House Energy panel Republicans continue to press EPA over fraud cases

Source: Amanda Peterka, E&E reporter • Posted: Tuesday, May 29, 2012

Top Republicans on the House Energy and Commerce Committee yesterday blamed U.S. EPA for upheaval in the biodiesel industry, saying the agency wasn’t doing enough to address fraud in the fuel credit-trading marketplace.

Chairman Fred Upton (R-Mich.), Oversight and Investigations Subcommittee Chairman Cliff Stearns (R-Fla.), Energy and Power Subcommittee Chairman Ed Whitfield (R-Ky.) and Rep. Michael Burgess (R-Texas) have asked Administrator Lisa Jackson to furnish further information on how the agency is handling fraud cases.

Over the past eight months, EPA has announced three high-profile fraud cases involving renewable identification numbers (RINS), or 38-digit numbers representing gallons of biodiesel that can be traded among companies to meet the nation’s renewable fuels mandate. The last case, announced April 30, involved the sale of more than 60 million fraudulent credits worth $84 million (Greenwire, May 1).

Industry observers expect the agency will announce more cases in the coming months.

“Unfortunately, the production of and trade in fraudulent or invalid RINs has developed into a large and growing problem,” the lawmakers wrote Jackson. “And EPA’s efforts to address the problem so far appear ineffective, and in some respects have harmed the renewable fuels marketplace.”

The lawmakers take issue with EPA’s “buyer beware” policy that requires market participants to perform due diligence to make sure the RINs they purchase are valid. EPA in March released a new enforcement policy that requires those who unknowingly purchased fraudulent RINs to pay penalties if those credits force them out of compliance with their renewable fuels requirements.

The lawmakers wrote that EPA’s handling of the situation has left small producers without a market, as oil companies have stopped buying RINs from all but the most trusted and recognized names in the industry.

“This, in turn, has drastically distorted pricing in the RIN marketplace, making RINs more expensive and driving up costs for the obligated parties,” the lawmakers wrote.

This is not the first time Energy and Commerce Republicans have pressed EPA over its handling of RIN fraud. In early February, Upton and Whitfield wrote a similar letter to EPA. They said that the agency’s Feb. 23 response, in which it affirmed the buyer-beware policy, was insufficient.