Will the EPA Reverse Itself on the Write Down of the Renewable Mandate? The Message from the RINs Market Scott H. Irwin

E10 blend wall challenges drove EPA policy shift: The proposal seeks to put the RFS program on a steady path forward - ensuring the continued growth of renewable fuels while recognizing the practical limits on ethanol blending, called the ethanol "blend wall. EPA Proposed 2014 RVOs

E10 blend wall challenges drove EPA policy shift: The proposal seeks to put the RFS program on a steady path forward - ensuring the continued growth of renewable fuels while recognizing the practical limits on ethanol blending, called the ethanol "blend wall. Novel legal argument for renewable mandate write down: inadequate domestic supply EPA Proposed 2014 RVOs

EPA Proposed 2014 RVOs

What are the Implications of the 10% Ethanol Blend Wall for the RFS?

The Ethanol Market: No Mandate Price Quantity 1.1 x P cbob 13 Demand Supply PePe Gasoline Blenders Selling Price Buying Price 13 bil. gal. = E10 blendwall 5 bil. gal. = minimum for MTBE replacement

The Ethanol Market: RFS Mandate Price Quantity 1.1 x P cbob 13 Demand Supply PePe 12.6 Gasoline Blenders Selling Price Buying Price RFS 2011

The Ethanol Market: RFS Mandate Price Quantity 1.1 x P cbob 13 Demand Supply PePe 12.6 Gasoline Blenders Selling Price Buying Price 13.8 RFS 2011 RFS 2013

The Ethanol Market: RFS Mandate Price Quantity 1.1 x P cbob 13 Demand Supply PePe 12.6 Gasoline Blenders Selling Price Buying Price 13.8 RFS 2011 RFS 2013 Additional biodiesel mandate

The Ethanol Market: RFS Mandate Price Quantity 1.1 x P cbob 13 Demand Supply PePe 12.6 Gasoline Blenders Selling Price Buying Price 13.8 RFS 2011 RFS 2013 D6 RINs Price = 0 Additional biodiesel mandate: D6 = D4 RINs Price

The Biodiesel Market: No Mandate Price Quantity P ulsd Q* Demand Supply P bd =

Price Quantity P ulsd Q* Demand Supply P bd 1.28 Diesel Blenders Purchase Price Selling Price RFS 2013 The Biodiesel Market: Binding RFS Mandate

Price Quantity P ulsd Q* Demand Supply P bd 1.28bg Diesel Blenders Purchase Price Selling Price wet RINs Price RFS 2013 The Biodiesel Market: Binding RFS Mandate

Price Quantity P ulsd Q1* Demand Supply P bd 1.28bg Diesel Blenders Purchase Price Net Selling Price wet RINs Price RFS 2013 The Biodiesel Market: Binding RFS Mandate Demand + Tax Credit Q2*

Price Quantity P ulsd Q1* Demand Supply P bd 1.28bg Diesel Blenders Purchase Price Net Selling Price wet RINs Price RFS 2013 The Biodiesel Market: Binding RFS Mandate Demand + Tax Credit Q2*

Who Knew What When about the EPA Policy Change?

OPIS biofuels news service reported on July 24: "There is lots of testimony on Capitol Hill this week on the subject of RINs, with various stakeholders reaffirming their positions on the controversial credits. A call for a repeal of the RFS by some lawmakers isn't regarded as a movement with any traction, but the noisy week has inspired buzz that EPA might act sooner rather than later and perhaps restate mandatory levels for blending that are part of the RFS.

OPIS biofuels news service reported on July 24: "There is lots of testimony on Capitol Hill this week on the subject of RINs, with various stakeholders reaffirming their positions on the controversial credits. A call for a repeal of the RFS by some lawmakers isn't regarded as a movement with any traction, but the noisy week has inspired buzz that EPA might act sooner rather than later and perhaps restate mandatory levels for blending that are part of the RFS. The next day, on July 25, OPIS reported: "Prices for D ethanol RINS are in a freefall this morning, on chatter coming from Washington caucuses and hearing rooms, as well as on a sense that some major holders of RINs are liquidating some holdings. OPIS just confirmed that 2013 vintage D6 RINs moved in the last 15 minutes for just 90cts, after opening at $1.05 and plunging in 5ct increments in a clear sellers' panic. There is no word on the scale of volumes, but those holding RINs are frightened that some sort of remedy might be coming from the Environmental Protection Agency.

OPIS biofuels news service reported on July 24: "There is lots of testimony on Capitol Hill this week on the subject of RINs, with various stakeholders reaffirming their positions on the controversial credits. A call for a repeal of the RFS by some lawmakers isn't regarded as a movement with any traction, but the noisy week has inspired buzz that EPA might act sooner rather than later and perhaps restate mandatory levels for blending that are part of the RFS. The next day, on July 25, OPIS reported: "Prices for D ethanol RINS are in a freefall this morning, on chatter coming from Washington caucuses and hearing rooms, as well as on a sense that some major holders of RINs are liquidating some holdings. OPIS just confirmed that 2013 vintage D6 RINs moved in the last 15 minutes for just 90cts, after opening at $1.05 and plunging in 5ct increments in a clear sellers' panic. There is no word on the scale of volumes, but those holding RINs are frightened that some sort of remedy might be coming from the Environmental Protection Agency. Only a few days later, on August 6, OPIS noted that: "It is a wild Tuesday morning in the paper markets for RINs - - Renewable Identification Numbers - - as well as most grades of gasoline. Reports from Washington indicate that there could be a forthcoming action from the Environmental Protection Agency, perhaps as early as today, that might grant some relief from targets on blending."

What Do Recent Movements in RINs Prices Tell US about The Possibility of an EPA Reversal on the Renewable Write Down?

OPIS biofuels news service reported on February 25: Senator Charles Grassley of Iowa last week told reporters, "I would doubt there would be a complete reversal [from the proposal], which is what I would like to happen. I'd be surprised if there wasn't some modification of the original rule that still might be considered a partial victory for ethanol."