Over the past nine months, Big Oil and its apologists have elevated the lowly RIN – an acronym for Renewable Identification Number - to near super-villain status, citing high RIN prices as “proof” that the RFS has to be scrapped. Big Oil has even spent money to put a scary cartoon on one of their dozen or so “it’s not really us” websites, featuring a snarling Uncle Sam trying to convince us all that we should be afraid of these mysterious RINs.
Unfortunately, the RIN horror story has been compelling to a lot of people, including some members of Congress. Fortunately, like most ghost stories, turning on the light usually makes the ghouls disappear.
The real RIN story is less “Friday the 13th” than it is “A Christmas Story.” After all, if Ralphie can figure out how many Ovaltine proof of purchase seals it takes to get a Little Orphan Annie Secret Circle decoder ring, surely an army of oil company accountants can figure out how many RINs they need to meet the requirements of the RFS.
When ethanol and gas are blended together, the blender keeps the RIN, just as a person would tear off a box top or keep a proof of purchase seal. The RIN doesn’t cost anything. Ethanol plants are required to provide one RIN with every gallon of ethanol they make. The Renewable Fuel Standard requires companies that refine or import gasoline – known as “obligated parties” - to turn in enough of those RINs to the Environmental Protection Agency (EPA) as proof of purchase seals, to show that they blended the amount of renewable fuels required by the RFS.
If a refiner or any other blender of gasoline and ethanol uses more ethanol than they’re required to use, they can save those RINs for later use, or sell their extra RINs to others. If a refiner or importer decides not to use the renewable fuel required in the RFS, they can comply by buying RINs from those who have blended more than they need.
That’s where Big Oil has figured out a way to make the system appear complicated and frightening. They like to call their ghost story “RINsanity.” Early this year, oil companies began paying more for RINs than they had in the past. A lot more. Before 2013, RINs traded for a few cents, or even tenths of cents. This year, oil companies have paid as much as $1.50 for them. RINs have traded around 80 cents for most of the year, and dropped to 50 cents this fall. In the meantime, throughout 2013, a gallon of ethanol itself – with a RIN included - cost at least 20 cents and as much as a dollar less than a gallon of gasoline.
In effect, oil companies have paid $1.50 for permission to not save a dollar. Is that RINsanity? Maybe a lack of “RINtelligence?” Not likely in an industry with income in the trillions. In an effort to make a political point, exploiting a RIN market that has no transparency is perhaps just another example of the lack of “RINtegrity” that Big Oil has displayed in its all-out assault on ethanol and the Renewable Fuel Standard.
The oil industry says RIN prices went up when refiners bought extra RINs to meet RFS requirements, a number they say they can’t reach because of a 10 percent ethanol “blend wall.” Meanwhile, most oil companies prevent branded station owners from creating additional (free) RINs by offering E15, an 85 percent gas 15 percent ethanol blend tested and approved for use in 2001 and newer cars and light trucks. That extra potential ethanol volume obliterates the blend wall argument, but oil companies argue no one wants E15, and “prove” it by banning its sale.
The Renewable Fuel Standard was passed to increase clean, renewable alternatives to oil. It is doing that. The RIN program is also doing exactly what it is supposed to do – providing incentives for those who sell new cleaner fuels, and financial disincentives for those who refuse to move forward. The RFS is working. Leave it alone.
Lamberty is the senior vice president for the American Coalition for Ethanol. He also owns and operates a convenience store in Sioux Falls, SD.