A Houston company was accused of selling refiners and brokers fraudulent U.S. credits for biodiesel, further roiling a $2 billion market policed by the Environmental Protection Agency.
Green Diesel LLC allegedly sold more than 60 million invalid clean-fuel credits in 2010 and 2011, the agency said in a notice sent to the company yesterday. The credits were generated without producing the required fuel to match, the agency said.
“The fraud is no longer minor by anyone’s standards,” said Eric Rubury, president of OceanConnect LLC, a broker for the credits that sued the EPA over its handling of the program. “This could now be in the hundreds of millions of dollars for the industry, unless the EPA recognizes the exceptional nature of this issue.”
Under federal law, refiners such as Exxon Mobil Corp. (XOM) and ConocoPhillips must produce 1 billion gallons of biodiesel annually, with their contribution determined by their share of the fuel market. Under rules set up by the EPA, instead of making the fuel themselves, those refiners can buy credits from other producers to fulfill their obligations.
The market in credits for the cleaner fuel seized up after federal prosecutors last year accused Clean Green Fuels LLC of selling 32 million fraudulent certificates. A second company, Absolute Fuels LLC, was issued a notice of violation in February for selling 48 million bogus certificates.
Each credit, or Renewable Identification Number, is worth more than $1. Philip Rivkin, the chief executive officer of Green Diesel, didn’t return a telephone message today.
Green Diesel voluntarily produced certain records in August 2011 and January 2012 to the EPA, and “will continue to cooperate with the EPA in this matter,” the company said in a statement provided via e-mail by its lawyer in the matter, Richard Roper. “Green Diesel looks forward to meeting with EPA to resolve this matter.”
The fraud investigations also have ensnared buyers of the credits, as 30 refiners settled with the EPA without admitting wrongdoing. Exxon agreed to pay a U.S. fine of $165,407; ConocoPhillips (COP), $250,000, and a unit of BP Plc (BP/), $350,000. The EPA says those companies also need to buy replacements for any fraudulent credits, which means purchasers of the credits would have to pay millions of dollars more to replace their RINs.
If EPA sticks to that position, “honest market participants” will be “made victims twice,” Rubury said today in an e-mail.
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