US EPA preregisters Genscape as QAP-A, QAP-B RIN provider
Genscape has announced that it is the first service provider preregistered under the U.S. EPA’s quality assurance plan (QAP) program for A-RIN and B-RIN assurance.
The proposed EPA rule provides obligated parties retiring A-RINs and B-RINs eligibility for an affirmative defense against civil liability for future RINs invalidity. As an added benefit for the robust due diligence required for A-RINs, obligated parties are not required to replace invalid A-RINs. A unique feature of the EPA program allows RINs to be qualified for A- or B- status during the period between the rule proposal and the final rule expected in late summer 2013.
“To get the benefits of A- and B-RINs, obligated parties must verify RINs according to the proposed QAP requirements during the period between the proposed and final rule,” said Larry Schafer of the Diamond Group, a well-known policy consultant to the renewable fuels industry. “This enables the industry to start seeing the benefits of the program today.”
As part of the EPA quality assurance plan program for A-RINs, the QAP provider must provide a financial backstop for replacing A-RINs if they later become invalid. This involves a significant financial commitment considering the replacement obligation is for the five-year life of the RIN and the RIN must be replaced with a valid A-RIN at market price. Genscape’s financial RIN replacement service is further backed by its $2.5 billion parent company, DMGT. “The QAP provider having long-term financial stability to stand behind the A-RIN is the key to creating the confidence and liquidity the market wants,” said Robert Barton, managing director of Agriculture and Biofuels at Genscape. “The confidence generated by a Genscape A-RIN benefits downstream trading and elevates a producer with the most valuable type of RIN.” In today’s market, Genscape A-RIN assurance can be obtained for about 2 cents per RIN. At a minimum, market parity is expected between today’s “Tier 1 RINs” and A-RINs. For producers that have been taking discounts of 5, 10 or 15 cents, the A-RIN provides a significant advantage.
“While the affirmative defense provided by a B-RIN is a plus, the majority of market participants we have spoken to are looking for a guaranteed RIN, something they can retire for their RVO and forget about it,” said David Dunn, a broker with Progressive Fuels Ltd. “That is finally accessible in the form of a QAP-A RIN.”
To provide flexibility in a transitional market, Genscape offers renewable fuel producers the option to select A-RIN assurance on a transaction-by-transaction basis when needed over and above B-RIN assurance.
Producers may also choose to warrant all RINs as A-RINs. “Multiple producers have already enlisted our QAP-A services to assure all their RINs as A-RINs to maximize the value in the market,” Barton added.
Genscape uses the same cost-effective ongoing monitoring to validate B-RINs. The service is provided at comparable prices to a QAP requiring quarterly audits. As an additional cost benefit, with proprietary monitoring technology, producers are saved the hassle of providing a stream of documents that many producers have estimated would cost them an entire full-time employee.
Additionally, B-RINs with ongoing monitoring provide more timely, better quality assurance for obligated parties, who are ultimately liable for replacing invalid B-RINs.
To accelerate industry adoption and to simplify RIN management for obligated parties Genscape will be providing the RIN Integrity Network platform to the current 46 obligated party customers for no additional charge. “At this point it’s more important to get producers who are doing things right exposure to obligated parties and help the industry take advantage of the benefits in the period between the proposed and final rule,” Barton said. “It also simplifies things for obligated parties as the RIN Integrity Network platform provides a central system for QAP’d RINs prior to this information being added to the EMTS.”