The Energy and Commerce Subcommittee on Oversight and Investigations today held a hearing on "RIN Fraud: EPA's Efforts to Ensure Market Integrity in the Renewable Fuels Program." Today's hearing examined the Environmental Protection Agency's management of fraud in the production and trade of Renewable Identification Numbers, or "RINs," which serve as credits for the production and blending of renewable fuels and are used for compliance purposes under EPA's Renewable Fuel Standard regulations.
Today's hearing was part of the subcommittee's ongoing investigation into fraud in the RIN market. Energy and Commerce leaders recently wrote to EPA concerning the agency's response to this growing problem. Since November 2011, EPA has identified some 140 million invalid or fraudulently created RINs associated with biodiesel fuel, and that number could double in the coming months. Members and witnesses at today's hearing described the destructive consequences RIN fraud is having on consumers, job-creators, and small businesses and discussed the urgent need for a solution.
"Clearly there is a problem with the current situation. Today we will discuss how to fix the problem, and how to do so with appropriate urgency," said Oversight and Investigations Subcommittee Chairman Cliff Stearns (R-FL).
Charlie Drevna, President of the American Fuel & Petrochemical Manufacturers, discussed the problems with EPA's current "buyer beware" approach to enforcement. Under EPA's current structure, "obligated parties" who unknowingly purchased fraudulent RINs are required to replace the RINs, incurring high costs that ultimately get passed down to the consumer. Representing refiners who serve as "obligated parties," Drevna described these companies as victims. He stated, "EPA's inability to adequately address the situation and provide obligated parties with assurances that it will not continue to be punished for being victims of fraud in the future is creating significant uncertainty and concern in the marketplace."
Thomas Paquin, President of VicNRG, LLC, a marketer and distributor of biofuels, described the turmoil facing the entire biodiesel industry as result of the actions of a few bad actors. "The current issues as well as the future fraud threatens tens of thousands of jobs in the renewable fuel industry," said Paquin. "Approximately 85% of the biodiesel producers are struggling to keep their doors open and biodiesel distributors and blenders are facing tens if not hundreds of millions of dollars in RIN replacement costs even though they have executed business in good faith."
Byron Bunker, Acting Director of the Compliance Division at EPA, appeared before the subcommittee to testify on EPA's efforts to address RIN fraud. "EPA understands the seriousness and urgency of the fraudulent RIN issue and has been diligently working with industry to alleviate uncertainties in the renewable fuels market for obligated parties and producers alike," said Bunker. "We are working closely and continuously with industry and other stakeholders to explore all options that could improve implementation of the RFS program. We are committed to taking action to make necessary adjustments to the program in a timely manner."
While EPA has made progress in uncovering fraud, today's hearing demonstrated strong bipartisan agreement that serious issues still remain and much needs to be done to restore certainty to the biodiesel market. Members of the subcommittee urged EPA to continue working with the private sector to resolve these problems so that innocent market participants do not continue to be punished.
The committee's investigation into EPA's handling of RIN fraud began earlier this year.