08 August 2012 20:22 [Source: ICIS news]
(recast with comments from the EPA)
By Al Greenwood
HOUSTON (ICIS)--Two companies accused of creating phoney biofuel credits remain as of Wednesday on a US regulator's list of registered producers.
The so-called Renewable Identification Numbers (RINs) serve as credits for the production and blending of biofuels, and companies use them to comply with the nation's Renewable Fuels Standard (RFS).
Absolute Fuels allegedly created more than 48m invalid RINs, according to a notice of violation issued on 2 February 2012.
The RINs were invalid because Absolute Fuels did not produce the corresponding amounts of biofuel, the EPA alleged.
In addition, Absolute Fuels chief executive Jeffrey Gunselman was arrested in mid-July. The US accused Gunselman and Absolute Fuels of creating and selling RINs for biofuel that was never produced.
Meanwhile, Green Diesel received a violation notice on 30 April 2012. The EPA accused Green Diesel of creating more than 60m invalid RINs without producing the requisite amount of biofuel.
No one from Green Diesel is known to have been arrested, although federal agents raided the office of a sister company, Fuel Streamers. It is not known why agents were at the office.
Fuel Streamers did not immediately respond to a request for comment. The listed phone number for Absolute Fuels did not work, and the company did not immediately respond to an email seeking comment.
In a statement, the EPA said the two companies had stopped producing RINs months before the regulator issued the violation notices. As such, the two companies were not involved in any RIN transactions since the EPA issued the notices.
Likewise, Absolute Fuels and Green Diesel are not active in the EPA Moderated Transaction System (EMTS), the system the regulator uses to manage RIN trading. None of the company's RINs are being traded through the EMTS, the EPA said.
Nonetheless, the nation's RIN programme has come under increasing scrutiny following a rash of fraud cases.
Rodney Hailey, the head of Clean Green Fuels, was convicted in June of selling $9.0m (€7.3m) worth of RINs without producing a gallon of biodiesel.
Altogether, Clean Green Fuels, Absolute Fuels and Green Diesel have created more than 140m invalid RINs, according to allegations by the EPA.
Already, the invalid RINs have entangled several fuel companies, which bought the credits on the belief that they were legitimate.
The EPA takes a buyer-beware approach to RINs, so fuel companies can be found liable for owning invalid credits – even if they had purchased them in good faith.
So far, 30 fuel companies and subsidiaries have reached administrative settlement agreements with the EPA, agreeing to pay $3.45m in penalties in connection with the purchase of 38.5m invalid RINs, according to the regulator.
The invalid RINs make up a small percentage of the total number of RINs in 2011 – less than 1% of the total RINs and about 6.5% of the biodiesel RINs, according to the National Biodiesel Board.
Still, the American Petroleum Institute (API) said that "The invalid RINs are jeopardising the success of the entire renewable fuels standard. We need a speedy resolution by the end of this year."
The producer list is part of the larger problem of uncertainty in the RIN market, said Bob Greco, the API's downstream director. He made his comments during a conference call.
Fuel companies do not know if the RINs they purchase would later be deemed invalid, exposing them to penalties.
The API is working with the EPA and the biodiesel industry to change the current regulations, so fuel companies will not face penalties if they buy the RINs on good faith, Greco said. Ideally, the change could take place by the end of the year.
In response to the invalid credits, the biodiesel industry has introduced a RIN verification system, called the Genscape RIN Integrity Network, according to the National Biodiesel Board.
Additional reporting by Joe Kamalick and Leela Landress
($1 = €0.81)
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