US petroleum group laments lack of biofuel fraud controls

27 September 2012 23:22  [Source: ICIS news]

MEDELLIN, Colombia (ICIS)--The American Petroleum Institute (API) criticised the US Environmental Protection Agency (EPA) on Thursday for lack of progress in addressing fraudulent use of biofuel credits and failing to address other issues with the country's renewable fuels programme.

“Both the RFS [Renewable Fuels Standards] and the RINs [Renewable Identification Numbers] programme have significant problems, which remain unresolved despite months of work by EPA and the White House,” saod Bob Greco, API downstream group director.

In a programme that has become noted for fraud, the 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.

Under rules set by the EPA, instead of producing fuel themselves, refiners can buy credits from other producers to fulfill their obligations.

“It appears increasingly unlikely that the administration will address the issue of fraudulent RINs in time for a solution to be in place before next year,” Greco said.

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 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.

The fraudulent sales have involved more than 140m bogus RINs, according to the API.  

In June, a federal jury convicted one such company, Clean Green Fuels, of selling some $9m (€7m) of illegal RINs. In August chief executive of Absolute Fuels, Jeffrey Gunselman, was indicted and accused of creating millions of phony biofuel credits.

Bipartisan legislators on 20 September 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 Rins.

The fraudulent RINs problem threatens the viability and acceptance of the entire RFS programme, but that is not the only problem, Greco said. 

The EPA said this month gasoline refiners must use 1.28bn gal (4.8bn litres) of biodiesel in 2013. The mandate under the RFS programme, which is meant to boost production of renewable fuels, is a 28% increase from the 1bn gal requirement this year.

The agency increased the biodiesel volume requirements above what the statute requires, which will hike refiner costs by hundreds of millions of dollars and could impact consumers, according to Greco. 

By: Leela Landress
+1 713 525 2653

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