U.S. Files Complaint, Announces Settlement to Address Alleged Renewable Fuel Standard Violations by NGL Crude Logistics and Western Dubuque Biodiesel

(Environmental Protection Agency) The U.S. Environmental Protection Agency (EPA) and the U.S. Department of Justice today announced the filing of a complaint against NGL Crude Logistics, LLC and Western Dubuque Biodiesel, LLC and a settlement with Western Dubuque to address alleged violations of the Renewable Fuel Standard.

The complaint, filed in the U.S. District Court for the Northern District of Iowa in Cedar Rapids, Iowa, alleges that NGL entered into a series of transactions with Western Dubuque in 2011 that resulted in the generation of approximately 36 million invalid renewable identification numbers, or RINs. RINs are credits created when a company produces qualifying renewable fuel and can be traded or sold to refineries and importers to use for compliance with renewable fuel production requirements.

Under the settlement, Western Dubuque has agreed to pay $6 million to resolve alleged Renewable Fuel Standard program violations for generating RINs for renewable fuel that was produced using unapproved feedstocks and production processes. A feedstock is the basic material used in the production of renewable fuel. The consent decree does not resolve any claims against NGL.

“These cases uphold the energy independence and greenhouse gas reduction purposes of the law that Congress passed,” said Cynthia Giles, assistant administrator for EPA’s Office of Enforcement and Compliance Assurance. “EPA is committed to a level the playing field for responsible companies, and to ensuring that companies that illegally obtain an unfair competitive advantage are held to account.”

“Congress passed the Renewable Fuels Standards program to incentivize production of biofuels in order to achieve substantial reductions in greenhouse gas emissions, reduce the United States’ dependence on foreign oil and modernize the United States’ renewable energy industry,” said Assistant Attorney General John C. Cruden for the Department of Justice Environment and Natural Resources Division. “The Justice Department is committed to ensuring that Congress’ goals are not undermined by entities that attempt to compromise the integrity of the incentive program.”

“The Department of Justice is committed to maintaining the integrity of the Renewable Fuel Standard program,” said U.S. Attorney Kevin W. Techau for the Northern District of Iowa. “Congress enacted incentives for the production of biofuels to make the United States stronger and more energy independent. This $ 6 million settlement supports that goal.”

The complaint alleges that in 2011, NGL purchased more than 24 million gallons of biodiesel on the open market, and that approximately 36 million RINs had been assigned to the biodiesel. NGL sold most of the RINs to other entities. NGL then sold the biodiesel to Western Dubuque, but designated it as a “feedstock.” Western Dubuque reprocessed the biodiesel provided by NGL and generated a second set of RINs for the same fuel. Western Dubuque sold the reprocessed biodiesel and the second set of RINs back to NGL. NGL then sold most of these RINs to other entities.

The complaint asks the court to require NGL to retire 36 million RINs to offset the harm caused by the alleged violations and to pay a civil penalty.

EPA estimates that the generation of the second set of RINs alleged in this case resulted in excess greenhouse gas emissions equivalent to 151,319 metric tons of carbon dioxide.

EPA learned that Western Dubuque used improper feedstocks during a 2011 inspection of the company’s biodiesel facility, located in Farley, Iowa. EPA then conducted an extensive investigation into transactions between Western Dubuque and NGL, and determined that the feedstocks that NGL supplied to Western Dubuque were biodiesel, which is not a permitted feedstock, and that other companies had already generated RINs for the product. Western Dubuque informed EPA that it has not used biodiesel as a feedstock since 2011.

EPA is responsible for developing and implementing regulations to ensure that transportation fuel sold in the United States contains a minimum volume of renewable fuel. The Renewable Fuel Standard program - created under the Energy Policy Act of 2005 - was developed in collaboration with refiners, renewable fuel producers, and many other stakeholders. It was expanded and strengthened under the Energy Independence and Security Act of 2007, which was designed to encourage the blending of renewable fuels into our nation's motor vehicle fuel supply, and reduce the nation's dependence on foreign oil, help grow the nation's renewable energy industry, and achieve greenhouse gas reductions.

Western Dubuque owns and operates a 30 million gallon biodiesel plant located in Farley, Iowa. NGL is an energy service company that transports fuel and other products. At the time of the alleged violations, NGL was known as Gavilon, LLC.

The settlement with Western Dubuque is subject to a 30-day public comment period and final court approval.

Excerpts from Politico's Morning Energy: The Justice Department reached a settlement with an Oklahoma energy company on Thursday for biofuels fraud. NGL Crude Logistics agreed to pay a $25 million fine and $10 million in other penalties — even though the company appears to have reaped a total of about $43.6 million in sales from fraudulently double-counting biofuel credits in 2011.

DOJ spokesman Wyn Hornbuckle said the company incurred costs in the process of committing the fraud, and the consent decree released by DOJ said NGL Crude Logistics "does not have an ability to pay a penalty greater than that required by this Consent Decree." Eric Wolff has more for Pros. READ MORE