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

enewable fuel would still have no bearing on the refiner's RFS compliance
demonstration, contrary to the intent of the Act. The refiner would have to procure RINs
separately. If the refiner purchased more renewable fuel than it needed for compliance
purposes in this way, it would not have any excess RINs to transfer to another party. The
Act stipulates that allowances must be made for credits to be generated for excess
renewable fuel.
To address the concern regarding producers withholding RINs from the market,
under this alternative the renewable producer would be required to make the RINs
available for transfer to an obligated party. As under the proposed option, this RIN
transfer could be done in one of several ways, such as through direct contract or a
restricted clearinghouse. Any RINs not provided directly to an obligated party would
then need to be made available through a regularly scheduled public auction to the
highest bidder. This could be through an existing internet auction web site, or through
another auction mechanism implemented by a generator so long as the mechanism is
equally open and available to all obligated parties. Only obligated parties would be
permitted to bid on the RINs in such an auction.
To ensure the effectiveness of such an approach, however, there are a number of
additional aspects of the program that would need to be specified. Since a renewable
producer could essentially withhold RINs from the market by setting the selling price too
high, such an approach would hinge upon any such auctions occurring without any
minimum price for the RINs. Producers would be required to transfer RINs to the highest
bidder regardless of the bid price, even if there was only a single bidder. The renewable
producer would be required to send the successful bidder a written confirmation of the
RIN transfer, including the RIN identification numbers. If there were no bids, the
renewable producer would be required to roll them over to subsequent auction cycles
until such time as the RINs were no longer valid for compliance purposes and they would
simply be retired. Finally, in order to ensure that RINs were actually being made
available, such sales, trades, or auctions would be required to occur at least quarterly, but
we seek comment on whether a shorter cycle would be more appropriate.
Various other aspects of the RIN auctions or transactions would also have to be
specified. For example, the location, time, and other details of any auction would have to
be made widely known to obligated parties in sufficient time for them to participate. To
this end, the rule could specify that there must be advance public notice of the intent to
conduct an auction and the auction procedures, and that this notice must be advertised
through nationwide media or a public internet posting. The minimum amount of advance
notice could be, for example, one week or four weeks. The regulations could require
that the RINs be transferred in large enough blocks, such as 5,000 RINs, in order to
prevent undue transaction costs. The regulations could also specify the time period
during which any public auction must remain open; seven days could be specified, for
example. Other criteria for how the auction is conducted could be included in order to
ensure its legitimacy. Interested commenters should include details for RIN auctions or
transactions that they believe should be addressed in implementing regulations.
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