April 22, 2013 [OPIS] - Thanks to its transmix operations, Kinder Morgan Energy Partners is seeing only upside from the steep escalation in the value of RINs, having reaped nearly $2 million from their sale in the first quarter, the company said this week.
In a conference call to discuss first quarter earnings, Chairman and CEO Rich Kinder called RINs “a positive” that contributed $1.9 million in sales in the January-March period.
The company has on a monthly basis approximately 700,000 excess D6 (or corn-based ethanol) RINs, spokeswoman Emily Mir told OPIS.
Kinder said during the call that the financial return from the sale of the credits depends on RIN prices. “Today those prices are running 65cts, 70cts, so you can multiply that out and that’s how much per month we can make from it,” the CEO said, noting that they were 10cts a few months ago and have been as high as $1.08 or $1.10 at one point.
Kinder added that the company was selling its excess RINs on a monthly basis to a customer “who wants to take all that we have.”
As previously reported by OPIS, the midstream giant along with other transmix processors inhabits a small but winning niche in the RIN-preoccupied gasoline market.
Transmix processors are not obligated to blend renewable fuel into the gasoline they supply so any ethanol used in the unleaded they sell generates excess RINs that can be sold in the secondary market.
As noted by Goldman Sachs, the gasoline portion of transmix – the blend of dissimilar products that become comingled in pipelines – has already been counted against a refiner’s or importer’s renewable fuel obligation, making transmix processors non-obligated parties under the Renewable Fuel Standard.
Kinder Morgan owns transmix facilities in Colton, Calif.; Richmond (3302 Deepwater Richmond, 4110 Deepwater Richmond), Va.; Dorsey Junction, Md.; Indianola, Pa.; Wood River, Ill.; and Greensboro ( Greensboro, Greensboro – Burnt Poplar), N.C.
The EPA estimates that some 750 million gallons of transmix is produced annually in the U.S.; about 40% of the derived product is gasoline and 60% is distillate.
On Wednesday, the company’s five business segments earned approximately $1.276 billion before DD&A and certain items, up 24% year on year. The products pipelines business segment contributed $200 million to total earnings, up 14% versus the first quarter of 2012, and is on track to slightly exceed its published annual budget of 6% growth, Kinder Morgan said in a statement.
