A Baltimore company called Clean Green Fuel found a way to abuse the U.S. ethanol mandate to steal $9 million from the oil industry.
The EPA runs a program that is supposed to ensure 36 billion gallons of biofuels are blended into the gasoline supply by 2022. Every gallon produced earns something called a renewable identification number, or RINs, which are then sold to and traded among refiners and other “obligated parties” to help meet their annual biofuel quotas.
Clean Green Fuel was selling these credits but never producing the underlying gallons. Clean Green Fuels did not even have a manufacturing plant, though it was registered by the EPA as a biofuel producer authorized to generate RINs.
Nor was it alone. In the biodiesel market—whose size is second only to corn ethanol—the EPA itself estimates that some 140 million RINs are fraudulent or otherwise invalid, and the true number may amount to as much as 12% of the biodiesel “supply.”
The EPA, however, maintains a “buyer beware” policy that says refiners are responsible for ensuring they buy good RINs, even if they are purchased in good faith from companies certified by the EPA. After the EPA’s enforcement gumshoes raided Clean Green Fuels and deduced that it was a fraud, they did not notify the companies buying these credits for 15 months.
Then the agency said the companies would have only 14 days to replace the bad RINs. And then it fined 24 businesses for not conducting due diligence. The total cost came to $40 million.
The real failure of oversight is the EPA’s, given that no one would ever buy biodiesel or ethanol in the absence of the mandate that the agency helped to create. Refiners have been ripped off to the tune of $200 million so far by crooks and government fines, which consumers ultimately pay for at the pump.
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