EPA accuses Texas company of creating 48M fuel credits

Source: Amanda Peterka • E&E  • Posted: Monday, February 6, 2012

A Texas-based biodiesel company allegedly created more than 48 million fake renewable fuel credits, U.S. EPA said yesterday in a notice of violation to the company, Absolute Fuels.

Absolute Fuels produced the fake credits to comply with federal renewable fuel standard obligations, EPA said. The credits, represented by Renewable Identification Numbers, are worth approximately $62 million, according to Sutherland Asbill & Brennan LLP, a law firm based in Washington, D.C.

According to EPA’s notice addressed to Absolute Fuels CEO Jeffrey Gunselman, the company generated fake credits for more than a year, beginning Aug. 31, 2010, and ending Oct. 11, 2011.

Under the Clean Air Act, Absolute Fuels could face a civil penalty of up to $37,500 for every day a violation occurred.

The notice comes a few months after the agency issued violations to companies for using fake credits from Clean Green Fuel LLC, a company whose owner was charged with distributing 32 million of the credits under a $9 million scam (Greenwire, Oct. 7, 2011). The case prompted calls by the petroleum industry for EPA to do more to address credit fraud (E&ENews PM, Nov. 4, 2011).

At that time, EPA already had its sights on Absolute Fuels.

In a report submitted in October 2011 to federal court in the Northern District of Texas, U.S. Secret Service agent Michael Fiveash said there was “probable cause” to believe the company and Gunselman had created and sold fake renewable fuels credits since early 2010.

The court filing revealed that Secret Service, EPA and local officials were investigating the company and its CEO since May 2011 for criminal violations of the Clean Air Act and other federal statutes.

The filing also accused Absolute Fuels and Gunselman of devising a scheme to obtain money through wire fraud, which was later used to purchase personal property. Fiveash asked the court for warrants to seize an aircraft worth $3 million and a number of vehicles, including a 2010 Mercedes Benz and a 2011 Bentley.

Ten of the cars and the aircraft were registered to Gunselman while Absolute Fuels was generating fake renewable fuel credits. A subsequent court filing said Gunselman was also seeking real estate deals during that time.

According to a local news channel, federal officials raided the company’s office and Gunselman’s home as part of their investigation and seized the vehicles and other property. All offices owned by Absolute Fuels and its affiliated company Absolute Milling LLC are now shut down, the TV station said in October.

Gunselman formed Absolute Fuels in April 2009, according to Texas state records. Between April 2009 and January 2010, the company produced biodiesel in conjunction with Double Diamond Biodiesel Inc. in Dimmit, Texas, according to the Secret Service report.

In August 2010, Gunselman purchased an existing biodiesel plant in Anton, Texas, but the venture failed to produce any fuel. The facility, however, was registered with EPA and generated renewable energy credits, according to the filing.

A broker attempting to buy Renewable Identification Numbers from Gunselman first alerted federal authorities to Absolute Fuels’ activity after becoming suspicious of the large quantity of credits being sold. When inspectors later visited the plant, they found “floors immaculately clean for a biodiesel production facility” and concluded the plant was not producing any fuel.

A second Texas plant purchased by Gunselman in April 2011 also failed to produce any fuel.