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RINs spike following reports that Trump to direct EPA to deny SREs

Highlights

RINs up modestly on day after morning rally

Sources waiting for official announcement

New York — Renewable Identification Numbers rose sharply in morning trading Sept. 9 following media reports that pending petitions for retroactive small refinery exemptions (SREs) from federal biofuel blending mandates could be denied.

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D6 RINs traded as high as 55 cents/RIN following the report, up from an S&P Global Platts assessment of 46.50 cents/RIN on Sept. 8, before sliding to an afternoon assessment of 49.25 cents/RIN on Sept 9.

Reuters reported late Sept. 8 that US President Donald Trump will direct the Environmental Protection Agency to deny petitions the exemptions, which extend as far back as 2011.

The EPA did not respond to requests for comment.

Administration of SREs has been contentious

A refinery with less than 75,000 b/d of throughput capacity can petition the EPA for an exemption from federal biofuel blending mandates. The EPA's administration of the waiver program has been a hot-button issue for the biofuels and oil industries.

A January court decision signaled the EPA would need to grant fewer exemptions, but refineries that received an exemption in the past could continue to receive exemptions in the future in the form of an extension.

That led small refineries that had not received a small refinery exemption to apply for all possible years to potentially be grandfathered into future exemptions.

The biofuel industry hailed the decision from the court to limit the agency's ability to grant the exemptions, but oil interests have supported retroactive exemptions as a way to remain eligible for future waivers.

Biofuels lobby hails news while refiners cautious

Biofuels industry groups hailed the reports while oil industry sources saw it as a political move to solidify Trump's base in the Midwest.

"The biofuel lobby continues to press both the White House and Midwestern senators, trying to leverage the election cycle to try to gain a quick decision," a refining source charged.

"The RVO was set this year with the assumption that SREs would be granted. [The EPA] reallocated those gallons to everyone else," he added, referring to the renewable volume obligations the EPA sets annually.

If petitions for SREs are denied, refining sources fear that a greater share of biofuels blending compliance would fall on a smaller number of obligated parties.

Still, both biofuel and oil sources were united in their caution around the reports, bringing RINs back to only modest gains on the day after the early rally.

"Traders have become skeptical of what the president says he's going to do," said one RINs broker. "Especially in RINs."