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LCFS Spot Contract |
California LCFS |
Oregon LCFS |
Price June 16th, 2023 |
$ 79.00 |
$ 140.00 |
Avg. Weekly Price June 12th - June 16th, 2023 |
$ 81.15 |
$ 140.00 |
Average Monthly Price June 2023 |
$ 82.27 |
$ 139.63 |
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LCFS Futures Contract |
Pricing |
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Dec. '23 |
$ 81.50 |
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Dec. '24 |
$ 85.50 |
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Dec. '25 |
$ 92.00 |
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The California Low Carbon Fuel Standard (LCFS) credit market shed value across the forward curve last week. Prompt credits shed $1.65/t, to average $81.15/t, last week. The prompt market has largely been in a choppy holding pattern since early May.
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 showed a modest contango through Q2 2024.
Last month’s California’s Air Resource Board (CARB) workshop discussed an “auto-acceleration mechanism” as unused LCFS credits rose to record highs. During the workshop California regulators indicated that the final scoping plan may not take effect at the start of the new year much to the disappointment of stakeholders. The regulatory body indicated that the acceleration mechanism would likely not take effect until 2H 2025.
RIN Spot Contract |
D3 |
D4 |
D5 |
D6 |
Price June 16th, 2023 |
$ 2.22 |
$ 1.46 | $ 1.45 | $ 1.43 |
Avg. Weekly Price June 12th - June 16th, 2023 |
$ 2.21 |
$ 1.47 | $ 1.46 | $ 1.44 |
Average Monthly Price June 2023 |
$ 2.16 |
$ 1.45 | $ 1.44 | $ 1.42 |
Current year vintage D4 RINs firmed $0.039/RIN, or 2.76%, on average last week. The market ended the week as low as $1.458/RIN after starting at $1.485/RIN as record high D4 RIN generation for the month of May weighed on the market late in the week.
The EPA delayed by one week the release of the final ‘Set Rule’ to June 21 in a court notice with Growth Energy. The agency will not seek additional extensions to the deadline. The final RFS ‘Set Rule’ covering the 2023-2025 blending obligations was sent to the White House Office of Management and Budget (OMB) on May 15. The original consent decree between the EPA and Growth Energy held the agency to a June 14, 2023 deadline for the release of the finalized ‘Set Rule’.
Retailer industry groups SIGMA and NATSO urged the White House to increase the advanced mandate and remove the eRIN program for 2024 the week prior ahead of the original June 14 deadline.
May RIN Generation came in at an all-time high of 2.11 billion driven by fresh record D4 RIN generation of over 750MM credits. Domestic and foreign renewable diesel accounted for roughly 59% of total D4 generation.
Total D6 generation came in at 1.28 billion credits taking the total for the first five months of the year to 6 billion RINs.
Total RIN generation for the first five months of 2023 came in at 9.35 billion covering over 44% of the total 2023 proposed obligation.
The latest EPA data issued June 15 showed one additional SRE petition issued for the 2022 compliance year taking the total for 2022 to 11 pending petitions. Overall pending petitions totaled 28.
News back in February 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 to this, 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 EPA retroactively overturned 69 Trump-Era SREs starting in April of last year by denying 31 SRE waivers for 2018 and then denying all SRE petitions for 2016 through 2020. Denying SREs is bullish for RINs markets as refiners must enter the marketplace to purchase RINs to cover compliance obligations which were originally waived.
A court ruling earlier this month halted compliance obligations for two refineries with existing SRE petitions taking issue with the retroactive nature of the SRE denial.
If approved the SRE ruling will prove very bearish for the wider RIN marketplace as participants will view the decision as a shift in the EPA’s approach to granting SREs. Notes from the court were strongly in favor of granting the SREs, as the court made it clear it intends to handle SREs as originally intended by the RFS—i.e., waive RFS compliance if undue hardship can be demonstrated—and to allow waivers which were issued in an “unlawful retroactive application.”
Questions? Contact our team for more information: environmental@aegis-hedging.com