ethanol, or ethanol with a CI equal to the annual gasoline standard as set by the CARB, has been limited as trading has typically concentrated on reference CI levels that are closer to the final CI level of the physical ethanol that is delivered.

In 2019, the annual gasoline standard CI was 93.23 CI, while the CI of ethanol traded in California was in the high 60s-low 70s. In addition, Platts has observed that spot trading liquidity for ethanol rail cars delivered into South California terminals has fallen, while the North California spot trading liquidity has shifted to rail cars containing ethanol with CI levels in the high 60s-low 70s.

The proposed discontinuation would affect the following assessments:

The daily assessments appear in the Platts price database under the symbols listed above, on Platts Biofuels Alert pages 10 and 210 and in Platts Biofuelscan. The monthly averages appear in the Platts price database under the symbols listed above and on Platts Biofuels Alert page 212.

Please send all feedback and questions by January 3, 2020, 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.