Firm Says It Was Sold Phony Fuel Credits

     HOUSTON (CN) – A fuel distributor claims two companies sold it millions of “fraudulently created, and thus invalid” renewable fuel identification numbers. RIN numbers are part of the U.S. EPA’s Renewable Fuel Standard program, to encourage use of renewable fuels.



     If a refiner blends more renewable fuel than its share, it generates excess RINs, which can be traded or sold to companies that do not blend their fuel with ethanol or biodiesel, according to ethanoltoday.com, “The Official Online Magazine of the American Coalition for Ethanol.”
     Vinmar Overseas sued Lansing Trading Group and OceanConnect, in separate but similar complaints in Harris County Court.
     Lansing Trading Group is based in Overland Park, Kan., OceanConnect in White Plains, N.Y.
     Vinmar, which is registered in the Bahamas and works out of Houston, says it bought 4.1 million RINs from OceanConnect, then resold them to other companies only to find out that they were phony, and worthless.
     “Vinmar made written demand upon OceanConnect to supply Vinmar with replacement RINs with valid 2010 or 2011 RIN numbers. However, despite such demand, OceanConnect has failed to supply Vinmar with valid RINs,” Vinmar says.
     Vinmar says it bought 500,000 RINs from Lansing Trading Group which also proved to be phony, and Lansing also failed to replace them.
     The complaint does not state what the monetary loss was.
     The EPA created the Renewable Fuel Standard Program under the Energy Policy Act of 2005, which required 7.5 billion gallons of renewable fuel to be blended into gasoline by 2012, according to the EPA web page.
     The program was expanded under the Energy Independence and Security Act of 2007 to include diesel, and to increase the “volume of renewable fuel required to be blended into transportation fuel from 9 billion gallons in 2008 to 36 billion gallons by 2022,” according to the EPA.
     The program is designed to reduce greenhouse gas emissions by using renewable fuel, reduce U.S. imports of petroleum and encourage the development of renewable fuels.
     Under the program, each batch of renewable fuel produced is assigned a 38-digit serial number called the renewable identification number RIN. When the product is sold, the RIN goes with it.
     “The program applies to any party taking title to the product, anywhere along the supply chain, from the point of production until the renewable is ultimately blended into finished gasoline or diesel,” according to ethanoltoday.
     Once the fuel and its RIN reach the end of the supply chain, and the fuel is blended into gasoline or diesel by a refiner or importer, the RIN becomes a tradeable credit.
     The EPA requires fuel refiners and importers to establish a “Renewable Volume Obligation,” by multiplying the total volume of fuel produced or imported by the Renewable Fuel Standard percentage, which was 7.76 percent in 2008, according to ethanoltoday.
     The refiner or importer then submits its share of RINs to the EPA to demonstrate compliance with the program.
     “The RIN, in essence, is now a credit used as a method to keep score. If an obligated party blends more renewable fuel than its share, it generates excess RINs. These excess RINs can then be traded or sold to another company that finds it more economical to purchase RINs instead of blending ethanol or biodiesel. Banking and trading of RINs as renewable fuel credits forms the basis for an open RIN market,” according to ethanoltoday.com.
     Vinmar sued both companies for breach of contract, breach of warranty and seeks rescission of contracts.
     It is represented by Stephen Lemmon with Brown McCarroll, of Austin.

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