New EPA Rules Try to Fix Fraud in U.S. Biofuel Program

The Environmental Protection Agency has proposed new rules that it hopes will increase the use of renewable fuels and at the same time curb fraud and address concerns raised by U.S. refiners. So reports Bloomberg.

The Environmental Protection Agency has proposed new rules that it hopes will increase the use of renewable fuels and at the same time curb fraud and address concerns raised by U.S. refiners. So reports Bloomberg.

The agency yesterday called for a mandate of 16.55 billion gallons of renewable fuels such as ethanol for 2013. That’s an 8.9% increase over last year.

It also came out with new rules that target fraud, after the agency found out that three separate companies sold bogus Renewable Identification Numbers (RINs) for fuel that was never produced. A federal law passed in 2007 mandates that each year, refiners must blend certain amounts of renewable fuels with gasoline. The amount is determined by the size of the refiner’s share of the fuel market. But like with affordable housing or wetlands, instead of producing the fuel themselves, refiners can buy RINs, or credits, from other producers, who will fulfill that refiner’s obligations under the federal law. Under the EPA’s new proposal, those who purchase these RINs or credits must have them verified through third- party audits.

The new rules also spell out what happens – and more importantly, who pays – when a RIN is found to be invalid, according to Bloomberg.

As part of the proposal, the EPA also issued 2013 quotas for ethanol and other biofuels. Refiners must produce or purchase credits for 2.75 billion gallons of advanced biofuels, such as biodiesel, and 14 million gallons of cellulosic biofuels.

The biofuel quotas have proven to be particularly controversial. Last week, a federal court tossed out the agency’s 2012 mandate for cellulosic ethanol, calling the quotas too onerous – particularly since there was no commercial production of cellulosic biofuel last year. But instead of lowering the cellulosic biofuel mandate from the 8.65 million gallons called for in the 2012 mandate, the EPA’s new rules double it.

The move prompted Bob Greco, a director of the American Petroleum Institute to say, “EPA needs a serious reality check.” The EPA, for its part, called the cellulosic target a “reasonable representation of expected production.” Agency officials also said it was in line with the court’s decision, Bloomberg writes.

Refiners have also taken issue with fact that Brazilian ethanol made from sugar cane is being used to meet the biofuel mandate. Such imports have risen sharply as domestic producers, who use corn, struggle with higher costs on account of the Midwest drought in the Midwest. The EPA classifies sugar-cane ethanol as “advanced” because when it is burnt, it produces less greenhouse-gas emissions. Corn-based ethanol does not receive the same designation.

To read the full Bloomberg article cited in this story, click here

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