The Renewable Fuel Standard (RFS) regulations provide a limited flexibility to carry a RIN deficit. Obligated parties and renewable fuel exporters that used invalid RINs may be able to show that they meet their Renewable Volume Obligations (RVOs) by:
- carrying a deficit forward in accordance with the limitations at 40 C.F.R. Â§ 80.1427(b) and,
- making up the deficit with valid RINs in the following compliance year.
Obligated parties and renewable fuel exporters that used invalid RINs in a given year thus have the options of:
- replacing invalid RINs in the given yearâ€™s compliance reports with valid RINs that meet the RFS requirements for that year, including roll over and RIN life limitations, or
- incurring or adding to a RIN deficit for the given year that is carried forward to and made up in the next compliance year.
The EPA expects obligated parties and renewable fuel exporters to acquire sufficient RINs to timely meet their RVOs and comply with the deficit carryover provisions. The EPA recognizes, however, that some parties that used invalid RINs may not be able to obtain sufficient replacement RINs of the proper vintage, and this constitutes what's known as a shortfall violation.
There are two potential types of shortfall violations. First, 40 C.F.R. Â§ 80.1427(b)(1)(iii) provides that an obligated party or renewable fuel exporter may not carry more than 57% of their biomass-based diesel RVO from 2010 to 2011. If a partyâ€™s use of invalid RINs caused it to violate this carryover limitation by falling short of satisfying 43% of its 2010 RVO, then each gallon-RIN that would have been necessary to satisfy 43% of its 2010 RVO constitutes a separate shortfall violation.
Second, 40 C.F.R. Â§ 80.1427(b)(1)(i) and (iii) permits a party to carry a deficit from calendar year i into calendar year i+1 only if that party:
- did not carry a deficit into calendar year i from calendar year i-1 for the same RVO,
- fully makes up for that deficit in year i+1, and
- carries no deficit into year i+2.
Thus, if a party carried any sized deficit from calendar year i-1 into calendar year i, and failed to acquire sufficient RINs to fully make up for that deficit and fully satisfy their calendar year i RVO, then each gallon-RIN the party would have needed to fully make up for that deficit and fully satisfy its calendar year i RVO constitutes a separate shortfall violation. Furthermore, that party is not permitted to carry a deficit into year i +1.
The EPA intends to resolve shortfall violations according to its Interim Enforcement Response Policy to Resolve Violations Arising from the Use of Invalid 2010 and 2011 Biomass-Based Diesel Renewable Identification Numbers (March 14, 2012) http://www.epa.gov/compliance/resources/policies/civil/erp/erp-invalidrins.pdf. (4 pp, 648 KB, About PDF)