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EPA Fuels Scam

Monday October 15th, 2012   •   Posted by K. Lloyd Billingsley at 12:21pm PDT   •  

The federal Environmental Protection Agency, in keeping with its unofficial Stalinist mascot Che Guevara, likes to posture as a tough law-and-order agency, finding inspiration in Roman crucifixion campaigns, and always on guard to protect the planet from “polluters.” Now it turns out that EPA rules are a target-rich environment for scammers.

The 2007 Renewable Fuel Standard (RFS) mandates that refineries blend biodiesel with petroleum-based diesel, with a total requirement of 1 billion gallons of biodiesel. The EPA hosts an electronic system for the trading of credits in the form of 38-character Renewable Identification?Numbers, or RINs. Refineries use the RINs to comply with the renewable fuel law. By purchasing the RINs they get credit for meeting the RFS mandate, but without actually purchasing any of the fuel.

The EPA system is so poorly monitored that scam artists have been able to cash in. A Maryland man was able to sell $9 million of RINs without producing any biodiesel. The case is far from isolated. According to the National Biodiesel Board, in 2011 approximately 6.5 percent of all biodiesel RINs were fake.

The supposedly vigilant EPA learned of the scam but legislators charge that the federal agency took far too long to issue a warning and take action. When the scam did become public, it drove some legitimate biodiesel producers out of business. The EPA says it has new regulations that will fix the problem but no changes are likely this year. It’s dubious, however, whether some kind of EPA Renewable Regulation Standard can fix this problem.

A case can be made that the Renewable Fuel Standard is unrealistic and unworkable, which is why some legislators want to repeal it. They contend that preferential treatment for ethanol and other biofuels has not solved our energy woes. More attention to U.S. domestic energy reserves might help. Meanwhile, it remains clear that misguided legislation plus bad regulation equals massive fraud and higher costs for government.

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October 2012