RINs Problem Requires a Solution

Mark Green
Posted September 27, 2012

The problem of fraudulent biodiesel Renewable Identification Numbers (RINs) – used to demonstrate compliance with federal mandates – continues. With U.S. refiners making plans for 2013, they don’t know how the sale of more than 140 million fraudulent RINs may impact their costs, nor do they know whether the problem will be fixed going forward. That’s the situation despite months of deliberation by EPA and the White House.

The impacts could be costly. Companies that unknowingly bought fake biodiesel RINs may have to pay fines and then buy new RINs to replace the fraudulent ones. Potentially, these are added costs to operations that could hurt consumers. API’s Bob Greco, group director for downstream and industry operations, discussed the issue in a conference call with reporters:

“We’re holding today’s call because we’ve seen no progress from the administration on fixing problems with the RINs program – and because our concerns regarding structural problems with the Renewable Fuels Standard have, so far, gone unanswered.”

Failure to resolve the problem is unfortunate and could undermine the entire Renewable Fuels Standard (RFS), which industry supports. EPA, which designed the RINs program, should take action. Some buyers of biodiesel RINs were defrauded by vendors who were listed on EPA’s website – and some still were listed as of Thursday morning, even though the owners already have been prosecuted, Greco said.

For one thing, Greco said, EPA could validate third-party verifiers, entities that affirm the genuineness of RINs, so that individual companies won’t be liable in the event of fraud in the future. EPA isn’t using the administrative authority it has to make needed corrections, he said, and it appears increasingly unlikely the problem will be solved before next year. Greco:

“The refiners who purchase RINs are now proceeding cautiously. Some may be wary of purchasing them from less well known biodiesel producers, which could penalize these firms and cost jobs. Ultimately, the fraudulent RINs problem threatens the viability and acceptance of the entire RFS program, but that isn’t the only problem with the program. It has become increasingly unrealistic and unworkable in several ways.”

These include:

• Volume mandates that could force concentrations of biofuels blended in gasoline at levels incompatible with vehicles and fuel dispensing equipment.
• A requirement for using cellulosic ethanol in gasoline – even though none is commercially available.
• Increasing biodiesel volume requirements above what is statutorily required, hiking refiner costs by hundreds of millions of dollars, potentially impacting consumers. 

Greco:

“The RFS program needs an overhaul. That will take congressional action to accomplish. While legislation has been introduced to address the RINs problem so that refiners can begin purchasing RINs credits in 2013 knowing they are valid, EPA could make that unnecessary if it simply got to work and fixed the problem itself.”