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Agriculture

US RINs markets climb on objections to EPA announcement

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US RINs markets climb on objections to EPA announcement

Houston — Renewable Identification Number markets have rallied in recent days as worries about a US Environmental Protection Agency announcement have been allayed by objections from lawmakers and biofuels groups.

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Opposition from Senator Chuck Grassley, Republican-Iowa, in particular, is seen as a key factor. Iowa is the largest producer of ethanol in the US as well as a bastion of the biodiesel industry.

"With a tax package to be passed and Grassley's connections, you can't [tick] him off," said one source familiar with RINs markets.

Grassley and Senator Amy Klobuchar, Democrat-Minnesota, on Thursday led a bipartisan group of 38 senators in writing a letter calling on EPA Administrator Scott Pruitt to uphold increases in the volume of biofuels used under the federal Renewable Fuel Standard.



"The 2018 proposed rule, while positive for maintaining the maximum blending target for conventional biofuel at 15 billion gallons, would represent a step back when it comes to advanced biofuels, resulting in less renewable fuels being blended than in 2017," the senators said in the letter.

The letter came on the heels of a similar missive from US biofuels groups Tuesday.

The EPA announced last week it was seeking public comment on a plan to lower biodiesel and advanced biofuel blending volumes in 2018 and 2019 beyond an initial July proposal.

In July, the EPA proposed requiring 19.24 billion gallons of biofuels be blended into transportation fuel in 2018. The figure was down from 2017's total of 19.28 billion gallons, but set conventional ethanol blending at 15 billion gallons for the first time.

Many biofuels groups were already cautious about the lower total volume and a further reduction would continue to draw the ire of lobbies and senators from states with large agricultural economies.

Further bearish pressure came after Bloomberg reported that the Trump administration was eying a change to the RFS that would allow RINs attached to exported ethanol to be separated and used for compliance or trade.

RINs markets immediately went into a tailspin following the news.

S&P Global Platts assessed ethanol (D6) RINs at 80.25 cents/RIN Thursday. The RINs fell from 83.50 cents/RIN before the news to a five-month low of 67.75 cents/RIN on September 29.

"RINs typically panic then recover," said the source. "People see a headline and dump, then think about how realistic the outcome might really be."

The EPA issues a RIN to track renewable fuel usage throughout the supply chain. Refiners and importers -- called "obligated parties" -- use them to show the EPA that they have fulfilled their mandated government use of renewable fuels. If the obligated party has not used enough physical product, it can buy RINs to satisfy the quota.

The letters provided something of a reality check for the market, indicating the rout may have been somewhat premature. "A lot of it feels like whatever happened last week was overdone," said a second RINs source, adding: "Most of that down move seems like it was [speculative players] trading the news. Nothing has really changed in terms of obligations yet."

--Josh Pedrick, joshua.pedrick@spglobal.com

--Edited by Keiron Greenhalgh, keiron.greenhalgh@spglobal.com