EPA accuses Texas company of peddling $84M in fake credits

Source: Amanda Peterka, E&E reporter • Posted: Wednesday, May 2, 2012

U.S. EPA accused a Houston-based biofuels company yesterday of generating and selling more than 60 million fake renewable energy credits for biodiesel that was never produced.

Green Diesel LLC produced the credits under the renewable fuel standard, which offers refiners, importers and exporters of renewable fuel a credit-trading program to comply with yearly renewable volume requirements, EPA said.

The more than 60 million credits generated by Green Diesel are currently worth $84 million, according to Sutherland Asbill & Brennan LLP, a law firm based in Washington, D.C.

According to the violation notice, EPA determined that the fake credits were generated between July 16, 2010, and July 15, 2011. The Clean Air Act allows the agency to assess a civil penalty of up to $37,500 a day for each violation.

“When fuel credits are generated or used that do not represent qualifying renewable fuel, it undermines Congress’ goals in creating the program, creates market uncertainty and is a violation of the standard,” EPA said in a statement emailed to Greenwire. “EPA enforcement of the standard deters fraud and abuse in the system, helps to restore certainty in the market and ensures that the goals of Congress are met.”

This is the third notice EPA has issued since November to companies allegedly producing fake credits, and it is likely not the last.

Last November, EPA accused a Maryland man of generating $9 million worth of fraudulent renewable identification numbers (RINs) on his computer. The 38-digit numbers represented 22 million gallons of biodiesel that was never produced at the man’s company, Clean Green Fuel LLC.

EPA issued another violation notice in February to Texas-based Absolute Fuels LLC for allegedly creating 48 million fake credits worth approximately $62 million. The agency said CEO Jeffrey Gunselman used the money to purchase an aircraft and a number of vehicles, including a 2010 Mercedes Benz and a 2011 Bentley.

EPA has not released such detailed information on its investigation of Green Diesel

Unlike in previous cases, EPA has also not issued violation notices to the oil companies that purchased the fraudulent RINs. But it is expecting those purchasers to comply with a policy released in March that requires companies to submit reports on whether the purchase of those RINs caused violations of the renewable fuel standard.

Under the new enforcement policy, those companies can also be subject to penalties for using the fake credits.

Last month, EPA settled with 30 companies, including major oil refiners, that it had slapped with violation notices for purchasing the fake credits from Clean Green and Absolute Fuels (Greenwire, April 23).

The newest violation notice did not come as a surprise to the National Biodiesel Board, which had long suspected that EPA has been investigating more companies for alleged RIN fraud. Anne Steckel, NBB’s vice president of federal affairs, said she was pleased to see EPA continuing its enforcement actions.

“If these allegations are true, this company has committed a crime and we urge the federal government to prosecute that crime to the fullest extent of the law,” Steckel said in a statement provided to Greenwire.

The fraud cases have ground the market to a halt for small producers as oil companies have steered clear of purchasing RINs from companies that do not come with a big name brand (Greenwire, March 12).

Steckel maintained that the renewable fuel standard was working as Congress intended and that the problems were the result of a few bad apples. The trade group has set up a task force that recently launched an auditing and monitoring program to increase confidence in the market.

“These are serious allegations that are causing disruptions in the biodiesel and petroleum industries,” she said. “However, it’s important to remember that these are isolated cases and that the vast majority of biodiesel producers are honest companies producing a great product.”