WHAT IS THIS THING CALLED THE POINT OF OBLIGATION?
If you’ve been paying attention to ag news this week and last, you’ve undoubtedly heard about something called the Point of Obligation. You probably picked up on the fact that it has to do with ethanol and the Renewable Fuel Standard. But what is the Point of Obligation (PoO) exactly? Well let’s see if we can boil that down.
As a function of the Renewable Fuel Standard (RFS), there is a requirement that a certain volume of renewable fuels must be blended into the nation’s fuel supply. This blend requirement is called the Renewable Volume Obligation, or RVO. The parties responsible for carrying out the RVO are the obligated parties, also known as the PoO, or the Point of Obligation.
So who carries the PoO now? Currently, refineries (gasoline manufacturers) and gasoline importers must meet the RVO. To comply with the obligated volume number, they submit their required amount of Renewable Identification Numbers (RINs) to the U.S. Environmental Protection Agency. A RIN is generated for each gallon of biofuel sold.
If an obligated party does not have the capacity to blend renewable fuels, or chooses not to carry out that obligation by blending, they can purchase RINs in the market. Parties that blend more than they are required are issued RINs that they can then sell to others who need them.
So as things sit now, there are a few hundred PoO’s that make sure the RVO is met.
Some are suggesting that the PoO be changed to parties downstream, so to speak.
Illinois Corn Growers Association does not have a position on the PoO question. We do expect, however, that the U.S. Environmental Protection Agency administer the RFS and affiliated RVO as written by Congress.