More Biodiesel Fraud Uncovered as RFS Deadline Looms

Two more biodiesel companies have been accused of fraud less than two weeks before the Environmental Protection Agency (EPA) will likely soon finalize regulations mandating how much biodiesel must be blended into gasoline this year. According to the Associated Press, the two companies are accused of generating fake ethanol credits, known as Renewable Identification Numbers (RINs), and selling them for $37 million:

Federal prosecutors say a 63-year-old Las Vegas man and a 64-year-old Australian citizen who lived in Canada have been indicted in Nevada on charges that they bilked a U.S. biodiesel fuel program out of more than $37 million.

A 57-count indictment unsealed Wednesday in U.S. District Court in Las Vegas accuses James Jariv and Nathan Stoliar of charges including conspiracy, wire fraud, obstruction of justice and conspiracy to launder money.

Jariv was arrested Tuesday in Las Vegas, where federal authorities say they froze bank accounts and seized property. Stoliar lives in Australia.

Jariv and Stoliar are accused of using two firms — City Farm Biofuel in Vancouver, Canada, and Global E Marketing in Las Vegas — to generate millions of dollars’ worth of federally-funded credits known as renewable identification numbers.

This marks the sixth company accused of biodiesel fraud since 2012. Under the Renewable Fuel Standard (RFS), refiners are required to purchase and blend increasing amounts of biofuels, including biodiesel, into the nation’s fuel supply. Failure to do so can result in hefty fines, even when the fuels do not actually exist. These fines are ultimately borne by consumers in the form of higher gasoline prices.

Even if refiners purchase the required fuel, they’re not out of the woods yet. To demonstrate compliance with the mandate, federal law forces refiners to buy and trade RINs, a string of numbers used for identification when the ethanol industry produces a gallon of ethanol. But refiners who unknowingly purchase fraudulent RINs can still face fines simply for trying to comply with federal law. Once again, these costs result in higher prices at the pump for American motorists.

A creation of government regulation, the RIN market serves no purpose other than to demonstrate compliance with the RFS, making it ripe for abuse. The federal ethanol mandate has created a system in which refiners can be fined either for failing to purchase fuels that do not exist or for unknowingly purchasing fraudulent fuel credits. Both of which raise gasoline prices on Americans.

With the public comment period for the 2014 RFS closing next week, the EPA should waive all compliance requirements for refiners this year. That would bring temporary relief for American motorists. Ultimately, the only permanent solution is for Congress to repeal the RFS.

If you agree that the RFS is broken, take action by signing our petition.