Grassley seeks answers from McCarthy on RIN market oversight

By Erin Voegele | September 26, 2013

Sen. Chuck Grassley, R-Iowa, has sent a letter to U.S. EPA Administrator Gina McCarthy, requesting that the agency take action to increase transparency in the renewable identification number (RIN) market and provide assurance that the market is functioning for its intended purpose rather that acting as a profit mechanism for financial institutions.

Within the letter, Grassley stresses he is concerned about recent reports of manipulation or exploitation of the RIN market by non-obligated parties, such as financial institutions. “Allegations that the opaqueness of this market is leading to abuse and exploitation by individuals or firms simply to generate profits at the expense of refiners, other obligated parties, and perhaps consumers is troubling.  The EPA needs to provide assurances that this market is functioning for its intended purpose, rather than acting as a profit mechanism for Wall Street banks and other financial institutions.”

Grassley asked McCarthy to provide answers to nine specific questions, including asking her to explain what safeguards the EPA has put in place to prevent market manipulation and abuses in the RIN market. Grassley also asks McCarthy to describe way is in which the EPA is working to modify the RIN market to eliminate manipulation and trading practices, such as hoarding. In addition, he inquires if there is away for members of the general public to discover market prices for RINs via the EPA’s transaction system and asks why the EPA doesn’t publically disclose information that would enhance transparency in the market.

In the letter, Grassley also asks McCarthy to explain what percentage of separated RINs are in the hands of non-obligated parties, and wonders if the current opaque RIN market is the best way to achieve a fair, orderly efficient market. In addition, he inquires if the EPA has considered external oversight over the RIN market.

“It’s troubling that there appears to be no way to determine who is trading the credits, at what price, and at what volumes,” wrote Grassley in the letter. “It’s even more alarming that it’s impossible to know the extent of the involvement of financial or other speculators.  It’s imperative, to maintain confidence that the pricing of RINs is based on market forces and not manipulation or excessive speculation, that EPA increase the transparency of the market.  By answering these questions, EPA may be able to provide the necessary transparency.”

Grassley is not the only Senator taking action with regards to RINs. Earlier this week Sen. Debbie Stabenow, D-Mich., issued a letter to Gary Gensler, chairman of the Commodity Futures Trading Commission, requesting an investigation into possible RIN market manipulations.