BIO analysis finds no link between blend wall, RIN price spike

By Erin Voegele | October 05, 2016

The Biotechnology Innovation Organization recently released a white paper that analyzes U.S. EPA data, challenging the widely accepted assumption that the blend wall caused the 2013 spike in renewable identification number (RIN) prices.

The white paper, titled “The Myth of High RIN Prices as Proof of the Blend Wall,” analyzes data recently released by the EPA on renewable fuel standard (RFS) compliance between 2010 and 2013, which is the last year for which complete compliance data is currently available.

“The success of the renewable fuel standard has become distorted by the myth that U.S. refiners have encountered an unbreakable blend wall,” said Brent Erickson, executive vice president of BIO’s Industrial & Environmental Section. “Oil refiners, their champions in Congress, and even EPA have proposed changes to the RFS program based on this myth. Yet these changes to the RFS are aimed at solving a problem that never existed.”

“Data recently made available by EPA demonstrates that obligated oil refiners and importers were able to meet RFS requirements through 2013—even building excess RINs—despite having reached the blend wall as early as 2010 and definitely surpassing it by 2012,” Erickson said. “EPA’s delays in issuing 2014 and 2015 rules—which were in response to the assumed arrival of the blend wall—obscured this data until now.”

“The delays in issuing rules and the proposed changes to the RFS have undercut investment in advanced biofuels and harmed developers of new technology,” Erickson continued. “EPA should reconsider its proposed RFS rules for 2017 in light of the newly available data.”

Within the white paper, BIO notes that RFS obligated parties reported fuel use and use of ethanol RINs indicates that the blend wall was reached as early as 2010 and was definitely breached in 2012. “Nonetheless, during those years conventional RIN prices remained low and obligated parties continued to accumulate excess RINs to carry over for future compliance years,” said BIO in the paper.

“The 2013 price spikes in spot market RIN trading cannot be explained as a consequence of the blend wall, since they are not connected to a demonstrable increase in difficulty for obligated parties to meet annual RFS obligations,” BIO continued. “The finding has implications for currently policy in EPA’s administration of the RFSW. Further research into the causes of RIN price spikes will require data on the volumes of RINs traded and actual prices paid during transfers of RINs.”

Within the report, BIO also notes that its analysis shows refiners’ and importers’ use of compliance flexibility reveals they have not experienced any RIN shortages. In addition, BIO stresses EPA’s rulemaking delays and unwarranted changes to the RFS based on blend wall assumptions harmed biofuel producers while providing obligated parties relief for a problem that didn’t exist. Specifically, the group notes that EPA’s new methodology for setting annual renewable volume obligations (RVOs) has caused a $22.4 billion shortfall in necessary investment in advanced biofuels. According to BIO, EPA should reconsider its proposed rule for the 2017 RFS in light of newly available data.

A full copy of the white paper can be downloaded from the BIO website.