Bill would force US feds to stop biodiesel RINs fraud

20 September 2012 19:58  [Source: ICIS news]

WASHINGTON (ICIS)--Bipartisan legislators on Thursday introduced a bill to stop production and sale of illicit biodiesel manufacturing certificates, charging that federal regulators have allowed rampant fraud that is costing hundreds of millions of dollars.

Republican Representative Pete Olson of Texas was joined by another Republican and two Democratic members of the House in sponsoring HR-6444, the “Stop RIN Fraud Act”, designed to force an end to illegal production of biodiesel renewable identification numbers (RINs).

In a programme that has become notorious for fraud, the US Environmental Protection Agency (EPA) established a system of tradable RINs that refiners and fuel blenders must obtain as proof that they are using certain volumes of biodiesel in their energy products.

Every gallon of biodiesel manufactured is assigned a RIN, and refiners obtain those numbers on purchase of biofuel supplies.

According to a House Energy and Commerce Committee report earlier this year, “When the biofuel is blended into transportation fuel, RINs can be separated from the underlying fuel and traded, much like currency, ultimately to facilitate [refiners and blenders] compliance efforts.”

But the committee’s investigation found that over the past year, several purported biodiesel production companies have been selling RINs to the fuels industry without actually producing the related biofuel.

In June this year, a federal jury convicted one such fraudulent company, Clean Green Fuels, of selling some $9m worth of illegal RINs.

In introducing his bill, Olson noted that fraudulent RINs have cost fuels producers and distributors hundreds of millions of dollars.  He and cosponsors of the legislation fault the EPA for failing to control the RINs system.

“Just three biodiesel companies have generated over 140m fraudulent RINs,” Olson noted, accounting for as much as 12% of the entire biodiesel RIN market.  The EPA is investigating additional companies suspected of generating false RINs.

“EPA’s current RIN programme makes the unknowing purchasers of RINs responsible for the fraudulent actions of those who knowingly create or trade invalid RINs,” Olson said.

He said his bill would force EPA to certify the validity and authenticity of RINs before they are traded on the market.

Olson and cosponsor Marsha Blackburn (Republican-Tennessee) also said they have asked the Congressional Research Service (CRS) to investigate the RINs fraud and determine the exact costs or damage done.  The CRS is the investigative arm of Congress.

“This legislation will ensure that EPA polices the programme,” Olson said, adding: “EPA should not be turning a blind eye to the problem of fraud in the RIN programme.”

The EPA has argued that it is the responsibility of RINs buyers to ensure that the certificates they purchase are valid, and that refiners and others should adopt a "buyer beware" policy.

Olson and Blackburn have been joined by Democrats Gene Green (Texas) and Jim Matheson (Utah) in sponsoring the legislation.

Although HR-6444 is likely to receive favourable treatment in the Republican-controlled House, there is little time left in the legislative calendar for action on the bill by various committees and then the full House. 

Nor is action on parallel legislation in the Senate likely before the US national elections on 6 November or even before the end of this year.

By: Joe Kamalick
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