EPA to Invalidate 30 Million Fuel Credits After Fraud

The U.S. Environmental Protection Agency said it has invalidated 33.5 million renewable-fuel credits sold by an Indiana company for biofuel it didn’t produce, the fourth time the agency has alleged fraud in the program.

The filing today follows fraud charges filed against the former owners of the Indiana-based E-Biofuels LLC in September. The U.S. Justice Department accused them of falsely claiming its products qualified under government incentives for renewable fuels.

The EPA move, which was posted on its website, may further roil the market for credits used by refiners such as Valero Corp. (VLO) and Exxon Mobil Corp. (XOM) to meet government renewable-fuel requirements. Before today’s action, the agency had said three companies produced a total of 140 million fraudulent Renewable Identification Numbers, or RINs.

The basic credit for ethanol last sold for 28 cents. At today’s value of about 40 cents each for biodiesel, the RINs affected by EPA’s decision would be worth about $13.4 million.

Under U.S. law, refiners such as Exxon and Valero must blend ethanol or other biofuels into their fuel mix. EPA rules allow refiners to buy credits from other producers to fulfill their obligations in lieu of making the fuel themselves.

The market in credits for the cleaner fuel seized up last year after federal prosecutors 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.

In the fraud case involving a third company, Green Diesel LLC, the EPA reached administrative settlements with 39 companies including Exxon and Valero. In that case, for example, Exxon agreed to pay a penalty of $165,407, according to the settlement document posted on the EPA’s website.

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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