July 3 0 , 2010

VIA ELECTRONIC MAIL

Erv Pickell U.S. Environmental Protection Agency Region 8 1595 Wynkoop Street

Mail Code: 8MSU
Denver, CO 80202

- 1129 pickell.erv@epa.gov

Re: RFS2

- Date of RIN Transfer

Dear Mr. Pickell:

On behalf of the Renewable Fuels Association, Growth Energy, and the American Petroleum Institute, we are writing to you regarding EPA’s recent interpretation of the Renewable Fuel Standard (RFS2) regulations that would no longer deem the invoice date as t he

date of transfer of RINs and renewable fuel for the purpose of the RFS rules unless actual title to
the renewable fuel is also transferred on that date.

As discussed with EPA in 2007, title of fuel is typically transferred upon delivery and it

is not always easy to know the actual date of receipt . EPA recognized this in August 2007 when it responded to a request for an interpretation to resolve this concern. EPA acknowledged “You have indicated that in most, if not all, scenarios no document is create d on the date that title of the renewable fuel is transferred to the purchaser, which typically is the date the purchaser receives the fuel, and that an invoice typically is used by the parties to recognize the transfer of title to the fuel.” (See e

- mail correspondence dated August 28, 2007 and August 31, 2007 included as Attachment A). At that time, we explained that “this invoice would comply with the Renewable Fuels rule if EPA accepts that for purposes of the Renewable Fuels Standard only,

the date o f transfer of title for the renewable fuel and the associated RINs is the date of the

invoice. ” EPA agreed and stated “we believe, where the parties use an invoice as the document which identifies title to a batch of renewable fuel, the product transfer d ocumentation requirements in section 80.1128(a)(7) are satisfied where the RINs assigned to the fuel are included either on the invoice or on a separate document which is transferred to the purchaser on the same day that the invoice is transferred.”

EP A’s new interpretation removes the flexibility provided under the RFS1 regulations for invoicing and reporting , which are more in line with the realities of the market . It also creates uncertainty and adds burdens on both producers and obligated parties a like. EPA’s prior interpretation avoided the problem of interfering with longstanding business practice of when title of fuel actually transfers for purposes of ownership, responsibilities, contract obligations and liability. Without the 2007 EPA interpr etation of the “date of transfer” for the limited purposes of this rule, compliance would become complicated and could lead to unforeseen adverse consequences related to ownership and liability. Thus, we request that EPA retain its RFS12 interpretation of “date of transfer” allowing parties to use the invoice date as the transfer date of

RINs and renewable fuel (for the purposes of this rule only) and allow the invoice date to be the “reportable event” for purposes of EMTS reporting. Alternatively, we req uest a determination that parties can rely on the invoice date plus a set number of days to account for the expected transportation time to estimate the date of transfer and to represent the “reportable event.” Either of these proposals will provide more certainty to the parties, be less burdensome, and still be consistent with the overall purpose of the EMTS reporting.

Background

The invoice date and title transfer date for renewable fuel transactions have several implications outside the RFS program, and standard sales contracts define actual title transfer in a variety of ways. Typically, full title does not transfer until the buyer actually receives the gallons of renewable fuel. When based on possession, the actual transfer of title date largely depends on the mode of delivery of the renewable fuel. Renewable fuel is typically delivered by truck, rail or barge. The invoice date may be within 1 to 2 days of the actual transfer date for delivery by truck. It can be ten to fourteen days before act ual delivery if done by rail car or barge. The actual date of delivery, particularly if transportation is by rail, may not be easily

tracked or could result in inconsistent notification to the seller due to the practical realities of the means of transpor tation and the varying methods of delivery to the buyer’s facility from the terminal. In light of these issues , EPA indicated under RFS1 that the invoice date can be used as the transfer date when the invoice represents the right to title to the fuel, eve n though full title

transfer would occur upon receipt of the fuel. (See e

- mail correspondence dated August 28,

2007 included as Attachment A ).

In the RFS2 rule, EPA established an EPA Moderated Transaction System or EMTS to

allow “for ‘real

- time’ reco rding of transactions involving RINs” and reduce errors in reporting. 75 Fed. Reg. 14,670, 14,728 (Mar. 26, 2010). Real time, under the regulations, means “within five (5) business days of a reportable event (e.g., generation and assignment of RINs, tran sfer of RINs).” Id. at 14,732. See also id. at 14,887 (40 C.F.R. § 80.1452(c)); EPA RFS2 Response to

Comments at 4

- 39 to 4

- 40 (2010). The “[t]ransaction date” required to be reported is the “date of the transfer.” 75 Fed. Reg. at 14,887 (40 C.F.R. §§ 8 0.1452(c)(7), 80.1453(a)(4)). In the RFS2 proposed rule, EPA noted that “the actual items of information covered by reporting under

RFS2 are nearly identical to those reported under RFS1 .” 1 74 Fed. Reg. 24,904, 24,975 (May 26, 2009) (emphasis added).

Since publication of the final RFS2 rule, EPA has indicated that “[t]he transfer date is the date that the seller transfers title of the renewable fuel to the buyer.” EPA, Questions and Answers on Changes to the Renewable Fuel Standard Program (RFS2), Que stion 10.6, http://www.epa.gov/otaq/fuels/renewablefuels/compliancehelp/rfs2

- aq.htm#12 (last updated July 12, 2010). In response to inquiries by the American Petroleum Institute, EPA stated that “the date that the renewable fuel is shipped or the date tha t the seller issues the invoice will only be considered the reportable event for the purpose of EMTS if title to the renewable fuel transfers

1 Technical amendments to the final RFS2 rule would have provided that “[t]he reportable event for a RIN purchase or sale occurs on the date of transfer per § 80.1453(a)(4).” 75 Fed. Reg. 26,026, 26,045 (May 10, 2010). EPA subsequently withdrew this technical amendment. 75 Fed. Reg. 37,733 (June 30, 2010).3 on these dates.” EPA Response to Question 1 in Request for changes to the EMTS and RIN compliance submitted by AP I May 14, 2010 (Attachment B ).

EPA Should Continue to Allow the Parties to Rely on Invoice Date as the Date of Transfer for Purposes of Reporting in the EMTS for RFS2 Compliance

.

While the undersigned associations generally support EPA’s EMTS and efforts to reduce reporting errors, we remain concerned with EPA’s new interpretation that only allo ws in EMTS

the use of the date when full title transfer occurs. As explained earlier, t his change will inadvertently impose undue burdens on both producers and obligated parties and create uncertainty and delays , potentially undermining the effectiveness of the EMTS reporting. As such, we request EPA revise its recent interpretation, and co nsistent with RFS1, allow parties to use the invoice date as the date of transfer of the RINs and thus as the “reportable event” for purposes of EMTS RIN

- Transaction reporting.

As EPA recognized, “both parties to a transaction should clearly understand and document the date of transfer” to “reduce the chance of reporting violations related to these timelines.” EPA Response to Question 1 in Request for changes to the EMTS and RIN compliance submitted by API May 14, 2010 (Attachment B ). We agree and beli eve a commonly

known date is necessary for the EMTS to work efficiently and practically. The actual delivery date is not often a known or certain date. On the other hand, the invoice date is a date certain that both parties can agree on and understand. An invoice in these cases represents the intent to transfer full legal title of the fuel, and thus the RINs, to the buyer upon the buyer’s possession. 2
Indeed, based on the RFS1, several sellers and buyers have already instituted a system that will

allow almost instant reporting to the EMTS based on the invoice date as the “reportable event.”

Based on differences in the industry, flexibility in invoicing has long been utilized by both sellers and buyers of renewable fuel. Using the invoice date does not undermine the purpose of the EMTS, and, in fact, promotes its purposes and efficient use by having a date certain that both seller and buyer will readily know and understand. Without a date certain, more confusion and uncertainty is imported into the pro gram, undermining the purpose of the EMTS

to reduce errors and simplify reporting.

We recognize, however, that there may be times that the actual delivery of the renewable fuel may not occur, despite invoicing of the sale and entry of the sale into the EMTS. While we believe this is not a common occurrence, to the extent this is a concern, we request EPA provide an alternative to using the actual transfer title date which allows parties to estimate the delivery date based on mode of delivery. To appro ximate time of delivery and provide a date certain, we propose the following as an alternative for determining the transfer date:

**•** For delivery by truck, invoice date plus one day;

**•** For delivery by rail, invoice date plus 10 days; and

**•** For delivery by barg e, invoice date plus 14 days.

2 Title is defined both as (a) “all the elemen ts constituting legal ownership” and (b) “something that justifies

or substantiates a claim.” See definition of title, http://www.merriam

- webster.com/dictionary/title.4 To the extent other forms of delivery are utilized, EPA can include similar estimated dates. This provides an alternative and certain date for reporting without imposing additional burdens on sellers and buyers, and would be tter capture those instances, which we believe are relatively few, where the actual delivery may not occur for reasons unknown at the time the invoice is issued. Any potential difference in these times and actual delivery date is still likely to fall with in the five day reporting requirement.

* * *

In many cases, the actual transfer of title does not occur until the fuel, and thus the RINs, is received by the buyer. The invoice date provides a reasonable alternative RIN transfer date for

those sellers and buyers that do not have a practical means of tracking and reporting the actual delivery date and receipt of the fuel. Alternatively, EPA should allow the parties to estimate actual delivery date as outlined above, rather than require a tracking and re porting system that may not be practical in all cases. Using a date certain promotes the benefits provided by the EMTS to ensure real time and efficient reporting of RIN transactions.

We would appreciate the opportunity to discuss this issue with EPA. Since the RFS2 program and the EMTS are already up and running, we request a meeting/conference call next
week (the week of Aug. 2) with representatives of the Renewable Fuels Association, Growth Energy and the American Petroleum Institute and clarificatio n on this issue as soon as possible.

Sincerely,

Geoff Cooper

Renewable Fuels Association

G reg Krissek Growth Energy

Patrick Kelly

American Petroleum Institute

cc: John Weihrauch, weihrauch.john@epa.gov Tony Miller, miller.anthony@epa.gov David Korotney, korotney.david@epa.gov Karl Simon, simon.karl@epa.gov

## ATTACHMENT A

E

- mail correspondence between Exxon Mobil and EPA, August 28, 2007 and August 31, 2007----- Forwarded by Clara Maria G Poffenberger/Houston/ExxonMobil on 07/19/2010 11:25 AM

-----

Clara Maria G Poffenberger/Houston/ExxonMobi l

08/28/2007 02:05 PM

To : Bennett.Marilyn@epa.gov, lawrence.george@epa.gov

C c :
William J Senn/Fairfax/Mobil

- Notes@xom

Subject : Request for Guidance on Title

Transfer Date

Marilyn,

As discussed with you on a conference call last week wit h ExxonMobil and various renewable fuel vendors, we describe below the invoice and title transfer scenarios we are facing and our understanding of how EPA's Renewable Fuels rule would apply. We request an interpretation of the Renewable Fuel regulation t o address these scenarios. This request is made on behalf of producers and marketers that represent approximately 80% of the renewable fuel produced in the U.S. It is important to us and to these companies that the producers, marketers, obligated parties, and EPA have the same understanding on how to comply with the rule in the most efficient way possible. Once you and others at EPA have reviewed the description, we are available to discuss the issue further with you if necessary. Nonetheless, it is impo rtant to us to have a clear understanding of EPA's interpretation of the rules before September 1.

Throughout the development of the RIN program, an invoice has been considered an appropriate document to

use for the PTD and to communicate the RINs associa ted with a transfer of title of a quantity of renewable fuel. The preamble to the rule states that “The PTD can be included in any form of standard documentation that is already associated with or used to identify title to the volume or can be a separate document. In many cases an invoice could serve this purpose.” 72 Federal Register 23939. In EPA’s response to Citgo, attached below,
EPA stated that the invoice is the title transfer document for transfer of RINs and ethanol. EPA’s Q&A #3.5 explains tha t PTDs can be electronic spreadsheets and that bills of lading would not be the PTD used to convey RINs. As a result, in developing systems to comply with the rule, including electronic spreadsheets that would make transfer of RINs easier, the regulated p arties have been operating under the assumption that an invoice

date could be deemed the title transfer date of RINs and associated renewable fuel.

Standard contracts with renewable fuel producers and marketers define title transfer in a variety of w ays. One common option provides that title of renewable fuel transfers upon receipt by the purchaser, not at the time of invoice or the date the product was loaded for shipment. Shipment takes place by rail, barge and truck. Whenrenewable fuel is loaded into rail cars, trucks or barges, bills of lading are created for the carrier or by the carrier. However, the carrier is not the purchaser, and title does not transfer. When the carrier delivers the product to the purchaser, title transfers to the purch aser. No documents are created at this time. Furthermore, if shipments leave from or arrive at terminals that are not owned or operated by the producer/marketer or the purchaser, it is unlikely that the RINs can be delivered to the purchaser in a timely manner unless title transfer date is deemed to be the invoice date. Please note that the terms of the contract govern ownership; as between vendor and purchaser, custody of the product usually reflects ownership.

Invoices are created in three differen t ways: (1) an invoice is created at the time of shipment (rail and barge shipments) and the date of receipt of the fuel is not known by the vendor; (2) an invoice is created after the purchaser notifies the seller that the product was received (in

- tank t ransfers, truck and some barge deliveries); or (3) the invoice is created after the shipment, when product is loaded during the night, over holidays, or on weekends. In all cases, the current system industry

- wide does not involve any document that is crea ted on the date of the title transfer of the renewable fuel. For various commercial and legal reasons, the parties in these transactions cannot alter the date that the title of fuel transfers. Title does not transfer on invoice date; it transfers upon r eceipt by the purchaser. The invoice is the product transfer document that indicates or confirms

that title is transferred but the date of the invoice is not the date of transfer.

Compliance with the existing Renewable Fuel Standard can be accomplished i n the following way. In scenario (1) above, the parties recognize that implicit in the invoice is an intent to transfer ownership of the renewable fuel when the purchaser receives the fuel, even if the exact date is not known at the time the invoice is cr eated. By including the RINs on this invoice, the RINs will also clearly transfer once the purchaser receives the fuel. This meets the requirement of section 80.1160(b)(4) that the transfer of a RIN with K code of 1 is transferred with an appropriate vol ume of renewable fuel on the same day. Section 80.1153 requires PTDs to include the date of the transfer. The invoice is the PTD but the date of the actual transfer can not be specified because it is not known at the time the PTD is created. We propose that the invoice date is the date of the intent to transfer renewable fuel and RINs. For purposes of the Renewable Fuel Standard only, the date of intent to transfer a specific volume of renewable fuel with specific RINs will be deemed to be equivalent to the date of transfer for

use on the PTD.

Under scenario 2, the producers/marketers send invoices after notice from purchasers of the date of receipt of product. The contracts with producers/marketers require RINs to transfer with the delivery of renewab le fuel. RINs are created with the production of the fuel and when that fuel is shipped, the RINs belong with the fuel. The invoice documents the date the purchaser received the fuel and also secured title to corresponding RINs. On the invoice of some pr oducers/vendors, each date of fuel received will have corresponding RINs for the volume received on that date. This complies with section 80.1160(b)(4) in that the invoice is not the transfer of

the RINs but is the document that reflects that the transfer took effect when the purchaser received the fuel. These invoices comply with section 80.1153. The date of the transfer of both the renewable fuel and the RINs will be documented on the invoice. Some producers/vendors of renewable fuel will use the inv oice date as the date of transfer of title for the renewable fuel and the RINs, despite the fact that the actual transfer of title by contract occurred when the fuel was received. This invoice would comply with the Renewable Fuels rule if EPA accepts that for purposes of the Renewable Fuels Standard only, the date of transfer of title for the renewable

fuel and the associated RINs is the date of the invoice.

Under scenario 3, the producers/marketers send invoices as soon as is commercially practical follo wing the shipment of renewable fuel. The justification for using the invoice date in this scenario is the same as scenario 2. Because the producer/marketer has a financial incentive to provide an invoice to the purchaser as soon as possible after shipm ent, it stands to reason there will not be significant delays in transmitting RINS, required by contract, to the purchaser. Requiring the RINS to be delivered on precisely the same day as the fuel changes ownership would require the renewable fuels indust ry to make significant staffing changes in order to allow for RINS to be transferred on nights, weekends, and holidays.

In all cases above, producers/marketers have agreed to provide ExxonMobil a monthly summary of the

transferred renewable fuel and RIN s, including the dates of those transfers, so that the regulated parties cankeep accurate records on transfers of renewable fuel and RINs. Lastly, EPA should be assured that the quarterly balance required by section 80.1128 is an appropriate check on the regulated parties to ensure that RINs and ethanol move together through the system.

Let me know if you have any questions or would like to discuss on a conference call.

(The Citgo Q&A can be found attached below.)

Clara Maria Poffenberger

Counsel

Law D epartment

- Environmental phone: 703 846

- 5904

____________________________________________________ Citgo Question Presented: A majority of the ethanol volume produced is loaded into trucks and railcars for delivery to terminal locations for blending wi th some time delay. When trucks and railcars are loaded on any given day, the producer cuts the invoice (PTD w/ RINs attached). It could be 2

- 20 days later before the volume is actually "received" or unloaded into a bulk terminal. Buyers of ethanol will not typically accept the invoice for payment until the product is received into tankage. Without EPA's clarification of how this should be handled by industry, there will be a myriad of interpretations. What date should the buyer use for the RIN

Transfe r Date; shipment, invoice date OR date of product receipt? There will always be the case where this activity will overlap month ends and reporting periods. EPA's answer should address these situations also. An actual example is included below for a CIT GO Baltimore Terminal delivery:

Example:

1

- BOL 276371 has a Ship Date of 06/21/2007 from origin Iowa Falls, Iowa (Fairbank

- Hawkeye Renewables)

2

- Invoice date 6/22/2007 for this BOL

3

- Railcar unloaded at our Baltimore terminal on 7/9/2007. Goods rec eipt entered in our inventory with this

date.

4

- Paid the vendor on 7

- 12

- 07

The vendor, having invoiced us in June for a 6/21 BOL, would probably be transferring the RIN on their records with the invoice on June 22. Our receipt is not until it reaches / unloads at the Baltimore Terminal which was July 9, so CITGO would not report the purchase until that day when we took title. We will always

have this cross

- month situation on rail activity and probably on a limited number of trucks. It appears that

we w ould receive RINs before we receive the product.

We are looking for the EPA to clarify how the RINs should be reported by both parties in this situation.

EPA's Answer: The date to be utilized is the date on the Title transfer document; Invoice Date. It does not matter when CITGO deems the product in their custody (or received).- Forwarded by Clara Maria G Poffenberger/Houston/ExxonMobil on 07/19/2010

11:21 AM

-----

From: Bennett.Marily n@epamail.epa

. gov

To : claramaria.g.poffenberger@exxonmobil .com 08/31/2007 10:44 AM

cc Kortum.Dave@epamail.epa.gov

, Simon.Karl@epamail.epa.gov

, Cohen.Janet@epamail.epa.gov

, Lawrence.George@epamail.epa.gov

Subject : RFS Product Transfer Documentation

Clara,

Thank you for your email requesting an interpretation of the renewable fuels program product transfer documentation requirements as they apply to specific invoice and

title transfer scenarios.

You have indicated that in most, if not all, scenarios no document is created on the date that title of the renewable fuel is transferred to the purchaser, which typically is the date the purchaser receives the fuel, and that an invoice typically is used by the parties to recognize the transfer of title to the fuel. The invoice may be created either at the time of shipment or after the product is received.

The regulations at section 80.1128(a)(7) provide that any RI Ns assigned to a renewable fuel must be recorded on the product transfer document used to transfer ownership of the renewable fuel volume to another party, or the RINs may be recorded on a separate product transfer document transferred to the same party on the same day as the product transfer document used to transfer ownership of the volume of

renewable fuel. We believe, where the parties use an invoice as the document which identifies title to a batch of renewable fuel, the product transfer

documentatio n requirements in section 80.1128(a)(7) are satisfied where the RINs assigned to the fuel are included either on the invoice or on a separate document which is transferred to the purchaser on the same day that the invoice is transferred. Where a separate document is used, the invoice must include the number of gallon

- RINs assigned to the fuel and reference the document which transfers the RINs. We plan to address this in a subsequent Q&A document.

We will also be sending this email along to API and NPRA.

Marilyn Bennett

## ATTACHMENT B

Request for changes to the EMTS and RIN compliance submitted by

A merican P etroleum I nstitute, May 14, 2010Request for changes to the EMTS and RIN compliance submitted by API May 14 2010

Question 1:

Is it acceptable to ackno wledge transaction data provisionally in EMTS and amend these data with new transactions, if necessary, at a later date?

EPA Response:

No. The RFS 2 regulations do not allow for the provisional entry of transactional data into EMTS. Each time a party e ngages in a transaction involving the transfer of RINs, the party must submit the required information to EPA via its EMTS account. This information must be submitted within 5 business days of the reportable event, which is the date that title to the

rene wable fuel associated with the RINs is transferred. See 40 C.F.R. 80.1452(c) and 80.1453(a)(4). Thus, the date that the renewable fuel is shipped or the date that the seller issues the invoice will only be considered the reportable event for the purpose of EMTS if title to the

renewable fuel transfers on these dates.

The seller should enter information regarding the transaction into EMTS as soon as possible after the transfer of title in order to allow the buyer enough time to confirm the transfer in EMT S. Pursuant to 80.1452, buyers must confirm the transaction in EMTS within 5 business days of the

title transfer date. In order to reduce the chance of reporting violations related to these timelines, both parties to a transaction should clearly understa nd and document the date of title transfer.

Question 2:

Will EPA provide a “true

- up” transaction code in EMTS to correct previously entered

transactions?

EPA response:

RFS regulations contain the flexibility for 0

- 2.5 assigned RINs to be transferred with each gallon of renewable fuel transferred. This flexibility allows parties to "true

- up" on subsequent sales of assigned RINs with renewable fuel without needing a true

- up code in EMTS.

Question 3:

Can an obligated party reduce its RVO for gasoli ne or diesel fuel that it did not refine, but which it “designates for export”?

EPA response:Under 80.1407(a), RVOs for obligated parties are calculated on the basis of gasoline or diesel fuel that is produced or imported into the 48 contiguous states o r Hawaii. T he regulations also specify, in 80.1407(f), that gasoline or diesel fuel that is exported is not included in the obligated party's RVO calculations. Thus, the regulations as currently drafted allow for exports to be

excluded from the RVO for a producer or importer of gasoline or diesel . They do not provide

for a party other than a producer or importer of gasoline or diesel (for example, an exporter of

renewable fuel

- see 80.1430 ) to reduce their RVOs for exported gasoline or diesel.

Sect ion 80.1407(f) does not specify that exported volumes of gasoline and diesel that are excluded from an obligated party's RVO must have been produced or imported by that obligated party. However, we believe that this is the most appropriate interpretation. Otherwise, an obligated party that purchased gasoline or diesel from another party would have an incentive to designate it for export in order to reduce its RVO. Moreover, an obligated party could potentially reduce its RVO down to zero through such pra ctices, even to the point of calculating a negative RVO which the RFS2 program is not designed to address. Therefore, we are only

allow ing obligated parties to exclude exported gasoline or diesel volume from their RVO s if that obligated party produced or imported that gasoline or diesel.