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NEWS NOTES
Oil industry tries biofuels matchmaking
Large corporation seeks same to purchase renewable fuels credits (possible LTR).
It’s not exactly Craigslist or Match.com, but now the American Petroleum Institute (API) has its own online matchmaking board — for oil and gas companies looking to trade renewable fuels credits. The API Credit Exchange (ACE) was created in March to help members of the industry (such as petroleum producers, refiners and importers) comply with recent increases in the Renewable Fuel Standard, the federally mandated minimum volume of renewable fuels that must be blended into gasoline. To do that, ACE helps match credit buyers with credit sellers via the Internet. “In an oversimplified way, it is similar to Craigslist,” says Patrick Kelly, a downstream associate with API in Washington, D.C.
The organization first considered the creation of a credit exchange for renewable fuels following the Energy Policy Act of 2005, which created the Renewable Fuel Standard program. That law mandated that gasoline sold in the United States include at least 5.4 billion gallons of renewable fuel in 2008 (and 7.5 billion gallons by 2012). In 2007, the Energy Independence and Security Act raised those standards further, to 9 billion gallons in 2008, increasing to 36 billion gallons by 2022.
API, which represents more than 400 companies, expects its credit exchange to help its members reach these standards by hosting a searchable bulletin-board style list of postings from companies looking to either buy or sell excess credits. What are actually traded are volumes of Renewable Identification Numbers, or RINs, serial numbers that the Environmental Protection Agency (EPA) assigns to different biofuels when they enter the market. At a membership cost of $1,000 to $1,500 for the first year, ACE participants of all sizes, from large oil companies to independent blenders, can post their asking price for biofuel credits — and, if they like what they see, biofuel producers can get in touch.
Although ACE provides a place for the companies to find each other, all of the actual buying and selling is done privately, Kelly says. In fact, if they so choose, companies can “blindfold” their contact information so that it won’t appear on the site; interested buyers or sellers can instead enter in their own contact information and wait to hear back. “That provides a little security that these people’s position, whether long or short on RIN credits, isn’t easily obtained,” he says.
Once the companies have made contact, the details of their transaction — including prices — are up to the individual companies. Although the original postings may list desired prices and volumes, those aren’t guaranteed, Kelly says. However, API says those public bids can provide some liquidity to the system, helping to set general market prices.
Companies are slowly joining the credit exchange, he says, but that activity is likely to pick up toward the end of the year. That’s when companies are required to report their renewable fuels usage to EPA — and at that time, many more companies may be looking to meet their match.
