The Environmental Protection Agency is ramping up its efforts to crackdown against violators of its ethanol mandate and renewable fuel standard, or RFS.
The EPA and the Justice Department took a number of enforcement actions on Tuesday against two large shipping and production companies for violating the RFS, in what appeared to be an attempt to game the system.
The actions come just days after EPA leveled a $27 million fine, the largest in the history of the EPA fuel program, against a renewable fuel exporter, giving the series of enforcement actions the appearance of a broader enforcement effort.
The administration took specific punitive actions against two companies on Tuesday, including presenting formal charges in federal court against NGL Crude Logistics, LLC, and Western Dubuque Biodiesel, LLC.
Western Dubuque, a fuel production and shipping company, settled with the EPA and the Justice Department. The charges against NGL are still being reviewed by a federal district court in Iowa.
The government said NGL "entered into a series of transactions with Western Dubuque in 2011," which resulted in the creation of 36 million invalid renewable fuel credits, or RINs. The EPA said the company generated RINs for a fuel that was produced using unapproved feedstocks and processes.
"RINs are credits created when a company produces qualifying renewable fuel and can be traded or sold to refineries and importers to use for compliance with renewable fuel production requirements," EPA explained.
Western Dubuque agreed to a settlement deal that requires it to pay $6 million to resolve the "alleged Renewable Fuel Standard program violations," EPA said.
Under the RFS, refiners are required to blend corn-based ethanol, biodiesel and other biofuels into the nation's gasoline and diesel supplies. How the fuel is produced, as well as what it is produced with, has to be approved by EPA before a company can produce fuel to comply with any of the several requirements under the program.
Western Dubuque was generating a fuel type that was not sanctioned by EPA, and could border on fraud, but the EPA did not claim fraud in its complaint to the court.
EPA cares more about the RINs that were generated, which are "invalid" and must be accounted for and retired. In previous cases going back to 2010, RIN fraud nearly completed decimated small biodiesel producers, sending EPA scrambling to figure out new rules to deal with the problem. In those cases, however, no fuel was produced, just the credits.
The settlement with Western Dubuque does not resolve any of the claims against NGL, which will be taken up in court.
"EPA is committed to a level the playing field for responsible companies, and to ensuring that companies that illegally obtain an unfair competitive advantage are held to account," said Cynthia Giles, EPA's head of enforcement.
"Congress passed the Renewable Fuels Standard program to incentivize production of biofuels in order to achieve substantial reductions in greenhouse gas emissions, reduce the United States' dependence on foreign oil and modernize the United States' renewable energy industry," said John Cruden of the Department of Justice's environment division.
"The Justice Department is committed to ensuring that Congress' goals are not undermined by entities that attempt to compromise the integrity of the incentive program," he said.
The complaint against NGL said the company produced 24 million gallons of biodiesel, generated RINs for the fuel, and then sold the fuel to Western Dubuque not as a fuel, but as a feedstock to make fuel. Western then "reprocessed the biodiesel provided by NGL and generated a second set of RINs for the same fuel," according to EPA.
"Western Dubuque sold the reprocessed biodiesel and the second set of RINs back to NGL," it explained. Then, NGL sold most of the RINs back to other companies to comply with the renewable fuel program.