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House Committee Investigates Biodiesel RIN Fraud
July 16, 2012
The House Energy and Commerce Committee held a hearing last week regarding fraudulent biodiesel renewable identification number (RINs) trading that has brought negative publicity to the biodiesel industry and uncertainty to the marketplace.
To date, EPA has brought enforcement actions alleging the generation and sale of 130 million fraudulent biodiesel RINs. Clean Green was convicted of selling over 32 million fraudulent RINs. EPA alleges that Absolute Fuels sold over 48 million fraudulent RINs, and Green Diesel generated and sold over 60 million fraudulent RINs. The sale of fraudulent RINs has damaged legitimate market participants, from small biodiesel producers to blenders to obligated parties, by reducing the economic incentive for those businesses to continue investing in the market as well as by perpetrating a theft on those businesses that have invested jobs and capital in biodiesel infrastructures.
While no concrete proposals emerged at the hearing, panel members discussed modifying the "buyer beware" policy within the system to instead allow market participants an affirmative defense if RINs were purchased in good faith. Several panel members also suggested that EPA needs to clearly define "due diligence" for market participants.
Panelists included representatives from the refining industry, biodiesel producers, and biodiesel blenders. J.P. Fjeld-Hansen, managing director at Musket Corporation, an affiliate of Love's Travel Stops and Country Stores, testified that "fraud in the RIN market takes many forms and Musket believes there is a problem that is considerably larger than the above mentioned fraud cases, biodiesel exports." Internally referred to as "strip and ship," Musket testified that there are many who are exporting biodiesel, either blended as a diesel blend (B5), blended into heating oil and bunker fuel, or as straight B100 and are not declaring their obligation to retire or buy RINs.
In addition to the recent congressional hearing, EPA has been engaging with industry stakeholders to come up with solutions for reining in fraud in the system, and returning certainty and confidence to the marketplace. RIN values have fallen about 20 cents to around $1.20.
This article originally ran in NATSO News Weekly (NNW), NATSO's member only weekly electronic newsletter. NNW is packed with the latest updates on government and business issues affecting the truckstop and travel plaza industry.
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