AFPM, API respond to US EPA’s plan to stop biodiesel-program fraud

19 April 2013 20:01  [Source: ICIS news]

MEDELLIN, Colombia (ICIS) --The American Fuel & Petrochemical Manufacturers (AFPM) and American Petroleum Institute (API) filed responses to the US Environmental Protection Agency's (EPA) proposal to stop biofuel-credit fraud, the AFPM said on Friday.

"EPA's proposal is a welcome attempt to address the significant fraud in the biofuel markets, but will not solve the systemic problems caused by the RFS biofuel mandates," said AFPM President Charles Drevna.

The EPA in September 2012 said gasoline refiners must use 1.28bn gallons of biodiesel in 2013. The mandate under the Renewable Fuel Standard (RFS) program, which is meant to boost production of renewable fuels, is a 28% increase from the 1bn gallon requirement in 2012.

"These mandates will harm consumers as the EPA forces the consumption of increasing amounts of biofuels that are incompatible with today's cars and refueling facilities," Drevna said.

Congress passed a law in 2007 that required refineries to blend biodiesel with petroleum-based diesel. To keep track of how the mandate is being completed, producers use a 38-character Renewable Identification Number (RIN).

Buyers like refineries can use the 38-digit RIN to show the EPA they have met their share of the annual mandate, and they can sell credits above their share to other buyers, giving flexibility to buyers who are not close to biodiesel fuel producers.

The AFPM and API comments provide mixed reviews of EPA's proposal to fix the RIN problem, called the Quality Assurance Program (QAP).

EPA has issued a Notice of Proposed Rulemaking, which details a voluntary program geared towards providing a more structured way to assure that RINs entering commerce were validly generated.

EPA said it expects the program to promote greater liquidity in the transfer and use of RINs, especially for smaller producers, helping to make the RFS program more efficient and effective.

The refining group supports the agency's decision to provide refiners with an affirmative defense to the liability created by fraudulent biofuel producers, but the scope of the EPA proposal is much broader than the problem it purports to solve, according to AFPM.

The rule follows EPA's discovery of more than 140m fraudulently created biodiesel RINs and its decision to assess fines against refiners who purchased these RINs from EPA-registered biodiesel producers.

"While this rule provides some assurance that EPA is willing to address problems with the RFS, we view it as merely a Band-Aid on a gaping wound in need of a much more drastic measure," Drevna said.

Under EPA's current structure, obligated parties who unknowingly purchased fraudulent RINs are required to replace the RINs, incurring high costs that ultimately get passed down to the consumer.

Both groups urge EPA to resist the temptation to create a third-party enforcement scheme that extends beyond the production facility.

The biodiesel industry has started using private, voluntary verification services for RIN buyers so they can prove their credits are legitimate and reduce risk.

The US biodiesel industry in May 2012, in a move towards stabilizing the RIN market, launched of the Genscape RIN Integrity Network dashboard.

The RIN Integrity Network dashboard allows obligated parties who subscribe to the Genscape service to do due diligence with real-time information on participating biodiesel producers.

Despite this attempt to address fraudulent RINs, significant problems still exist with the RFS and the only resolution is for US Congress to repeal it, according to AFPM.

By: Leela Landress
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