I think the original spreadsheet
on my blog may actually be correct…..waiting on some confirmation, does anybody
have a good contact at EPA? It isn’t a big deal this year bout would add about
150 million gallons (50+ million bushels) to the available RIN stocks. The
difference between the two assumptions for point 3) becomes a BIG deal in
future years.

I’m no longer convinced I’m
wrong about 3) so the spreadsheet on my blog MIGHT ACTUALLY BE CORRECT and
there are more than 2.640 billion gallons of maize rins possible for a carry
forward….look at the EPA rules.

Note the percentages are nested
and the RVO is NOT on the gap…..

This would mean if the carry in
of advanced and sub-advanced wasn’t 20% then more than 20% of the gap could
come in……. So the max carry is closer to the original one I had on my blog.

(---------------------ORIGINAL
MESSAGE--------------------------)

Greetings from Rome.

This is my interpretation or I
could just be wrong:

1)
First it isn’t that
you can carry 20% OUT of last year into this year. It is that you can meet 20%
of this year’s obligation with RINs from a previous year. That maters when the
mandate is growing. So if the mandate last year was 90 and this
year it is 100. Paulson’s calculation says you can carry out 90*.2= 18 when in
reality it is that you can use 100*.2= 20 this year. So the 2520
constraint is incorrect.

2)
Pauslon uses net
imports. He is correct in that exports lose RINs, you can’t export and then use
those RINs for compliance. The problem with using NET-exports is that the
imports are almost assuredly sugarcane ethanol which is by definition and
advanced fuel. Unless the price of advanced RINS and conventional RINs are the
same, you are not going to use those Advanced RINs to comply with the total
mandate. So you should be using simply exports in the calculation.

3)
Finally, and this
one seems to be not well considered is that the rule on carry is 20% of this
year’s mandate can be met with last year’s RIN carry in. Well there is no
corn ethanol mandate despite what is constantly reported as a mandate which
grows to 15bg. There is simply a gap in the total less advanced mandates that
corn can qualify for. So the max carry-in isnt’20% times this gap as it isn’t
even a mandate itself. It is 20% times the explicit mandates. So
how much corn could you carry in ? This is why there are those notes on the
bottom of the graph about my assumptions of what was in the other classes. I’m
probably wrong on those assumptions of how much other classes of RINs were
available but this is how the math should actually occur

You
can find the language as to why this appears true here http://www.gpo.gov/fdsys/pkg/FR-2010-03-26/pdf/2010-3851.pdf

Search
for the section D. 20% Rollover Cap. Notice the 20% applies to the RVOs of
which there are no corn ethanol mandates. So.

You have

Biodiesel mandate*20% = max
biodiesel carry

Cellulosic mandate*20% = max
biodiesel carry

Advanced mandate*20%=max
advanced fuel carry

Total mandate*20% = max
renewable fuel carry

There is no corn mandate so in
theory that isn’t capped in the way everyone puts it forth.

SO the point is, if you don’t
MAX OUT the carry from advanced fuels, this leaves more that corn ethanol can
carry from the previous year.

Advanced mandate = 2000

MAX advanced carry in is then
400 million gallons

Total mandate = 15200*20% = 3040
million gallons.

So if you were carrying in a
FULL compliment of advanced RINs the amount of maize RINS you could carry would
be 3040-400=2640.

However, given the fraudulent
biodiesel RINs (and the weird vintage price inversion in RINs it caused), the
fact that we had no cellulosic production and the fact that imports don’t look
so large as to say we filled up the 400 million gallons, then we have greater
room for maize ethanol to make compliance. So let’s say we carried in 100
million gallons of all advanced fuel types into 2012. That means we could carry
in

3040 – 100 = 2940 million
gallons of maize ethanol RINS to comply with the total and we would have used a
total of 20% of last year’s RINs to comply with the total mandate. The
Real trick in this calculation is to know what the carry out was for all
advanced fuels, but the number thrown out as the maximum that maize could under
any circumstances carry forward is not that it could be higher.

*as an aside, could over carry
advanced and then be forced to use it to comply with the total renewable
mandate but they wouldn’t be worthless.

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