The Changing RINs Landscape
Sponsored by:
CompIntelligence
RINAlliance
RINXchange
Sutherland
Contents
Steep Learning Curve ............................... 1
RIN and Biofuel Regulation,
Compliance .......................................... 3
RFS-2 Rules, Much Awaited,
Long Overdue....................................... 4
Economics Behind RINs ........................... 7
RIN Market Dynamics .............................. 9
Changes Ahead For Trading,
Reporting Systems ..............................11
Compliance Tool Turned
Turn-key Program ...............................13
RINs’ Electronic Trading
Exchange .............................................14
Law Firms’ Role in the
RINs Marketplace ...............................15
The Role of the CPA ................................17
About the Sponsors ..................................19
Executive Summary
The mandated and growing inclusion of biofu-
els in U.S. motor fuel and trade in the credits
(RINs) generated by their use is evolving from
compliance burden to profit center for fuel
suppliers of all kinds.
Regulations and compliance methods are
changing; shifts in energy policy could result
in even more modifications down the road;
ethanol-gasoline price relationships have
shown high volatility and supply estimates
of both RINs and biofuels themselves have
varied greatly.
This white paper provides a guide to the new
developments, complete with OPIS graphs
and pricing data as well as regulatory, finan-
cial services and trading expertise, to help fuel
professionals navigate the changing
landscape.
A Service of
OPIS White Papers
whitepapers.opisnet.com
© 2009 OPIS
American renewables policy that directs oil refiners, fuel importers and gaso-
line reformulators to incorporate biofuels in U.S. motor fuel and the blending
credits that serve as the currency for compliance have moved quickly from
regulatory challenge to a profit center capable of generating anywhere from 4
to 30 cents per gallon of renewable fuel.
As of May 2009, corn ethanol is the renewable fuel with the largest volume
target and the greatest number of related credits, called Renewable Iden-
tification Numbers (RINs). However, it isn’t the only fuel covered by the
Renewable Fuel Standard (RFS). Legislation also calls for the future use of
advanced biofuels such as cellulosic ethanol and biomass-based diesel.
Many companies found the first compliance year of the RFS program, 2007,
difficult because they were focused on learning the basic principles for
the RFS, or attempting to find a means to outsource their RIN compliance
management. Marketers who were also renewable fuel blenders did not
foresee their role within the RFS. Most blenders simply refused to take on
the responsibility, which comes with taking title to the RIN. Others joined a
cooperative that assisted with EPA compliance while pooling and marketing
their RINs.
In the second year, complexities emerged as companies discovered record-
keeping inadequacies and mismatches between their systems and others’ that
resulted in invalid RINs, and had to cope with not just changes to regulations
but the prospect for new ones in the near future. Issues of duplicated and
overlapping RINs were and are problematic but pale in comparison to the
issues brought on by bottlenecks in the system created when the RIN was not
transferred downstream for months following a product transfer.
Now, in 2009, major changes lie ahead in the world of RINs. In early May,
the Environmental Protection Agency ended months of uncertainty about the
direction of biofuels policy by proposing regulations for the expanded RFS,
or RFS-2.
Industry representatives and analysts who are parsing the massive Notice of
Proposed Rulemaking for specific impacts to their businesses have flagged
several issues that have major implications for the country as a whole but
more are likely to emerge during the 60-day public comment period.
This white paper will explore RINs’ brief history, the current business cli-
mate and the developing issues most likely to shape the future of RINs.
Steep Learning Curve
When RINs first entered the market in September 2007 their value was mea-
sured in fractions of a penny per gallon. They were perceived primarily as a
regulatory burden that fuel producers, marketers and importers had to bear.
Familiarity with the 38-character numeric codes, which were generated by
 The Changing RINs Landscape Page 2
renewable fuel producers and importers and transferred to buyers of physical
renewable fuels or separated from it as a credit, was slim at best. With etha-
nol production surging and the federal mandate for its use in petroleum fuel
modest by comparison, petroleum fuel producers (Obligated Parties man-
dated by the RFS) thought they could best meet regulations by continuing to
buy their own ethanol to blend with gasoline.

However, passage of the Energy Independence and Security Act (EISA) in

December 2007 dramatically raised the ethanol blending requirement and
the market kicked into high gear early in 2008. RINs soared to pennies on
the gallon. Companies face a choice of either actively stepping up their own
purchases of physical renewable fuel product, or purchasing the already
separated RIN credits from other parties. With little to no renewable fuel in-
frastructure on the coasts, many are forced to purchase the credits from those
blending in the Midwest.

The first quarterly reporting deadline in February 2008 proved to be a power-

ful motivator for RIN trades as did the EISA’s near doubling of the biofuels
38 digits of Renewable Identification Number (RIN) Information requirement to 9 billion gallons.
KYYYYCCCCFFFFFBBBBBRRDSSSSSSSSEEEEEEEE
K RIN assignment code (1=assigned, 2=unassigned) Those market participants who had put RIN accounting, reporting and trad-
YYYY Year batch is produced/imported (leaves facility) ing systems in place and had accumulated a number of RINs by blending
CCCC Company registration ID biofuels into traditional fuels found themselves besieged by refiners and
FFFFF Facility registration ID
BBBBB Producer assigned batch number
other Obligated Parties for whom it was cheaper or easier to buy the credits
RR Equivalence value for the renewable fuel from already-blended fuel than to do the blending themselves.
D Renewable type code
SSSSSSSS RIN block starting number Another significant challenge in 2008 was the requirement by RFS that all
EEEEEEEE RIN block ending number
regulated companies needed to have an attestation performed by an indepen-
Source: Environmental Protection Agency
RFS-2 proposes that the D code be
dent certified public accountant (CPA) by May 31, 2008.
expanded to cover the four
categories of renewable fuel defined in EISA. Confusion was prevalent regarding the requirements and availability of CPAs
with requisite knowledge of RFS regulations and attestation requirements.
A primary area of confusion was the waiver by EPA for Obligated Parties to
be able to defer a portion of their attestation requirements until their 2008 at-
testation. Some regulated parties misinterpreted this as a complete waiver of
attestation requirements.

The second year of the attestation required completion by May 31, 2009.
Regulated Parties are again facing challenges due to the fact that 2008 in-
cluded a full year of activity whereas 2007 was only a partial year. Addition-
ally, RFS regulations were modified in late 2008, which increases the scope
of testing required for the attestation process.

Some Obligated Parties supplying fuel have re-written supply agreements

which require the marketer to automatically transfer the valuable RINs over
to the supplier if the RIN laden renewable fuels are blended with the sup-
plier’s fuel. Unless individual states require that straight gasoline and diesel
be offered at pipeline terminals, most products will likely be offered pre-
blended in the near future.
The Changing RINs Landscape
About the Editors of this
White Paper
Beth Heinsohn joined OPIS in 2008 after
almost 20 years of writing about oil markets
for Platts and then Dow Jones Newswires.
Her stories have appeared in the Wall Street
Journal, Barron’s, the Associated Press,
The Moscow Times and web sites including
MSNBC, Smart Money, CNNMoney and
MarketWatch. She co-authored the 2008
OPIS White Paper, “Gasoline Economics
Revisited.”
Contributing Editors
Greg Staiti
(202) 383-0833
Gregory.Staiti@sutherland.com
John Gelbard
(212) 841-4439
jgelbard@iaenglander.com
Jeff Hove
(515) 224-7545
jeff@pmcofiowa.com
David Bennett
(203) 216-1972
DBennett@CompIntelligence.com
Page 3
The RINs market in 2008 was a wild ride of highs and lows but RIN prices’
ability to skyrocket now has renewable fuel blenders looking to get on the
same train that so many were trying to avoid early on in the program.
Holding many marketers back from either blending renewable fuels or taking
possession of RIN credits are issues such as confusion about reporting and
compliance requirements, the uncertain economics of blending, uncertainty
about the supply of RINs and biofuels themselves, new RFS regulations and
the emerging direction of government policy on fuel, biofuel and climate
change.
RIN and Biofuel Regulation, Compliance
In the eyes of the EPA the purpose of the RIN is, simply put, a means to track
the volume of renewable fuels used each year.
By reporting and tracking RIN-gallons used in the U.S., the EPA is better
able to adjust the following year’s renewable fuel standard that obligated par-
ties must meet to achieve their Renewable Fuel Volume Obligations (RVO)
each year.
Current law requires two separate obligations for 2009: a standard renewable
fuels obligation, which can be comprised of all renewable fuels, and a second
obligation that directs the obligated parties to purchase biomass-based diesel.
RFS-2 increases the number of fuel categories to four.
Refiners, fuel importers and blenders who are obligated parties are to use
(or purchase in the form of RINs) 10.5 billion gallons a year of corn ethanol
and 600 million gallons a year of advanced biofuels in the fuel they sell. The
advanced biofuel volume includes 500 million gal of biomass-based diesel
and 100 million gal of undifferentiated advanced biofuel.
Ahead of the publication in May 2009 of RFS-2, many obligated parties
attempted to stay ahead of the curve by purchasing biodiesel RINs. It’s a
strategy that has paid off following EPA’s direction that the 2009 obligation
for 500 million gallons of biomass-based diesel will be rolled into 2010’s
obligation of 650 million gallons for a total obligation of 1.15 billion gallons
to be met in 2010. Biodiesel and renewable diesel RINs from both years (as
well as some 2008 RINs) can be used to meet the requirement.
The amounts increase every year until 2022 when corn ethanol is capped at
15 billion gal and advanced biofuels account for 21 billion gal (16 billion
gallons of cellulosic ethanol and 5 billion gallons of undifferentiated ad-
vanced biofuel).
Renewable fuel producers are tasked with generating the 38-digit renew-
able fuel identification number (RIN) and must pass the RIN downstream as
attached to the gallon or batch of ethanol or biodiesel. Technically, the RIN
must be transferred to the buyer within 24 hours but EPA’s technical amend-
ment of October 2008 suggests that five days may be adequate.
 The Changing RINs Landscape
RIN ownership, obligations
Anyone can own RINs, including private
citizens. However, those owning or intend-
ing to own RINs must register with the EPA
and are subject to recordkeeping and report-
ing requirements related to RIN transac-
tions [http://www.epa.gov/otaq/regs/fuels/
rfsforms.htm].
Obligated Parties under the RFS are suppli-
ers of finished transportation fuel made from
non-renewable feedstocks or blendstocks.
This includes gasoline and diesel refiners,
importers and those blenders whose activi-
ties extend beyond the addition of renewable
fuels to gasoline. For example, a facility that
only blends ethanol into gasoline is not an
Obligated Party.
Small refineries (defined as refineries for
which the average aggregate daily crude
oil throughput for the calendar year doesn’t
exceed 75,000 bbl) are exempt until 2011
but can opt into the RFS program if they
want to.
Obligated Parties calculate their Renewable
Volume Obligations by applying the RFS
percentage issued every year by the EPA
(10.21% in 2009, for example) to their an-
nual gasoline and diesel production/import
volume.
EPA concern about a possible mismatch
between blending obligations and access to
RINs spurred the agency to invite com-
ments about how to change the definition
of an obligated party in its RFS-2 Notice of
Proposed Rulemaking.
Page 4
Enormous bottlenecks and non-compliance issues arise when RINs are
delayed for months due to the producers’ inability to transfer the RINs in a
timely fashion. This has resulted in a compliance nightmare for blenders as
they are forced to report and resubmit reports whenever late or revised RINs
are transferred. Thankfully, new reporting systems will be offered soon, in
order to reduce the compliance difficulties.
Another technical amendment now allows the producer to not pass RINs
down to a customer. The producer still cannot detach the RINs and sell, but
they have to attach them to another customer’s gallons (up to 2.5 RINs per
gallon). The only time a producer may separate and sell them is when the
renewable fuel has been blended with on-road motor vehicle fuel at a rate of
80% or less renewable fuel.
Any person or company accepting RINs must first register with the EPA.
Those who are accepting RINs must complete the appropriate quarterly
reports either as a RIN owner, Obligated Party, exporter of renewable fuel, or
producer/RIN generator.
All RIN owners must provide to the EPA, a third-party CPA attest engage-
ment which is designed to look for errors in RIN management methods.
The RINAlliance program, for example, automatically creates audit accounts
while creating the necessary EPA quarterly reports for RIN owners. These
accounts are then accessed by its third party CPA firm for the purposes of the
audit. Other blenders must provide their quarterly reports (RFS0100, 0200,
0300, and 0400) to a third party CPA who must then complete a representa-
tive selection of the information and perform the attestation. All attestations
are due to the EPA no later than May 31st of each year.
Misreporting of RINs or failing to meet federal renewable blending targets
can result in Clean Air Act penalties of as much as $32,500 per day per viola-
tion.
Numerous issues arise as invalid RINs mistakenly get into the system or
are delayed from moving downstream. Many times the invalid RIN is not
recognized for months and quarterly reports and RIN sales have already been
completed.
In these situations, and there are many, each party who took title to and re-
ported that RIN must now correct all reports and notify the company down-
stream of the error so it can do the same. EPA hopes to resolve these major
issues with their proposed Moderated Transaction System (MTS), a develop-
ment we’ll discuss in greater detail later.
RFS-2 Rules … Much-Awaited, Long Overdue
Revisions to the RFS (called for by EISA 2007 and superseding the mandate
in the Energy Act of 2005) promise to make compliance much more compli-
The Changing RINs Landscape Page 5

cated, and some say more difficult, than it already is. It will become increas-
ingly important, for those regulated under the RFS, to gain access to software
compliance programs either in-house or from a third party.

Source: Environmental Protection Agency

In brief, RFS-2 establishes specific volumes of a broader variety of biofuels

that must be used in transportation fuel, a category that now includes non-
road, locomotive and marine diesel. There are new definitions and criteria
for both renewable fuels and their feedstocks, including new greenhouse gas
(GHG) emission thresholds for biofuels, which, depending on how they’re
calculated, may discourage new investment in production of conventional
biofuels like corn ethanol and soybean diesel.

Because the proposal requires obligated parties to blend their share of each
of the four “carve-out” biofuel categories, RINs will have to change in order
for the EPA to keep track of who is doing their fair share of blending and who
isn’t.

Each obligated party will have a RVO for each of the following: renewable
fuel, biomass-based diesel, advanced biofuel and cellulosic biofuel. The 22nd
digit of the RIN (designated “D” in the RIN form) is currently either a “1”
signifying cellulosic biomass ethanol or “2” signifying non-cellulosic bio-
mass ethanol.

However, now the EPA is proposing that as of January 2010, the D code will
be 1 (cellulosic biofuel), 2 (biomass-based diesel), 3 (advanced biofuel), or
4 (renewable fuel). The new designation scheme incorporates 15 separate
“pathways” by which biofuel is produced. All regulated parties under the
RFS will have to capture specific RINs and bundle those RINs before they
can be sold to an obligated party. Obligated Parties will have to decide which
RINs they need for any given compliance year.

Each takes feedstock and production process into account, a development

which in combination with GHG emission thresholds and the proposed
indirect land use change method of calculating lifecycle carbon footprint has
 The changing RINs Landscape
The EPA has given itself several
ways to deal with a possible shortfall
of cellulosic biofuel, including RIN
creation, alteration of the require-
ment and substitution of advanced
biofuels.
Page 6
some wondering whether RFS-2 might curtail expansion of corn ethanol and
soybean oil biodiesel production.
Conventional biofuels other than those from grandfathered plants will be
required to emit 20% fewer lifecycle GHG compared to gasoline or diesel.
Advanced biofuels will be required to emit at least 40% fewer lifecycle
GHG, biomass-based diesel 50% fewer and cellulosic biofuel 60% fewer.
After months of contentious debate over how EPA should calculate carbon
dioxide emissions of various biofuels, the agency chose to include emissions
from indirect land use change (ILUC) in its lifecycle requirements. Biofuel
groups, agricultural academics and some lawmakers have objected to ILUC,
claiming there isn’t a generally accepted method of determining it. Some
were pleased that EPA is soliciting scientific feedback and peer review on the
ILUC proposal but lawmakers have introduced legislation that would have
the agency focus only on direct lifecycle GHG emissions in its regulation.
The new greenhouse gas rules and policies will directly impact how RFS-2
plays out and will create a number of new issues on how to handle ethanol,
biodiesel, advanced renewable fuel, and cellulosic ethanol. All who will own
RINs must find a way to systematically distinguish between ethanol RINs
and biodiesel RINs as well as future cellulosic ethanol and advanced renew-
able fuels.
That task is all the more vital in the face of new details about the MTS in
RFS-2. The EPA’s new transaction system will be a federally run, central
database used to collect and validate RINs and to help eliminate the errors,
duplication, and generation of “bad” RINs. It’s slated to begin full operations
in 2011.
Something RFS-2 didn’t provide was a waiver for the 2010 cellulosic ethanol
volume, seen as the toughest carve-out to deal with. Many believe it unlikely
that the U.S. cellulosic ethanol industry will be able to produce 100 million
gal/year by next year. The economic downturn has slowed the progress of the
industry, which is trying to move from pilot-scale facilities to commercial-
scale plants.
“The waiver criteria is not ‘plans to build,’ but is ‘projected volumes of cel-
lulosic biofuels production’,” American Petroleum Institute spokeswoman
Karen Matusic said, commenting after the release of RFS-2.
The EPA is authorized to create RINs or alter or waive biofuel requirements
and could resort to such a measure for the cellulosic requirement. EISA 2007
sets the price of waiver gallon-RINs at the greater of 25 cts/gal or $3 minus
the wholesale cost of a gallon. RFS-2 also proposes to allow excess advanced
biofuels to make up some or all of any shortfall in cellulosic biofuel.
Another RFS-2 issue of particular importance to fuel marketers is the EPA’s
consideration of changes to its definition of Obligated Parties. Concerned
The Changing RINs Landscape Page 7
about inflation in the cost of RINs, the agency has invited comment about
ways to more evenly align companies’ obligation to blend with biofuels with
their access to RINs. We’ll discuss the market implications of such a move
later.

The Economics Behind RINs

RINs are a tradable commodity but primarily represent volumes of biofuel

that are blended with petroleum fuel. The economics of fuel blending are no
small part of RINs value, as witnessed by their first full year and a half of
trade.

For most of 2008, the fuel market provided blenders, refiners and other
marketers enough financial incentive to blend gasoline with ethanol above
and beyond their obligations, creating tradable RINs in the process. Simply
put, the net cost of gasoline (when it’s worth more than ethanol) can, at the
appropriate differential, be lowered by blending with the alcohol fuel.

For vehicles with conventional engines, the maximum ethanol volume al-
lowed by law is 10%, hence the designation E10 for gasoline blended with
ethanol. However, the EPA is considering a request by a number of ethanol
industry interests and their legislative advocates to allow the use of concen-
trations up to 15%. The groups have expressed concern that the U.S. may
soon reach the so-called “blend wall” posed by the current 10% maximum
for vehicles not specially equipped to consume E85, and not meet the ex-
panded RFS volumes.

Some think that the EPA is likely to approve the incremental use of E12 or
E13 well before the December 1 deadline for a decision on E15 while others
note the equally vociferous objections to higher ethanol blends coming from
a number of oil refiners, automakers and environmental groups.

Whatever the concentration of ethanol, the graph above illustrates the eco-
nomic incentives and disincentives made possible by blending ethanol into
gasoline.
 The Changing RINs Landscape
Ethanol-gasoline price relationships
in Spring-Fall 2007 and then again
in March-September 2008 aligned to
produce wide cost savings for petro-
leum fuel marketers.
Page 8
The price of spot market conventional gasoline moved decisively higher ver-
sus ethanol in Spring-Summer 2007 and again in 2008. The differences were
so great that blending allowed marketers to shave 5-10 cents a gallon of costs
(including the tax subsidy, then 5.1 cents). Major oil companies introduced
E10 blends in a number of non-mandated markets and interest in splash
blending took a sharp turn higher.
In Chicago, for example, in mid-August ethanol commanded a price of about
$2.24/gal. Spot market reformulated blendstock could be had for $3.36/gal
and conventional gasoline for $3.10/gal. Blending 10% ethanol with 90%
reformulated blendstock resulted in a finished cost for a blended gallon of
$3.24, or some 12 cents a gallon less than the initial cost of the refinery-pro-
duced fuel. Applying a 5.1 cents a gallon tax deduction (reduced to 4.5 cents
as of Jan. 1, 2009) produced a net cost of $3.19 which was some 17 cents
under the original price of the gasoline blendstock.
There was similar motivation for marketers in areas that use conventional
gasoline. In Florida, or example, mid-August spot prices of $3.06/gal for
conventional 87 octane gasoline and $2.30/gal ethanol allowed a typical
90%/10% splash blend to result in a finished gross price of $2.98. After ac-
counting for the blending credit, the net cost was $2.929 or 13cts under the
spot price of conventional gasoline.
In late October 2008, the collapse in oil markets and faltering demand
dragged gasoline prices below those for ethanol and all but erased the finan-
cial incentive to combine the fuels together. However, by early April, a rise in
gasoline prices was making ethanol blending more financially remunerative.
Blending economics in 2009 (also influenced by fluctuations in the prices of
ethanol and corn) will likely remain subject to change. However, blenders
need to remember that just because they are registered under EPA’s RFS pro-
gram does not mean they have to report during periods when no renewable
fuels are purchased.
It is best to be registered under the program and be ready to take advantage
of renewable fuels once the price structures make economic sense to do so.
You must be registered with EPA in order to take title to renewable fuels with
RINs attached, as well as to engage in the trading of unassigned RINs.
The Changing RINs Landscape Page 9

RIN Market Dynamics

Factors unique to the new market have exerted both upward and downward
pressure on RINs. Born of government policy (in the form of the RFS), man-
dated use of biofuels has interacted with politics and market forces across
several commodities to produce something new.

As already mentioned, the near-doubling of the required corn ethanol volume

between 2007 and 2008 to 9 billion gallons a year was a significant factor
in the spike in RINs prices in January 2008, along with the realization of
many that compliance for the first reporting period might be more easily met
by buying RINs instead of blending ethanol in gasoline themselves. But as
of early 2009, the increase was a mere 1.5 billion gallons for the full year
and market participants had had several quarters more to comply with their
obligations.

So what was behind the near-doubling of RIN values in the first month of
2009? Some attribute the rise to concerns about insufficient supply of ethanol
and of RINs, due to financial troubles for a number of biofuel producers and
a drop-off in discretionary blending in some parts of the country.

Similarly, traders attributed the late 2008 price rise to the end-October bank-
ruptcy filing of major ethanol producer VeraSun, spot gasoline prices’ drop
below ethanol values and end-year tallying and topping off of RIN invento-
ries ahead of attestations for 2008 obligations.

Uncertainty about the course of biofuel regulation and/or policy has had the
opposite effect, driving RIN values lower.

Texas Governor Rick Perry’s (R) request to the EPA to waive half of the
 The Changing RINs Landscape
The EPA’s August 2008 rejection of
a governor’s request for a temporary
reduction of the RFS signaled that
economic concerns were insufficient
to warrant a waiver.
Page 10
biofuels mandate for one year across the country began one such period of
uncertainty between April and August of 2008.
At the time, the food vs fuel debate was raging and Gov. Perry voiced
concerns that soaring commodity prices were sapping the buying power of
lower-wage consumers who could least afford a rise in their food and fuel
bills. Biofuel critics went so far as to blame rising food prices on increasing
ethanol production.
Flooding in the Midwest raised concerns that a smaller-than-expected corn
crop for ethanol production would prompt a diversion of the harvest to food
and away from biofuels. Some thought the situation might constitute enough
of a natural disaster that the government might act to temporarily ease the
ethanol mandate.
RIN values moved lower on the prospect that a waiver would greatly reduce
the amount of ethanol that obligated parties would have to blend into fuel in
2008 and 2009.
However, in early August, the EPA rejected Gov. Perry’s request for a waiver
of the RFS and dimmed the prospect of success for future requests. The deci-
sion included criteria for new waiver requests that signaled the agency’s posi-
tion that economic concerns were insufficient in and of themselves to warrant
a waiver. RIN values subsequently recovered a few cents and held near those
levels until beginning an abrupt climb higher in early November.
More recently, uncertainty about the RFS-2 proposal (expected by the end of
2008 but not released until early May 2009) may also have contributed to a
slump in RIN values in March and April.
Probably the most current and relevant strain on renewable fuel blending
comes from downstream handling of the RINs as new fuel supply agreements
are re-written in an attempt to capture RINs.
Branded marketers/blenders that have brought renewable fuels onboard
will begin to see new language in their supply agreements that states that if
renewable fuels are blended with the supplier’s fuel, all RINs will be trans-
ferred and retained by the supplier.
This, in effect, leaves the marketer with a compliance burden that comes with
RIN ownership and little to no incentive to continue blending. Some suppli-
ers have already positioned themselves at pipeline terminals as only offering
pre-blended fuel leaving the marketer no straight gasoline to blend. Some
states have begun requiring straight gasoline and diesel be offered at all pipe-
line terminals in hopes of keeping the market competitive.
Overall, the RIN regulations and markets are new to everyone. Renewable
fuel blending practices and economics on the coasts differ dramatically from
those in the Midwest. What might be true for some speculators in a geo-
graphic area may not be true for others.
The Changing RINs Landscape
The EPA’s Moderated Transaction
System aims to catch errors and
monitor RIN quality as well as sup-
ply and demand.
Page 11
As the rules become better understood throughout the RIN chain, the market
will surely become less wild. Large discrepancies between 2008 and 2009
RIN values, for example, will be lessened as more obligated parties begin to
realize that 20% of their RIN obligation can come from the preceding year
RINs.
Changes Ahead For Trading, Reporting Systems
RIN tracking, validating, reporting, and auditing are playing a major role in
stopping marketers from accepting RINs and blending renewable fuels dur-
ing a time when millions of dollars are being generated. Changes in the RFS
and in EPA’s administration of it promise to complicate an already extensive
reporting system.
For example, RFS-2 has introduced greenhouse gas policies. In the case of
biodiesel, a producer will have to document that one gallon of B100 is able to
reduce GHG emissions by 50%.
New technical amendments to the RFS also require industry to submit soft-
ware applications used in their company’s RIN management process to their
third party CPA during the annual attest engagement.
The Moderated Transaction System, through which all RIN trades will be
channeled, will monitor RINs for quality and weed out duplicate RINs and
other errors.
The system should also reduce the reporting burden for obligated parties and
companies that handle RIN transactions, EPA said. And, if “aggressive” re-
newable blending obligations lead to tightened RIN markets, the MTS would
allow the agency to monitor credit supply and demand.
RIN producers, sellers, traders and buyers currently communicate among
themselves when deals are done, passing batches of RINs back and forth and
creating many opportunities for error.
The agency envisions a “node to node” communication network between
RIN market players and the EPA. The network would use a secure website,
trading batch RIN transactions in the XML format instead of formats com-
monly used now, including Excel or CSV. Before passing RINs on to the
market for trading, EPA would verify their quality.
EPA will not be a “matchmaker,” pairing RIN buyers and sellers, however.
Annual attestation engagements will still be required. RINAlliance will be
working with EPA on testing the new MTS node to node system as early as
January 1, 2010, a year before it becomes fully operational.
“The new RINAlliance system will disseminate the variable types of RINs
and prepare them for downstream sales once blended with standard fuel,”
said RINAlliance’s Jeff Hove. “This will accurately and expeditiously de-
liver specific RINs to obligated parties.”
 The Changing RINs Landscape
The definition of Obligated Party
could, in a future rulemaking,
change to more evenly align compa-
nies’ blending obligations with their
access to RINs.
Page 12
Noting changes in demand for RINs and the operation of the RIN market that
may be inflating their value, the agency raised the possibility in its RFS-2 pro-
posal that it could, in a future rulemaking, change its definition of Obligated
Party to more evenly align companies’ blending obligations with their access
to RINs.
Increases in the volume of biofuel injected into the U.S. fuel pool have given
rise to “significant disparities between obligated parties in terms of opportuni-
ties to acquire RINs,” according to EPA, which could be addressed by tweak-
ing the definition.
Obligated Parties are currently refiners and importers of finished gasoline,
RBOB and CBOB and only the parties downstream of them which use non-
renewable blendstocks to make finished gasoline, RBOB or CBOB. This
group excludes splash blenders who don’t have RVOs and can profit from the
sale of all the RINs they acquire by blending ethanol into purchased gasoline,
RBOB or CBOB.
One approach would be to shift the obligation to blend ethanol into gasoline
from refiners and importers to ethanol blenders (many of whom are refiners).
EPA could eliminate RBOB and CBOB from the list of fuels subject to RFS,
such that a party’s RVO would be based only on the non-renewable volume of
finished gasoline or diesel that he or she produces or imports.
For blenders, this means that parties who blend ethanol into RBOB or CBOB
to make finished gasoline would be obligated parties and their RVOs would
be based on the volume of RBOB and CBOB prior to ethanol blending.
Traditional refiners who convert crude oil into fuels would only have an RVO
to the degree that they produce finished gasoline or diesel, with all RBOB
and CBOB sold to another party being excluded from the calculation of their
RVO.
A variation that would more evenly distribute the obligations for diesel as
well as gasoline is one where the compliance obligation for all gasoline and
diesel goes downstream to parties who supply finished fuels to retail outlets or
to wholesale purchaser-consumer facilities.
EPA took a deliberately tentative approach because a definition change would
“result in a significant change in the number of Obligated Parties and the
movement of RINs,” and “many parties … would become obligated, and
would be forced to implement new systems for determining and reporting
compliance,” the agency said in the RFS-2 notice.
The advantage however would be to more evenly distribute the cost of meet-
ing the RFS among all parties that blend renewable fuel into gasoline.
 The Changing RINs Landscape
Under the revised RFS it will become
increasingly difficult for blenders to
avoid taking title to RINs.
Page 13
Compliance Tool Turned Turn-key Program
The RINAlliance program was born out of necessity to allow marketers the
ability to continue blending renewable fuels if they so choose. What began
as a compliance tool to help Midwest renewable fuel blenders has grown to
a profit center for those blending renewable fuels across the country. Some
marketers have created new positions and hired fulltime employees for the
sole purpose of managing RIN credits. The RINAlliance removes the need
for additional employees and software required to maintain compliance.
As of early April 2009, the RINAlliance program had already began sepa-
rating out RINs as ethanol and biodiesel in preparation for the new RFS-2
program.
RINAlliance subscribers are able to batch their RINs based upon RIN type,
aggregate their RINs with millions of others and sell based upon the market
demand for each type of RIN. The program will separate out RINs by year
and fuel type so that millions of RINs can be bundled in respective groups
and transferred to obligated parties.
As an indication of how important this process is, the price of 2009 biodiesel
RINs, made independent from ethanol, have already reached a high of 28
cents. At the current 1.5 RINs per gallon of biodiesel, that price equates to
a value of 42 cents per gallon of B100 for the blender who combines biod-
iesel with petroleum diesel and then sells the RINs. RINs made available
by renewable fuel blending marketers are in demand and very necessary for
meeting the RFS goals.
Unfortunately for those just getting into the blending of renewable fuels or
small-volume blenders, the numbers don’t always appear to work out to their
advantage.
Incapable of dedicating an employee’s time to the compliance requirements,
they decide to avoid renewable fuels altogether. In some cases this is the mar-
keter’s best strategy. If the blender can avoid taking ownership of the RIN
credits, they can avoid the compliance requirements of the RFS.
However, it will become increasingly difficult for these companies to avoid
taking title to RINs under the revised RFS as it is currently being suggested.
Furthermore, those that pass on accepting RINs, and have subsequently seen
their renewable fuels usage grow, have lost out on significant income.
Blenders that want to grow their renewable fuel usage either as a profit center
or to provide for a booming niche market may find that a web-based compli-
ance tool will relieve many of the compliance pitfalls and generate otherwise
lost revenues.
 The Changing RINs Landscape
The greatest obstacle confronting
exchange-based RIN trading has
been the difficulty of settling RIN
transactions.
Page 14
RINs’ Electronic Trading Exchange
In addition to joining cooperatives that assist with EPA compliance while
pooling and marketing their RINs, renewable industry players have also in-
corporated RIN activities such as trading, reporting and tracking into existing
systems.
While companies trading RINs may rely on already-established connections
with other traders and brokers, there is also an online trading platform where
deals for tradable RINs can be executed by anyone willing to register with
the EPA.
RINXchange, launched by New York-based Renewable Trading Services in
early 2008, capitalizes on one of the RIN program’s most compelling com-
ponents – free trade. Expressly permitted by the federal government to buy
and sell Type 2 RINs, non-stakeholders such as hedge funds and Wall Street
banks have expressed significant interest in trading RINs.
While companies trading RINs may rely on already-established connections
with other traders and brokers, there is also an online trading platform where
deals for tradable RINs can be executed by anyone willing to register with
the EPA.
RINXchange, launched by New York-based Renewable Trading Services in
early 2008, capitalizes on one of the RIN program’s most compelling compo-
nents – free trade.
Expressly permitted by the federal government to buy and sell Type 2 RINs,
non-stakeholders such as hedge funds and Wall Street banks have expressed
significant interest in trading RINs. Financial firms, battered by the severe
contractions of the housing, mortgage and then banking industries, as well
as by a global economic recession, are monitoring the budding RINs market,
according to RINXchange CEO John Gelbard, but haven’t yet initiated actual
involvement.
Apart from the uncertainty about the course of RFS-2 and U.S. biofuel policy
in general, financial players have market-based concerns about trading RINs,
Gelbard says.
The single greatest obstacle confronting exchange-based RIN trading has
been the difficulty of settling RIN transactions. The complexity of the 38-
digit numbers and the bookkeeping involved when transferring ownership
greatly complicate the clearing of trades (an essential component of any
actively traded product) and have deterred many traders from participating.
While still some months away from implementation, the aforementioned
RIN Moderated Transaction System run by the EPA should eliminate these
concerns.
 The Changing RINs Landscape
With the MTS in place, RINXchange
will be able to confirm long RIN po-
sitions of sellers prior to sell orders
being entered, and counter-party
risk should become insignificant.
Page 15
The MTS central database would allow all changes of ownership to occur in
something close to real time (T+3, similar to security settlement). Each reg-
istered RIN participant would have an account at the EPA which is credited
or debited for each transaction. With the system in place, RINXchange will
be able to confirm long RIN positions of sellers prior to sell orders being
entered, and counterparty risk should become insignificant.
Currently, the electronic bourse works as follows: If requested, buyers are
given a list of all potential RIN sellers on the exchange and can then choose
those whom they trust as counterparty, along with per-company volume lim-
its. The exchange compiles an algorithm from the preferences which is then
built into the trading program. Orders by that buyer will execute only against
those counterparties unless manually overridden.
With increased liquidity in RIN trading, especially after the MTS intro-
duction, Gelbard foresees the listing of RIN-related derivatives such as a
synthetic RIN product. This would allow hedging by market participants
who are currently unable to sell short. Producers who want to pre-sell future
production could sell a synthetic RIN to take advantage of high prices, while
speculators would be able to place bets on either side of the market. As with
all other instruments traded in financial and commodity markets, this will
reduce volatility as supply and demand are brought into balance.
Producers who want to pre-sell future production could sell a synthetic RIN
to take advantage of high prices, while speculators would be able to place
bets on either side of the market. As with all other instruments traded in
financial and commodity markets, this will reduce volatility as supply and
demand are brought into balance.
RINXchange’s Gelbard also sees a U.S. environmental policy role for RINs
beyond that of a “currency” for complying with the RFS.
For example, the purchasing of RINs could be an attractive strategy for
corporate public relations campaigns. To demonstrate their commitment to
sustainability and the neutralization of their carbon footprints, corporations
could purchase RINs and retire them. This gesture would remove a given
amount of RINs from circulation, decreasing supply in the market. Since
refiners, blenders and importers continue to have to report RINs to comply
with the RFS, a greater quantity of renewable fuels would have to be pro-
duced to bring supply back into RIN markets.
Law Firms’ Role in the RINs Marketplace
For participants in the RIN market, legal advisors may be the best defense
against the myriad of current and future challenges posed by the RFS pro-
gram.
The current regulatory framework was ramped up faster than any other EPA
fuels program (with less than a year between the proposed rule and effective
date), and has experienced considerable growing pains as a result.
 The Changing RINs Landscape
Amid commercial and regulatory
uncertainty, your legal team can
play a critical role in maintaining
current compliance, while advising
on investment risk and RIN market
participation.
Page 16
Moreover, just as parties were beginning to adjust to the economic realities
of the program, Congress laid out an aggressive and multi-layered quartet of
mandates that promised significant near-term changes. A “push-pull” tension
began to emerge, with powerful interests arguing for further expansion while
co-equal voices lobbied for retraction.
EPA has been caught in the middle of this debate, which contributed to the
long delay in publication of the RFS-2 proposal and has created substantial
commercial and regulatory uncertainty. Against this backdrop, your legal
and compliance team can play a critical role in maintaining current compli-
ance while advising on strategies to mitigate investment risks and adopt
flexible, long-term plans to participate effectively in the renewable fuel and
RINs marketplace.
Trading RINs under the current regulatory framework is fraught with ambi-
guity and risk. At the outset of the RFS program, parties – many of whom
had not previously been subject to EPA regulation – were left to their own
devices to develop proprietary systems and methods to generate RINs, recon-
cile volumes, document transfers and manage inventories and other records.
The lack of a standardized procedures contributed to inconsistencies, which
in turn spawned problems including invalid RIN codes, transfer delays, and
reporting inaccuracies. Even with the emergence of third-party software or
data management services, these problems have persisted and have lead to
recent calls to revamp the RIN trading system (to which EPA has responded
with its proposed MTS).
Legal and compliance advisors can help market participants navigate the
complex documentation, reporting and recordkeeping requirements to pre-
vent these types of issues from arising, and help companies make informed
choices on the available compliance technologies and solutions. Legal advi-
sors can also coordinate self-audits and other internal assessments, which can
be extremely useful tools for maintaining compliance and avoiding penalties,
particularly since the annual attest audit is currently the primary enforcement
mechanism under the RFS program.
Conducting an attest audit without even a modest amount of preparatory
self-review is ill-advised, especially under EPA’s strict liability system and
the possibility for up to $37,500 per day of violation in penalties. Moreover,
if a serious problem is discovered, your legal counselors can be a critical ally
in devising strategies to minimize exposure to penalties. A self-disclosure
can be a powerful asset in framing your non-compliance in the best possible
light.
Of course, ambiguity in the current regulations is not the only source of
uncertainty confronting RIN market participants. There are broader concerns
about the direction of the program – particularly the aggressive new ad-
vanced biofuel mandates – in light of the current recession and concomitant
slowdown in investments in renewable fuel technologies.
 The Changing RINs Landscape
Through appropriate hedging strate-
gies, parties can lock in minimum
prices for RINs, thereby safe-guard-
ing against programmatic changes.
Page 17
EPA may be faced with multiple state or private party requests to waive some
or all volumes under the various mandates in the next few years. Each such
request raises the possibility of a mid-course change in regulated parties’
RIN obligations. EPA denied Texas’ 2008 waiver request, but the agency has
acknowledged on numerous occasions concerns about the tight RIN market.
Other major unresolved issues – such as the “grandfathering” and carry-over
of current RINs for RFS2 compliance, the effect of the E10 “blendwall,” and
future legislative initiatives (e.g., a low carbon fuel standard) – inject further
uncertainty into parties’ RIN investments.
Certain aspects of the RFS-2 proposal are raising new areas of concern. For
example, it is unclear if renewable fuel producers and importers will be able
to certify compliance with the new feedstock restrictions incorporated in the
proposed definition of “renewable biomass.” This reluctance may result in
RIN shortages, which in turn could lead to price spikes.
In this environment, timely information and analysis is crucial, as new devel-
opments have a direct, contemporaneous impact on RIN prices. It is equally
important to put this information into context and assess the legal and politi-
cal likelihood of changes in the program.
Your advisors can play an important role in crafting the legal and policy
arguments that will advance your company’s interests with federal regulators
and legislators. Moreover, your advisors can function as an intermediary to
unite fellow market participants with shared interests in a common alliance.
Strength in numbers is not lost on EPA nor its congressional overseers.
It’s not enough, however, to merely react to new developments with advo-
cacy at the administrative and/or legislative levels. Parties must proactively
protect their significant investments in RINs, and can most effectively do so
by anticipating and addressing the consequences of a programmatic change
in their commercial arrangements.
Through appropriate hedging strategies (e.g., put/call options), parties can
lock in minimum sale/purchase prices for RINs, thereby safeguarding against
abrupt programmatic changes such as a regulatory waiver.
In addition to counseling on these strategies, your legal counsel can develop
contract terms to protect against more “routine” threats to your investments,
such as a counterparty’s breach or other material non-compliance affecting
the validity or availability of RINs for purchase or sale. Warranties, indem-
nifications, and prompt delivery terms are all options in your legal advisors’
toolkit that can help you minimize the risks associated with transacting in the
complex, evolving RIN market.
The Role of the CPA
Companies’ varying levels of knowledge about RFS regulations often dictate
 The Changing RINs Landscape
Companies that have multiple EPA
classifications may be using inad-
equate systems and processes, such
as Microsoft Excel. Others confuse
reporting requirements for compli-
ance rules.
Page 18
how they implement processes, systems and people. This can represent sig-
nificant risk if their knowledge is incomplete or incorrect.
The RCO (Responsible Corporate Officer) is ultimately accountable for the
information that is submitted to EPA in quarterly reports and annual attesta-
tions. However, the process and system may be the responsibility of someone
other than the RCO, such as finance, operations, tax, or trading.
For example, a company may choose to incorporate their RIN reporting and
compliance processes directly into their accounting system. This puts addi-
tional burden on those individuals and it represents another element of data
and information that must be validated.
Oftentimes, regulated parties don’t have the resources to dedicate to day-to-
day management of RINs and ongoing study of EPA regulations and updates
to them. For example, companies that have multiple EPA classifications may
be using inadequate systems and processes such as Microsoft Excel. In addi-
tion, there can be confusion over reporting requirements versus compliance
rules.
Even when a company has a dedicated compliance group, the focus on RFS
that is necessary to ensure proper compliance can be lacking. The danger is
that any misinterpretation, even minor, could potentially result in significant
compliance issues. There’s also the issue of invalid, irregular or fraudulent
RINs. Regulated parties dealing with RINs need the ability to track and
replace them, and then amend and re-file reports.
EPA’s issuance of RFS-2 in early May 2009 adds further levels of complex-
ity relating to compliance and annual attestations.
Section 80.1464, Subpart M contains new procedures that must be performed
as part of the annual attestation process beyond the existing requirements of
Section 80.1164, Subpart F, such as Independent Third-Party Engineering
Reviews and validation of feedstock purchases and transfers. More impor-
tantly, the required procedures incorporate the changes previously mentioned
with regards to renewable fuel management, recordkeeping and reporting.
In addition, companies will be required to maintain recordkeeping for now
four types of renewable fuel, which results in manpower burden beyond that
which exists today. Systems will need to be modified or completely changed,
processes will need to be modified and staff will need to be adept in their
knowledge of the regulations.
The key factor is that regulated companies will serve themselves most effec-
tively by making these modifications with the end result, the annual attesta-
tion, as a critical factor in design and execution of these changes. Outsourc-
ing of day-to-day RIN management will now become a very favorable option
for many companies.
The Changing RINs Landscape Page 19
About the White Paper sponsors
CompIntelligence Service
CompIntelligence is a full-service financial solutions company, and specializes in renewable fuels business intelligence and
compliance. We provide RFS and other business services, financial software applications, custom design and implementa-
tion services, and ongoing support of your operational processes and systems.
Our Renewable Energy Group has extensive experience working with companies on Renewable Fuels regulatory com-
pliance, as well as performing attestations mandated by EPA regulations. We work with you to develop a methodology
to apply this same information to gain business insight from your RIN and other compliance data. We can provide staff
augmentation, as well as design a customized process and ongoing support for regulated companies’ day-to-day program for
managing RINs
• Annual Attestation – This procedure under RFS regulations requires companies to have their RFS
activity tested and signed off by an outside CPA in accordance with standards prescribed by the
American Institute of Certified Public Accountants (AICPA) and the Public Client Accounting Oversight
Board (PCAOB).
• Quarterly RIN Activity Forensics and Reporting
• Design, Implementation and Improvement of RIN Processes, Systems and People
• Outsourcing of Day-to-Day RIN Management
• Compliance Counseling
* Irregularities and Potential Fraud
* Responding to EPA Correspondence
* Tax Implications
* RFS2; MTS; Updates to Regulations
* RIN Trading for Obligated Parties and Other Regulated Companies
To learn more about CompIntelligence’s solutions please visit www.compintelligence.com or contact David
Bennett, CPA, CFF at rins@att.net or 203.216.1972.

RINAlliance
The RINAlliance program was designed by regulatory professionals Jeff Hove and Dawn Carlson to save renewable fuel
blenders time and money. The program was developed initially for members of the not-for-profit Petroleum Marketers and
Convenience Stores of Iowa but quickly expanded across the nation as a turn-key internet-based program to assist blenders
of all sizes and in all states. The program is operated out of the PMCI offices in the heart of renewable fuel country.
RINAlliance is a consulting service managed by industry professionals with more than thirty years experience in the renew-
able fuel marketing industry. Hove also manages the regulatory compliance issues for petroleum marketers and chairs the
Iowa Renewable Fuels Infrastructure Board which assists retailers with grant monies to install renewable fuel infrastructure.
Carlson manages the overall operations of the association and subsidiary companies, lobbies and focuses on the financial
success of RINAlliance clients.
The RINAlliance online software allows blenders to upload and validate their RINs for duplication and overlaps and
segregate data for submission to the EPA’s CDX system satisfying quarterly report requirements. RINAlliance manages
all aspects of RIN management including consulting on proper management of RINs in order to maximize returns and
minimize expenses. RINAlliance prepares the EPA reports and the annual attest engagement and also brokers the RINs
The Changing RINs Landscape Page 20
About the White Paper sponsors
to obligated parties, returning profits back to the loyal and growing client base. The large volume of RINs managed
through the program makes one-stop shopping easy for obligated parties in need of reliable and accurate purchases of
any quantity.
To learn more about RIN Alliance’s solutions please visit www.RINAlliance.com | email info@rinalliance.com | phone
the office at 1.866.433.RINS | or phone direct to Jeff Hove at 515.250.2966 or Dawn Carlson at 515.238.9819

RINXChange
RINXchange is the only online marketplace for the buying and selling of Renewable Identification Numbers
(RINs). RINXchange provides an efficient, fast and neutral trading platform for RIN market participants and is
open to all parties registered with the EPA under the Renewable Fuel Standard (RFS) program, including pro-
ducers, importers, blenders, marketers, petroleum refiners, brokers and investors. RINXchange was founded in
2007 and is based in New York.
To learn more about RINXchange please visit www.rinxchange.com or contact John D. Gelbard, CEO
at jgelbard@iaenglander.com; 212-841-4439; Yahoo ID RINSRUS

Sutherland Asbill & Brennan LLP

Sutherland Asbill & Brennan LLP provides legal services worldwide to diverse clients in seven major practice
areas: corporate, energy and environmental, financial services, intellectual property, litigation, real estate, and tax.
Our Energy & Environmental Practice has more than 50 lawyers representing every major sector of the industry
in sophisticated matters, including:
• Transactions and Project Development • International Trade
• Environmental and Economic Regulations • Finance
• Legislative • Litigation
• Tax
Our clients are independent power producers and electric cooperatives; petroleum, power and natural gas market-
ers; domestic and multinational traders; hedge funds and financial institutions; refiners and crude oil producers;
industrial end-users and end-user groups; leading companies in the nuclear energy business and energy lenders.
Sutherland’s environmental practice covering fuels specification and mobile source programs has served refin-
ers, gasoline blenders, renewable fuel producers and importers for over two decades. We routinely assist our
clients in every aspect of the development and implementation of policies, plans and procedures to comply
with the environmental regulations that govern gasoline and diesel fuel specifications nationwide. In addition,
Sutherland attorneys have litigated major cases concerning the state and federal rules governing the manufac-
ture and distribution of clean gasoline and have worked closely with the Environmental Protection Agency to
assure that our clients’ interests are reflected in federal and state fuels policies and rulemaking.
To learn more about Sutherland and our Energy practice, please visit us at www.sutherland.com, or contact one
of our team members:
Peter H. Rodgers p. 202.383.0883 e. peter.rodgers@sutherland.com
Susan G. Lafferty p. 202.383.0168 e. susan.lafferty@sutherland.com
Gregory R. Staiti p. 202.383.0833 e. gregory.staiti@sutherland.com
 RINXCHANGE TM

Where RINs Trade

The RINXCHANGE™ serves as a platform for the
trading of RINs. The RINXCHANGE is open to all
parties registered with EPA under the RFS program,
including producers, importers, blenders, marketers,
petroleum refiners, and investors.

www.rinxchange.com