U.S. Environmental Protection Agency January 17 , 2011

Submitted via electronic mail to:

John Weihrauch, Weihrauch.John@epamail.epa.gov Jeff Kodish, Kodish.Jeff@epamail.epa.gov Karl Simon, simon.karl@epa.gov Paul Machiele, Machi ele. P aul @epamail.epa.gov

RE: RFS2 Date of RIN Transfer

Dear Mr. Weihrauch

, Mr. Kodish, Mr. Simon, and Mr. Machiele :

Thank you for your continued interest in resolving the important issue of EMTS RIN transaction reporting for RFS2 compliance

.

As a fo llow

- up to our letters of July 31, 2010 and December 14, 2010 (attached)

, and in response to the

EPA request dur

ing our recent teleconference on January 13 , 2011, this letter explains how the integrity

of the EMTS process would be compromised if the EPA decides to retain the renewable fuel title transfer date as the sole means of substantiating a RIN transaction.

To best understand why this issue is so important to such a wide range of regulated parties under RFS2, it is useful to give a brief summary of how the regulated parties’ systems evolved to where they are today. Under RFS1, EPA had a very similar requirement for specifying the RIN s transfer date. As the implementation of RFS1 approached, a group of representatives from regulated industries worked wi th

EPA to address this major impediment to the seamless flow of information. Whether the appropriate EPA personnel were involved in the decision or not, EPA agreed that the regulations allowed the use of

the i nvoice d ate as the RINs t ransfer d ate, provide d that both parties used the same date to memorialize

the transaction. Over the past 3 years, almost every accounting / RIN s processing system used by the regulated industr ies has been built to work off of the invoice date , as is evident by the intense interest and alignment of the overwhelming majority of regulated/ obligated parties on this issue

. It is noteworthy that

t he issue at hand was not discussed in EPA’s Notice of Proposed Rulemaking for RFS2 because EPA’s proposed wording was left virtually identical to that of RFS 1 on this matter and no indication was given that EPA would reverse its long standing allowance of the i nvoice d ate.

It is also important for EPA to understand that the information EMTS requires for a RIN transaction is mostly in the exclusive possession of the renewable fuel seller. For this reason, regulated parties have set up EMTS reporting systems based on seller

- initiated transactions. Any resolution to the RIN transfer date issue needs to support the continuation of seller

- initiated transactions.

With this background in mind, the resolution of the RIN transfer date is critical to the continued success of the current EMTS entry system. The seller

- initiated, invoice

- based accounting system s cannot work efficiently with the renewable fuel title tr ansfer date because that date is unknown to the seller in most2 of 3

cases, and is unknown on a real

- time basis even to the buyer in many cases

. In order to accommodate the use of the actual title transfer date, a new business process and significant system chan ges would be necessary across the industry. Aside from the considerable expense and burden involved in making these conversions, we believe there will be some fundamental changes in the quality of the inputs into EMTS

, as explained below.

 In most cases, without the use of the invoice date or some approximate date as proposed, n o single trading partner possess es enoug h information to generate a RIN s trade in EMTS. Title transfer for much of the renewable fuel transactions occurs upon delivery of the product as

oppos ed to the point a bill of lading is generated. While tools exist to approximate the exact timing of delivery

, per our proposal to EPA in our earlier letters , none of them short of the buyer’s receiving terminal records would identify the actual fuel title transfer date. The buyer of

the renewable fuel w ould have to assemble the receipt dates of the renewable fuel and transmit that information to the renewable fuel seller so the seller has the final piece of data it needs to generate the EMTS trade. It is likely that e very buyer and seller in the industry w ould devise a separate process for capturing and transmitting this information, and that in some cases, it could even be unique to each terminal receiving prod uct for a buyer since the third

- party storage facilities will have their own distinct process for relaying the information back to the inventory

holder. (And as mentioned above, beyond the transfer date, the buyers do not possess most of the information an EMTS entry requires.) The additional layer (s) of communication between people and systems before the data is introduced into EMTS will most likely result in a larger number of

errors in the trades submitted to EMTS and potentially unavoidable delay s in the information being received by EMTS . As t he EPA is fully aware, even a small decrease in accuracy can have major effects on the number of transactions that would be impacted in EMTS.

 The completeness of quarter

- end reporting would be further complicated by the higher

number of unmatched trades in EMTS. There is a known discrepancy between EMTS and RFS2 in that the quarterly and annual reports in EMTS work from the date EMTS trades are

matched instead of the date the cou nterparties transferred the RIN s and renewable fuels. Admittedly, this situati on does not create a material discrepancy in the reporting because of the tight requirements EPA has on the timeliness of reporting and matching trades. The significance of this discrepancy , however, is directly correlated to the number of unmatched trade s within EMTS (and the number of un

- submitted transactions outside of EMTS), and will grow as it takes regulated parties longer to synchronize the information between themselves.

EPA mentioned during the January 13 , 2011 conference call that extending the same allowance fo r RIN s Transfer Date under RFS2 as was provided under RFS1 would complicate enforcement efforts. The industry is not aware of how the propos ed technical amendment could create opportunities for abuse of the system or create significant additional complexit y around enforcement

. We believe that s uch problems will be prevented by the fact that both buyer and seller would use the same transfer date methodology for any given transaction

, which (by definition) ha s to match in EMTS. If EPA knows of specif ic instances or examples that raise concerns about enforcement

, we would appreciate discussing

them so we can arrive at a mutually agreeable solution.3 of 3

EPA has stated repeatedly that it do es not w ish to interfere with existing business accounting practices

. This can be accomplished b y a llowing the requested flexibility

, and w e respectfully ask EPA to reconsider offering our proposed technical amendment for proposed rulemaking

.

We look forward to discussing and resolving this issue with you in the near future. Thank you very much

for your consideration

.

Sincerely,

Geoff Cooper

Renewable Fuels Association

Greg Krissek Growth Energy

Patrick Kelly

American Petroleum Institute

Tim Hogan

National Petrochemical and Refiners

Association

cc: Tony Miller, M iller

. A nthony@epa .gov David Korotney, K orotney. D avid@epa.gov Paul Argyropoulos, A rgyropoulos. P aul@epamail.epa.gov Chet France, F rance. C het @epamail.epa.gov