The Always Interesting, Cutthroat World of Biodiesel
Significant developments in the biodiesel renewable identification number (RIN) credit market have unfolded in the past two months. In April, Houston-based Green Diesel LLC was issued a notice of violation (NOV) from the U.S. EPA for generating more than 60 million bad RINs, the third known case of its kind following last year’s bust of Clean Green Fuel LLC and Absolute Fuels LLC. Just before the agency issued the NOV, it announced administrative settlements levied against 30 obligated parties and renewable fuel exporters for purchasing invalid biodiesel RINs.
The agency has come under fire not only from oil lobbyists seeking repeal at minimum of the cellulosic mandates in the renewable fuel standard (RFS), but from RIN broker OceanConnect and the U.S. House. OceanConnect filed a lawsuit against EPA alleging negligence in registering biodiesel producers (RIN generators) without verifying if they even have a plant (Rodney Hailey, Clean Green Fuel owner). After the Green Diesel NOV, a House committee sent EPA a letter stating it opened an investigation on the agency’s handling of the RIN fraud cases, which has wrought havoc on small biodiesel producers, brokers and oil companies. The committee gave EPA a tight deadline to produce testimony and documents on virtually every detail in the fraud cases, particularly what EPA knew about Green Diesel prior to its NOV issuance while it was settling with obligated parties.
Just before Memorial Day weekend, federal agents raided Cima Green Energy Services’ New Jersey office in search of documents, emails and anything to do with Indiana producer eBiofuels LLC and parent company, publicly traded Imperial Petroleum. Biodiesel Magazine learned handfuls of companies were subpoenaed to turn over all correspondence pertaining to eBiofuels to federal agents, including the FBI, U.S. Securities and Exchange Commission and EPA.
As these developments unfolded, Genscape’s RIN Integrity Network, developed with the National Biodiesel Board’s RIN Integrity Task Force, launched. Producers pay to allow their facilities to be monitored in various ways so subscribed obligated parties can verify through a dashboard that credits purchased are valid. Several companies have their own integrity programs, such as Murex, which lays claim to 100 percent validity in 7.6 billion RINs moved since RFS launched. Murex became one of the first RIN marketers to require initial and ongoing site audits for all its suppliers. Weeks after Genscape’s program launch, Lee Enterprises’ RIN 9000 program, featuring RIN education and fuel sampling, merged into Genscape’s RIN Integrity Network.
In June, the jury trial of the first accused biodiesel RIN scammer, Hailey, began. Reports of the trial indicate Hailey’s defense is everybody knew the credits were fake but they bought them anyway, so there was no fraud. Hailey was convicted of wire fraud, money laundering and violating the Clean Air Act. Finally, since May 1, about the time the Green Diesel NOV was issued, until mid June, RIN values declined by 17 percent from around $1.45 to $1.20. RIN expert Jess Hewitt with Gulf Hydrocarbon says this has more to do with the price spread between diesel and biodiesel than fraud.