Baltimore biodiesel fraud cases draws congressional interest

A federal investigation of fraud in the renewable fuels industry in Baltimore and Texas has drawn congressional interest, with Republican leaders of a House panel expressing concern that the Environmental Protection Agency's handling of the cases could cause significant problems for the nation's motor fuels markets.

Rep. Fred Upton, R-Mich., chairman of the House Energy and Commerce Committee, and the energy and power subcommittee chairman, Rep. Ed Whitfield, R-Ky., wrote the EPA's director of transportation and air quality earlier this month requesting a briefing on the investigation and questioning the agency's enforcement action against energy companies that bought the allegedly phony renewable fuel credits.

Rodney R. Hailey, 33, of Perry Hall, owner of the now-shuttered biodiesel company Clean Green Fuel, is scheduled to go on trial later this year in U.S. District Court in Baltimore on charges of wire fraud, money laundering and violating the federal Clean Air Act by allegedly selling more than $9 million dollars' worth of renewable fuel credits without producing the biodiesel fuel to back up the credits.

A Texas firm, Absolute Fuels of Lubbock, is also under investigation for allegedly selling an even larger quantity of invalid renewable fuel credits, said to have grossed $40 million.  The agency issued a civil violation notice to the company's owner earlier this month; no criminal charges have been filed.

Meanwhile, federal regulators have served 24 violation notices on bio-fuel refiners, distributors and other companies that bought Clean Green Fuel's allegedly invalid fuel credits, known as "renewable identification numbers" or RINs.  The agency is threatening to fine the buyers - including Exxon Mobil, Morgan Stanley, Shell and Sunoco - up to $37,500 per day unless they replace the allegedly phony credits with valid ones. But the committee leaders wrote that with EPA investigating other companies it's hard to know which biofuel credits are legitimate, and they question the agency's treatment of the buyers.

"As a result, the risk of unknowingly buying problematic RINs (credits) is great, and so the renewable fuels marketplace in in turmoil," Upton and Whitfield wrote. They added that other bio-fuel makers are hurt by the uncertainty and their ability to remain in business could be jeopardized.  "The costs of this this turmoil ultimately will be borne by consumers," they warned.

To see the letter, go here.

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