EPA Raises Biodiesel Mandate for Refiners Under Program

The Environmental Protection Agency said gasoline refiners must use 1.28 billion gallons of biodiesel next year, under a program that was hit by fraud earlier this year.

The mandate under the program, which is meant to boost production of renewable fuels, is a 28 percent increase from a 1 billion gallon requirement this year.

The action “is another step that strengthens America’s energy security by reducing dependence on foreign oil,” EPA Administrator Lisa P. Jackson said today in a statement.

Under federal law, refiners such as Exxon Mobil Corp. (XOM) and ConocoPhillips (COP) must produce biodiesel each year, with their contribution determined by their share of the fuel market. Under rules set by the EPA, instead of producing fuel themselves, those refiners can buy credits from other producers to fulfill their obligations.

That market in credits for the cleaner fuel seized up after federal prosecutors accused two companies, Clean Green Fuels and Absolute Fuels LLC, of selling fraudulent credit certificates.

The National Biodiesel Board, a Washington-based group representing producers, said it is using an outside auditing process to prevent any new cases of fraud. The EPA also is working with producers and refiners on new rules to tighten enforcement, and said it will complete the process this year.

As a result of the fraud investigations, refiners are leery about buying credits from smaller producers, according to congressional testimony in July.

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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