Five Things You Need to Know About RINs

February 21, 2018

When the Renewable Fuel Standard (RFS) was enacted in 2005 and later expanded in 2007, the Environmental Protection Agency (EPA) needed a way to ensure that refiners were blending the mandated amount of ethanol into America’s gasoline supply – so they made one up. The resulting compliance system dreamed up by the EPA and called the Renewable Identification Numbers (RINs) system, was supposed to make it possible to track all biofuel production, use and trade in the United States. But as you might imagine, the system hasn’t worked out so well. It’s enabled criminal fraud while simultaneously costing refiners and consumers hundreds of millions of dollars.

Let’s take a look at EPA’s broken RIN compliance system and the issues that are costing businesses, taxpayers and the government some serious cash:

  1. RINs are serial numbers assigned to a batch of biofuel. They allow each batch to be tracked, whether it is exported or blended. RINs can be separated from a batch of biofuel once it’s been blended. Sound complicated enough yet?
  2. Refiners can blend biofuel or buy RINs. Many small, independent refiners aren’t equipped to blend biofuel into gasoline since it requires expensive infrastructure upgrades. Instead, these refiners have to buy RINs, and how much they spend is at the mercy of RIN market prices – RINs initially cost as much as 40 cents apiece, but can skyrocket up to as much as $1.98 per RIN. If these RINs turn out to be fake, refiners have to absorb the cost and can even be fined additional money.
  3. While the RIN system is costing some, other companies are getting rich. Large retail gas chains often have the capability and infrastructure to blend biofuels themselves. Many small refiners and independent retailers don’t. But since retail chains are considered “non-obligated” parties under the RFS, they can sell RINs from the fuel they blend to actual “obligated” parties. In 2015, Murphy’s USA made 67 percent of their net income from selling RINs – over $117 million.
  4. RFS compliance costs are out of control and need to be fixed. The Governors of Pennsylvania, Texas and Delaware have all sent letters to the EPA asking the agency to ease blending requirements for refineries in their states, since the cost of compliance for refiners has been so prohibitive. Philadelphia Energy Solutions (PES), a refinery that recently announced bankruptcy, is spending more on RFS RIN compliance than on the entire company payroll. A refinery purchased by Monroe Energy in 2012 spent $150 million on RFS compliance costs in 2016 – which is more than what Monroe paid for the entire facility. Because RIN compliance costs are threatening good jobs in their sectors, unions like the United Steelworkers (USW) are advocating for RFS reform.
  5. Since the RIN system is difficult to understand and easy to manipulate, RIN fraud runs rampant. In 2015, Jeffrey Wilson of Indiana was convicted of orchestrating biodiesel fraud. With a total take of $56 million in criminal profits, Indiana state officials labeled the incident as the state’s largest tax and securities fraud. In another of the largest cases of criminal RIN fraud recorded, Philip Rivkin, made over $100 million defrauding U.S. companies and taxpayers by selling bogus RIN numbers.

These are just a few clear examples of how the broken RFS is costing taxpayers money and threatening good jobs. The RFS compliance system needs to be fixed. Contact your legislator today and let them know that you support common sense reform to RINs and the ethanol mandate.

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