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RINs 101

RINs or Renewable Identification Numbers are the unique 38 digit serial number assigned to every gallon of renewable transportation fuel. Ranging from biogas, to ethanol, to biodiesel, they cover a wide varying range of feedstocks and production schemes. Normally 1 gallon of a biofuel equals 1 RIN. The 1:1 ratio can vary slightly depending on the RIN category but for our 101 purposes let’s make it easy! Good so far?

There are different assigned RIN categories to denote which type of biofuel the gallon is.

D4 RINs represent biomass based diesel: soybean oil, oil from algae, waste from oil, fats, grases, jet fuel, heating oil, canola oil, rapeseed oil

D5 RINs represent advance biofuel: sugarcane ethanol, grain sorghum, biogas from waste digesters, non-cellulosic portions of food waste and cover crops.

D6 RINs represent renewable fuel: sorghum ethanol using dry mill process, corn starch ethanol, butanol, starches from crop residue and cover crops

D3 RINs represent cellulosic biofuel: switchgrass, miscanthus, crop residue, food waste, cover crops, tree residue, renewable compressed natural gas

D7 RINs represent cellulosic diesel: any process that converts cellulosic biomass to fuel to make cellulosic diesel, jet fuel, and heating oil using crop residue, switch grass, yard waste, cellulosic food waste and cellulosic cover crops.

These tracking numbers are used to enforce the RFS (Renewable Fuels Standard), they ensure that the prescribed levels of blending are met.

RINs begin at production. For each gallon produced, one RIN is assigned. After the producer creates the RIN it is reported to the EPA. Throughout the gallon’s lifetime, the RIN accompanies it on the fuel’s journey. The RINs are transferred to the refiners, importers, and blenders of the fuel, who are required to blend a portion of their gasoline or diesel supply with ethanol or biodiesel. 

And finally when the pure gallon of biofuel is actually blended with gasoline or diesel, RINS become separated from their gallon and the blender turns the RIN over to the EPA as proof that they met their blending levels. Only obligated parties are required to submit their quota of RINs to the EPA. Obligated parties are those who introduce fuel into the US fuel supply, like Valero or Tesoro.

These obligated parties can demonstrate their compliance by purchasing the gallon of fuel that has the RIN or by purchasing RINs straight from the biofuel producer.

As we covered yesterday, the published renewable identification number (RIN) data for March was nearly 1.52 billion RINs, bringing the total for the first three months of the year to more than 4.37 billion. 1.25 billion RINs in March were the D6 category coming from corn ethanol meaning nearly 1.25 billion gallons of corn ethanol were produced in March.

In recent years, there has been more ethanol produced than the law demands, so excess RINS have been generated and have started to accumulate. These RINs can then be used in years where the levels are not met. Currently excess RINs are sold or purchased by those obligated parties, they can hold onto them for future use or turn them in to EPA to meet their blending obligations. This process allows blenders to meet their blending requirements without having to actually blend ethanol or biodiesel into gasoline or diesel. The blenders are still allowed to receive credit without physically blending biofuels because the fuel was blended in a previous time period when production exceeded the mandated blending level. 

Due to this, a market has been developed for RINs. Blenders with excess RINs can sell them to other refiners that cannot meet the blending level requirements. This means that there is a value for RINs that has the effect of offsetting some of the cost of producing the biofuel. If less fuel is being produced than the law states, it drives up the price of the RIN and in theory increases the incentive to produce the fuel, the whole intent of the RIN system.

So RINs act as a fine to ensure optimal behavior as well as a tracking mechanism. Obligated parties are not required to blend renewable fuels, but they do have to acquire RINs and send them back into the EPA. If they have excess RINs from blending, great, if they do not blend their required biofuel amount, they will need to blend more themselves to receive the RIN credits, or buy the excess RINs from another blender.