Regulation of Fuels and Fuel Additives: Renewable Fuel Standard ...

party had more RINs than it needed to show compliance with its renewable volume
obligation, these excess RINs would serve the function of credits, and could be used, banked,
or traded in the next compliance period. RINs could be transferred to another party in an
identical fashion to a credit. However, our proposed program provides additional flexibility
in that it would permit all RINs to be transferred between parties before they were deemed to
be in excess of a party's annual RVO at the end of the year. This is because a RIN serves two
functions: it is direct evidence of compliance, and after a compliance year is over excess
RINs serve the function of credits for overcompliance. Thus the RIN approach has the
advantage of allowing real-time trading without having to wait until the end of the year to
determine excess.
As in other motor vehicle fuels credit programs, we are also proposing that any
renewable producer that generates RINs must use an independent auditor to conduct
annual reviews of the party’s renewable production, RIN generation, and RIN
transactions. These reviews are called “attest engagements,” because the auditor is asked
to attest to the validity of the regulated party’s credit transactions. For example, the
reformulated gasoline program requires attest engagements for refiners and importers,
and downstream oxygenate blenders to verify the underlying documentation forming the
basis of the required reports (40 CFR Part 80, Subpart F). In the case of RIN generation,
the auditor would be required to verify that the number of RINs generated matched the
volume renewables produced, that any extra value RINs were appropriately generated,
and that RINs numbers were properly assigned and documented on the renewable fuel
PTDs as required by the regulations.
b. Alternative Approach To Tracking Batches
If we did not implement a RIN-based system for uniquely identifying, measuring,
and tracking batches of renewable fuel, the RFS program would necessarily require that
we measure renewable fuel volumes at the point in the distribution system where they are
actually blended into conventional gasoline or diesel or used in their neat form as motor
vehicle fuel. However, this alternative approach would create a number of significant
problems.
First, the parties obligated to meet the standard (refiners, importers, and blenders of
gasoline) are often not the parties who produce renewable fuel or blend renewable fuels such
as ethanol into gasoline. This separation would require a mechanism for obligated parties to
obtain credit for renewable fuels blended by non-obligated parties. Generally, this would be
done through contract management. Unfortunately, there might be an incentive to exaggerate
the volumes of renewable fuel blended and thus exaggerate the number of credits generated.
This alternative approach might also create opportunities for double-counting batches of
renewable fuel, either intentionally or unintentionally.
Second, as described in Section I, one of our guiding principles in designing the RFS
compliance and trading program was to ensure that existing business practices could continue
to the degree possible. With the alternative approach described above, some refiners might
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