Company settles with feds in RFS fraud case

Source: Marc Heller, E&E News reporter • Posted: Friday, September 28, 2018

An Oklahoma company would pay the federal government a civil penalty of $25 million in a renewable fuels fraud settlement the Justice Department and EPA announced today.

Officials said NGL Crude Logistics LLC generated 36 million fraudulent biodiesel credits through the renewable fuel standard in 2011 by setting up two sets of credits for the same volume of fuel and selling them to show compliance with the standard.

“NGL was cheating,” said Susan Bodine, assistant EPA administrator for enforcement and compliance assurance, in a conference call with reporters. “It really was quite a scheme.”

As part of a settlement pending court approval, NGL will be required to buy back and retire 36 million credits, called Renewable Identification Numbers, at a cost of $10 million, officials said. Bodine said that requirement will make the RIN market whole.

The settlement, subject to a 30-day public comment period and approval by the U.S. District Court for the Northern District of Iowa, follows a July finding by the court that NGL was liable in the case.

The pattern described by the Justice Department reflects the intricacies of the market for renewable fuel credits, a criticism that opponents of the RFS often launch at EPA and Congress. Companies that game the system are “notoriously adaptive,” said Principal Deputy Associate Attorney General Jesse Panuccio.

According to officials, NGL sold 24 million gallons of biodiesel to Western Dubuque Biodiesel, designating the fuel as “feedstock,” which generated RINs. Western Dubuque then reprocessed the fuel, resulting in the creation of a second set of RINs for the same fuel — which it in turn sold back to NGL.

NGL then sold most of the RINs to other entities, officials said.

“It’s essentially a recycling program,” Bodine said.

The settlement is the latest in a string of RFS fraud cases, both civil and criminal, involving biodiesel. Panuccio said those cases have generated more than $60 million in court-imposed penalties and about 30 convictions.

Officials said EPA discovered the practice through a tip from program participants, which led to an investigation into the transactions.