Q&A
Regulation Meets Its Match Jeff Hove, vice president of RINAlliance, talks about the complex world of RFS compliance and RIN management. INTERVIEW BY RON KOTRBA From his office in Urbandale, Iowa, just outside of Des Moines, RINAlliance Vice President Jeff Hove forecasts stable renewable identification number (RIN) prices through the rest of 2014. “The extended RVO (renewable volume obligations) deadline for 2013, the great unknown for the 2014 RVOs and delays in the biodiesel blenders credit appear to have everyone very comfortable,” Hove tells EPM. “If, however, we continue to see the ethanol/gasoline price inversions, we may see more clear gasoline being marketed than in previous years. This may create a need for D6 (conventional) ethanol RINs to jump somewhat so that unbranded supply gets blended.” This, Hove says, may be more of a logistical rail situation rather than an RVO issue. Hove knows the federal system of regulation and how rules, policies and laws impact industry. After graduating from the University of Wisconsin’s Stevens Point College of Natural Resources with a degree in hydrogeology and contaminant transport, he worked for firms serving various major federal government departments and private companies requiring environmental assessments and cleanups. The work provided a solid foundation and understanding of state and federal Clean Air Act and Clean Water Act laws. Moreover, Hove gained intimate knowledge of the machine that is federal regulation. In 2005, Hove joined the Petroleum Marketers and Convenience Stores of Iowa and became immersed in the marketers’ day-today regulatory struggles. “Once the renewable fuel standard (RFS) was implemented in 2007, we saw a need for our marketers to continue blending under some very onerous and complex rules,” Hove says. “For this, we designed the RINAlliance program to provide turnkey compliance solutions for our blenders and marketers. The program quickly grew outside of Iowa and is currently nationwide.” Following the formidable RIN fraud episodes 60 | Ethanol Producer Magazine | JUNE 2014
in the biodiesel industry, RINAlliance partnered with EcoEngineers to keep the biodiesel program moving forward.
On your website, it appears that most of your renewable fuel customers are biodiesel-related. Why doesn’t RINAlliance have more ethanol customers, and what is the company doing to increase its market share in the ethanol space? RINAlliance does not directly serve the renewable fuel production industry. The 2 million RINs managed in our system per day are equally split, 50/50, between ethanol and biodiesel, and they are brought into our program via our blenders. We have had a significant focus on biodiesel since the major fraud instances, and we believe that many of our clients enjoy blending with biodiesel. With that said, the issue of noncompliant RINs virtually shut down that part of the RFS. Our goal was to work with legitimate biodiesel producers so that our blenders could continue buying product from those facilities and to keep the biodiesel industry moving forward. We established biodiesel facility vetting protocols that were favorable to our key RIN buyers— these later morphed into U.S. EPA’s Quality Assurance Plan rules to a great extent— and we were subsequently able to continue marketing our biodiesel RINs.
What are the biggest challenges to the RIN market and compliance today, and how does RINAlliance ease customers’ minds with respect to these challenges? Competition within the marketing industry is always a challenge. More often than not, renewable fuels with RINs can keep costs down, which means the marketer can be more competitive. We are seeing
the value of the RIN getting worked into pricing at the pump across the country. Our system was designed to generate profits while making RFS compliance quick and easy. Both are needed if we truly want to incentivize renewable fuel blending in the U.S. We have a fantastic staff capable of tackling any RFS, EMTS [EPA Moderated Transaction System] and CDX [Central Data Exchange] question. We also have in-depth knowledge of IRS, fuel quality, and equipment compatibility issues that plague our industry. Our program responds to market conditions very quickly. Whether we are taking steps to avoid fraudulent and/or noncompliant RINs—blocking more than 35 RIN generators—or monetizing the RIN expeditiously, we see those industry needs and we fill the gaps. Any size blender can cost-effectively blend and manage RINs in our program. We have companies that handle less than 50,000 gallons per year and others that are well over 300 MMgy. We are able to monetize all RINs within seven days under our RIN sale contracts. This means that even our smallest blenders can see the benefit of RINs quickly, and at top-tier pricing.
How many obligated party and renewable fuel customers does RINAlliance have, and what services does RINAlliance make available to each type of client? RINAlliance has almost 200 blenders and only a handful of obligated parties. The obligated parties in our group mainly consist of refined fuel importers—diesel from Canada—and even they are primarily marketers that are blending renewable fuels. We provide 100 percent of EPA compliance reporting and attest engagements for all of our clients. We trade RINs on behalf of any blender that wishes to take advantage of our RIN sale contracts. This is not a requirement for membership but approximately 95 percent