Government’s Answer to RIN Fraud: Fine the Victim?
Consider the following for a moment: Every state in the country (except New Hampshire) requires drivers to purchase auto insurance. You dutifully purchase auto insurance while adhering to the government’s list of approved vendors, as required by law. You operate your vehicle with that insurance policy that you paid for. But you and others operating in good faith find later that the government has accused your insurance provider of being a fraudulently run business and that the insurance they sold you was not valid. Now imagine that the government then unexpectedly levies fines on you for driving without valid insurance.
This is the situation in which many domestic fuel manufacturers today find themselves with Renewable Identification Number (RINs) credits. RINs have been mandated to be purchased from private vendors of biodiesel under the federal government’s Renewable Fuels Standard (RFS) which is operated by the U.S. Environmental Protection Agency (USEPA). Several of these vendors that were initially approved to sell RINs by the USEPA are in various stages of investigation or prosecution by federal authorities. Fuels manufacturers who inadvertently bought these particular RINs to comply with the federal RFS mandate are now being fined by the Government, even though these same manufacturers are the victims of RIN fraud. Can you recall a situation where the victims of fraud are charged with the crime of being a victim?
The federal government requires manufacturers of gasoline and diesel to purchase a sufficient number of RINs each year to demonstrate compliance with the RFS. Many manufacturers that complied with this mandate are now under attack from the government because those RINs that were purchased in good faith in compliance with federal government rules, were subsequently informed that the RINs were invalid. In fact, the federal agency which mandated the creation of an artificial market and maintains a list of apparently approved vendors of product for this market has balked at creating a mechanism by which purchasers can determine if the product (RIN) they purchase is valid. Further, the federal government levied fines against manufacturers that complied with the mandate even though they were victims of RIN fraud. Only something created and mandated by Washington DC could be this absurd.
Since the summer of 2012, as Congress became aware of the government’s actions that facilitated the RIN fraud debacle, oversight hearings were held and the USEPA was called to account for its actions. Quickly thereafter, the White House became involved to expedite forcing the USEPA to develop a solution through rulemaking. Multiple meetings with stakeholders and other interested parties ensued through Christmas 2012, and on January 31 of this year, USEPA finally issued a proposed rule designed to restore some integrity to the RIN market for biodiesel. Congressional oversight continues as the rulemaking process is expected to drag on into the summer of 2013 before anything changes.
The articles and letters posted below would form the basis for a tragic comedy if the consequences weren’t so serious.