LCFS & RIN Pricing Report Through May 12, 2023

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• Figure 1. California & Oregon LCFS Pricing
• Figure 2. RIN Pricing

Figure 1. California & Oregon LCFS Pricing through 5/12/2023

The California Low Carbon Fuel Standard (LCFS) market slipped marginally following the previous week’s strength. Prompt credits shed $0.20/t, on average last week. LCFS strength has been driven by trader buying and strength in futures markets as the credits become more attractive options ahead of the California Air Resource Board’s new, more stringent scoping plan. The forward structure remained in contango, yet some carry rolled out of 4Q22 and 1Q23.

California’s Air Resource Board (CARB) will hold a workshop to discuss an “auto-acceleration mechanism” as unused LCFS credits rose to record highs. The workshop is scheduled for May 23 and will accept comments up to June 6.

Figure 2. RIN Pricing through 5/12/2023

	D3	D4	D5	D6
Price May 12th, 2023	$ 2.17	$ 1.55	$ 1.54	$ 1.52
Avg. Weekly Price May 8th - May 12th, 2023	$ 2.15	$ 1.56	$ 1.55	$ 1.53
Average Monthly Price May 2023	$ 2.06	$ 1.56	$ 1.55	$ 1.53

RIN prices were modestly weaker across nearly all D-categories amid a lack of actionable headlines. D3 RINs found some support late in the week.

The market is still largely in a holding pattern awaiting a mid-June deadline for the finalization of the EPA’s set rule, while the weeks leading up to the announcement are likely to see press leaks and rumors stir up market activity.

EPA Administrator Michael Regan issued comments at a House Agriculture Committee hearing recently indicating the EPA is likely to cave to both industry and lawmaker pressure to increase the advanced biofuel mandate in the final ruling expected in June.

Debt ceiling negotiations saw non-farm state Republicans look to put advanced biofuel credits on the chopping block, while protecting SAF and carbon capture projects. President Joe Biden threatened to veto the bill, quashing the potential bullish headline impact.

Lawmakers issued a letter in late-April requesting the EPA to delay the implementation of its ambitious eRIN program. The letter cites that the RFS was never intended to be used as "a tool to electrify transportation," and brought up further concerns with the eligitibility of OEMs to generate RINs as well as challenging the overall feasibility of the program.

News that United Refining was denied its SRE hardship waiver by the Third Circuit court added bullish undertones to the RIN complex as the move adds additional demand to the marketplace. Trade organization Growth Energy entered comments in support of enforcing SREs in its case against the EPA. A full denial of all SREs would represent more than 1.6 billion RINs

Prior this move, the approval by a federal court of a SRE for Calumet Special Products 30,000 b/d refinery in Montana provided bearish undertones to RIN markets.

SREs were carved out in the Renewable Fuel Standard (RFS) for refiners producing 75,000 b/d or less which could prove compliance with the RFS—i.e., purchasing RINs—resulted “undue economic hardship.”

The chance of a pivot in the EPA's approach to SREs continued to provide underlying bearish sentiment. A reversal or dovish change in SRE policy would have an outsized impact on the D6 category. 

Market activity is likely to remain curtailed ahead of guidance from the EPA expected in June.

Questions? Contact our team for more information: environmental@aegis-hedging.com