Congressman Pete Olson

Representing the 22nd District of Texas

OLSON, BLACKBURN SEEK AN END TO FRAUD IN RFS

September 20, 2012
Press Release

WASHINGTON, DC – Reps. Pete Olson (R-TX) and Marsha Blackburn (R-TN) today introduced legislation to stop the rampant fraud in the Environmental Protection Agency’s (EPA) Renewable Identification Number (RIN) program. The RIN program allows fuel producers and refiners to comply with the Renewable Fuel Standard (RFS). The RFS requires them to blend a certain amount of renewable fuel into petroleum stocks every year.  Each gallon of renewable fuel is assigned a RIN, and these RINs are traded between companies to meet their obligations.  Because of the lack of oversight in the RIN market, illicit companies have generated hundreds of millions of fake RINs, costing legitimate producers, refiners and traders hundreds of millions of dollars in losses. Reps. Gene Green (D-TX) and Jim Matheson (D-UT) are also original co-sponsors.

Just three biodiesel companies have generated over 140 million fraudulent RINs – approximately 5-12% of the current biodiesel RIN market -and EPA is investigating other illicit companies.  However, EPA’s current RIN program makes the unknowing purchasers of RINs responsible for the fraudulent actions of those who knowingly create or trade invalid RINs. The Stop RIN Fraud Act of 2012, H.R. 6444, would police the program by requiring EPA to certify the validity and authenticity of RINs before they are traded on the market. Olson and Blackburn recently requested Congressional Research Service to conduct a study to quantify the damage done.

Rep. Pete Olson said, "I oppose the RFS and support its repeal, but while it is in place, we should make it free of fraud. This legislation will ensure that EPA polices the program by certifying the validity and authenticity of RINs before they are traded on the market.  EPA should not be turning a blind eye to the problem of fraud in the RIN program."

Rep. Marsha Blackburn said,“I have seen firsthand through our oversight investigation into the RIN program that it has been ripe for fraudulent activity since its inception. Bad actors have taken advantage of weakness in the EPA’s lack of oversight by generating and selling more than 140 million fraudulent RINs. This legislation will finally help ensure that the EPA or accredited third parties have systems in place that can verify RINs without placing the full oversight burden on refiners and importers.” 

Renewable Fuel Standard (RFS) - The RFS requires obligated parties - refiners and importers of gasoline and diesel - to blend at least 36 billion gallons of renewable fuel annually by 2022. Beginning in 2012, biomass-based diesel is mandated to comprise at least 1 billion gallons annually of this cumulative total by 2022. The RFS requires obligated parties to blend renewable fuel in an ever-increasing percentage of their transportation fuel.  Renewable Identification Numbers, or RINs, are an integral part of the RFS. They are generated by renewable fuel producers and importers and assigned to the fuel when it is produced.

Renewable Identification Number - A RIN is a 38 digit serial number assigned to gallons of renewable fuel as they are produced. Obligated parties must collect and submit to EPA each year enough RINs to match their RFS compliance obligations. Each gallon of biodiesel produced generates 1.5 RINs. Biodiesel producers have the unique ability to separate RINs, whereas other biofuel RINs accompany the fuel until it is blended or purchased by an obligated party, where it can become a “detached RIN” and openly traded or submitted for EPA compliance.  EPA’s Moderated Transaction System (EMTS) is the virtual tracking system for RINS. Once the biodiesel, or any other qualifying fuel, is produced, RINs are entered in the EMTS system.

Problem with the current RINs system - Obligated parties who unknowingly submit RINs later found to be fraudulent have been subject to EPA fines and penalties, and must replace the bad RINs with good ones. Even if an obligated party takes steps to avoid buying RINs later found to be fraudulent, EPA still holds them responsible for the actions of others even if they purchased the RINs in good faith. EPA requires a third party engineering review before a biofuel producer can generate RINs in the EMTS system. There is no regulatory system in place to ensure that after the plant is reviewed, that it is actually producing the amount of biodiesel that it says it is.

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MEDIA CONTACT:

Melissa Kelly (Olson) 202-441-6885
Mike Reynard (Blackburn) 202-225-1112