EPA rolls out RINs Moderated Tracking System for RFS2 enforcement

By Ron Kotrba | April 15, 2009
The U.S. EPA held a Webinar on Feb. 25 to explain the development of its Moderated Tracking System which will be used to accurately and securely track renewable identification number (RIN) credits. The program is intended to help accurately enforce the mandates under RFS2. Hitherto, RIN transaction reporting has been something only ethanol producers have had to manage, for the most part; but under RFS2 biodiesel RIN transactions, in addition to RINs associated with other types of biofuels, will also be managed as part of EPA's enforcement of RFS2.

The renewable fuels registry RINSTAR has been working with EPA to help develop a federal register through which all RIN transactions would flow to ensure accuracy and honesty in reporting. On March 5, the Webinar along with live polling that EPA originally held Feb. 25 was rebroadcast by RINSTAR and live polling. One of EPA's missions in originally holding the Webinar was to collect industry-stakeholder feedback regarding RIN tracking and its new program to do so.

The need for EPA to moderate RIN transactions is apparent in the large number of invalid RINs, mostly ethanol, which have entered the marketplace. In 15 months' time there were 27,000 rejected, invalid RINs, according to Clayton McMartin, president of Clean Fuels Clearinghouse and RINSTAR. "During that time, we have safeguarded our membership from hundreds of millions of invalid Gal-RINs," McMartin said. Through MTS, the EPA will not play "matchmaker" in the market with RINs but instead will act as an accounting mechanism to bring integrity to the market.

"MTS is a terrific program because there was a major flaw with the original RIN program in that it is very cumbersome in terms of settlement and verification of whether the RINs were actually valid or not," said John Gelbard, CEO of RINXchange, an exchange where the sale and purchase of RINs can be conducted. "You have this 38-digit number and it is very complex to keep track of transactions. Every single transaction, which normally is at least a few hundred thousand RINs, involves a whole bunch of separate RIN numbers and every time one of those were transferred or broken up into separate items, there was possibility for human error in transposing them." He said it is very hard for parties to know when they buy RINs if they were getting valid RINs; or if there was an error, that it could be corrected. "It's not that there is fraud going on, but just a lot of back office clerical work," Gelbard said.

Currently under RFS1, RIN reporting to EPA is quarterly, which means by the time EPA goes through them all it could take six months before a party learns of invalid RINs. Through MTS, EPA will become a RIN bank for participants, and EPA will keep a running tally on everyone's positions. The MTS is not expected to go into effect until the final ruling for RFS2 is released, anticipated for early 2010. MTS will allow EPA to debit a RIN seller's balance and credit the buyer's account in virtual real time, or within 3 days. As a result, EPA will no longer accept spreadsheets as a means to report RIN transactions once MTS is enacted.

Another major change starting next year under RFS2 will be the introduction of RINs specific to the type of renewable fuel, such as corn-ethanol, advanced biofuel, cellulosic ethanol or biodiesel. So, instead of having one generic RIN regardless from which renewable fuel source it came, there will be RINs that identify what specific type of renewable fuel it represents. "That's a major change," Gelbard said of RFS2. "If they didn't have the [MTS] bookkeeping correction at the same time as this change goes into effect, it would have been a nightmare scenario because you would have had not only potential problems with RIN numbers but potential problems with the source of the RINs."

The Webinar, and polling data gathered by RINSTAR, can be viewed at www.cleanfuelsclearinghouse.com/2009/03/epa-mts-webinar-3-5-09/.
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