Introduction -

In 2007, the Environmental Protection Agency (“EPA”) established a program for trading renewable fuel credits (called “Renewable Identification Numbers” or “RINs”) for companies that were unable to produce enough renewable fuel to meet standards imposed by the Clean Air Act. Problems arose because the program imposed strict liability on anyone who traded in these credits if the credits proved to be invalid. As it turned out, there was widespread fraud involving companies claiming to have produced renewable fuels and the accompanying credits, when, in fact, they had created false RINs and no fuel. Dozens of innocent traders were fined hundreds of thousands of dollars by the EPA, despite their lack of awareness, and the viability of the program was threatened. Last week, the EPA proposed a program intended to reduce the threat of fraud in this program, and to possibly limit the exposure of innocent traders. This alert describes this new proposal.

Summary of Proposal -

On February 21, 2013, the EPA issued and published in the Federal Register a 60-page Notice of Proposed Rulemaking (“Proposal”) that would create a Renewable Fuel Standard RIN Quality Assurance Program (“QAP”). The Proposal is “intended to reduce the incidence of invalidly generated RINs entering the market, provide reasonable assurance of replacement of invalidly generated RINs, and increase liquidity in the RIN market.”