EPA red flags RIN separation activities

EPA does not give creativity points for RIN separation outside the identified legal parameters.
By Ron Kotrba | April 14, 2011

The EPA sent this notice out today, regarding RIN separation:

Due to a number of recent inquiries regarding RIN separation, we are sending this EnviroFlash to all subscribers. 

Parties may separate RINs assigned to a volume of renewable fuel only pursuant to one of the nine conditions described in 40 CFR §80.1429(b)(1 through 9). Parties that meet one of the specified conditions for separation may separate up to 2.5 assigned RINs per gallon of renewable fuel pursuant to §80.1428(a)(4). Records documenting separation events must be maintained pursuant to §80.1454.  Within five days of separating a RIN from an assigned volume, the separating party must report the action in EMTS pursuant to §80.1452.

Note that there is no condition that permits a party to separate (or retire) assigned RINs because the downstream purchaser of their renewable fuel is not able to accept RINs due to not being registered for RFS2. RINs, whether they are assigned or separated, may only be transferred to parties properly registered for the RFS2 program pursuant to §80.1450.

Wayne Lee, principal of biodiesel consulting firm Lee Enterprises, says the question for biodiesel and biomass-based diesel producers is, “Do you know what to do with excess RINS when your buyer is not registered with the EPA for the RFS2 program?”

Lee Enterprises’ RIN trading expert, Jess Hewitt, tells me, “The EPA doesn’t give extra points for creativity” when it comes to RIN separation. He says with the high biomass-based diesel RIN prices today, biodiesel producers are getting calls from brokers encouraging them to separate the RINs from the gallons at the plant, something that could get the biodiesel producer, and the purchaser, in trouble with EPA.

One would think rather than getting in trouble, biodiesel/RIN purchasers would simply register with the EPA—but Hewitt says the cost and paper trail to go through annual attestations is prohibitive for some distribution players.

Biodiesel and other biomass-based diesel producers are advised to check out who their customers are to make sure they are registered with EPA, and if they are unsure, call an expert and have them figure it out.