Jul. 12, 2012, Washington, DC – US lawmakers today pressed the Environmental Protection Agency (EPA) to issue reforms aimed at shoring up confidence in the fraud-wracked biodiesel market by the end of this year, knowing that a legislative fix will be a political challenge during election season.
The EPA, which is working with biodiesel producers and refiners on the revamp, is not committing to issuing a formal rule by year’s end, but said it may settle on the basic features of the plan by then.
“It may not be possible to have a final action in advance of 1 January,” EPA compliance division acting director Byron Bunker said at a House of Representatives subcommittee hearing today. “It may well be we can have the system in place.”
Since November 2011, the EPA has revealed three companies issued fraudulent credits used by oil refiners to comply with the Renewable Fuels Standard’s biofuel blending mandate. Biofuel producers generate the renewable identification numbers (RINs) through an EPA-administered system when they make ethanol or biodiesel. The RINs can detach from the physical fuel and be bought or sold independently.
The firms at the heart of the scandal – Clean Green Fuels, Absolute Fuels and Green Diesel – issued 140mn invalid RINs without producing the underlying biodiesel. Some market participants believe more invalid RINs are being disseminated by US fuel exporters that are selling their credits rather than retiring them.
The Renewable Fuels Standard operates as a “buyer beware” system that penalizes refiners for submitting invalid credits. With refiners now increasing their standards for due diligence, small biodiesel producers are finding it difficult this year to convince spooked buyers to take their product.
“I cannot emphasize enough: you have got to help these guys now, and it is serious and it is urgent,” representative Michael Burgess (R-Texas) said to EPA officials at the hearing.
Refiners and the biodiesel industry are working with the EPA on a plan that may include a more robust certification program for producers and an “affirmative defense” protection that reduces liability for buying RINs.
The biodiesel industry sees the EPA fix as less urgent than the refiners. Biodiesel producers are adopting a private RINs monitoring system operated by US energy data provider Genscape.
“What we are working on with the EPA and the obligated parties regarding regulatory issues will only improve upon those efforts, but they are not the solution” National Biodiesel Board spokesman Ben Evans said. “So whether our regulatory discussions are completed by the end of the year is less relevant than getting private-sector solutions in place quickly that can address the issues.”
Refiners need “legal certainty” before the end of this year, American Fuel and Petrochemical Manufacturers president Charles Drevna said in testimony today. Refiners including Shell and BP have had to pay penalties for using the invalid RINs.
“Right now this thing is the law of the land and to categorize the refiners who are victims as either lazy or criminal is totally in my opinion, in our opinion, unfair,” Drevna said.
Bunker, of the EPA, said there is “considerable agreement” among the parties involved. Industry stakeholders delivered a proposal to the EPA on 12 June, he said.
“I would encourage you to work on getting those negotiations and the rulemakings started before we get into the fall,” representative Gene Green (D-Texas) said to Bunker during the hearing.
Republican lawmakers today asked the EPA to produce details on its plans in the next 90 days.
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