Fraud! EPA finds 33.5 million more fake biodiesel credits

The Environmental Protection Agency has invalidated 33.5 million renewable fuel credits sold by an Indiana-based biodiesel company for biofuels that were never produced.

This is the fourth time the agency has had to take fraudulent credits off the market.

Refiners are required to purchase renewable fuel credits (RINs) from biofuel producers to comply with the federal biofuel mandate. However, the biofuel credit market has been wrought with fraud as the EPA identified about 140 million fake RINs earlier this year.

“This most recent indictment increases the total number of invalid RINs to over 170 million,” said Charles Drevna, president of the American Fuel & Petrochemical Manufacturers. “We still, however, do not know the full scope of the fraudulent activities within the biodiesel industry except to recognize that it is extensive, pervasive and unfortunately not quantifiable since EPA does not provide details about its ongoing investigations.”

The EPA’s filing against the former owners of E-Biofuels LLC follows charges levied against the company in September by the Justice Department. The DOJ accused the company of “falsely claiming its products qualified under government incentives for renewable fuels,” reports Bloomberg.

Today biodiesel credits are worth about 40 cents each, meaning that the EPA’s actions could affect about $13.4 million worth of RIN’s, according to Bloomberg.

Refiners must purchase RINs in order to comply with federal regulations in lieu of blending biofuels into gasoline, but are still fined by the EPA when they unknowingly purchase fraudulent credits.

“EPA unfortunately continues to hold obligated parties responsible for illegal activities perpetrated by biodiesel producers such as E-Biofuels,” Drevna added. “In the absence of an EPA-approved affirmative defense tied to reasonable due diligence standards, the industry remains unfairly exposed to a system that actually penalizes the victim of fraud rather than focusing on the perpetrator of the crime.”

The federal biofuel mandate, called the Renewable Fuel Standard (RFS), has come under fire recently from a wide variety of industries for causing food and fuel prices to spike as well as causing environmental harm. Lawmakers on Capitol Hill have been actively discussing how best to reform the mandate in order to ease economic and environmental damage caused by the mandate.

“It is harming as many farmers as it helps, is becoming obsolete as an energy independence resource and increasing greenhouse gas emissions,” said Scott Faber, president of the Environmental Working Group.

Even the EPA has admitted that the RFS is unworkable the way it is currently structured as it is forcing more ethanol onto the market than refiners can handle — a phenomenon called the “blendwall.”

“We’re recognizing that the blend wall has been reached,” Christopher Grundler, head of the EPA’s transportation and air office, told senators in a hearing on the RFS.

“Reaching the blend wall clearly presents constraints to using higher ethanol quantities because of the infrastructure and other market limitations,” Grundler said.

While some industries and lawmakers are pushing for full repeal of the RFS, many are simply asking Congress to reform the mandate to ease economic pressures and address environmental damages.

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