OAKHURST, N.J. (DTN) -- The Department of Justice and Environmental Protection Agency on Thursday, Sept. 27, announced a settlement with NGL Crude Logistics LLC. The company will retire 36 million renewable fuel credits, known as renewable identification numbers, and pay a $25 million civil penalty under the settlement to resolve violations of the Renewable Fuel Standard program. The cost of the RIN retirement is approximately $10 million.
DOJ and EPA alleged that NGL entered into a series of transactions with Western Dubuque Biodiesel LLC in 2011 that resulted in the generation of an extra set of renewable fuel credits for approximately 24 million gallons of biodiesel. NGL's scheme generated approximately 36 million additional RINs. RINs are 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.
On July 3, the United States District Court for the Northern District of Iowa found NGL liable for failing to retire RINs when it designated and sold biodiesel to Western Dubuque as "feedstock" for the production of biodiesel, causing Western Dubuque to generate invalid RINs and commit other prohibited acts under the RFS program and transferring approximately 36 million invalid RINs to other entities.
The complaint alleged that, in 2011, NGL purchased millions of 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. Western Dubuque resolved its alleged violations of the RFS program in a 2016 settlement with the United States.
EPA discovered the violations through a tip from RFS program participants, an inspection and extensive investigation into the NGL transactions.
EPA is responsible for developing and implementing regulations to ensure that transportation fuel sold in the U.S. contains a minimum volume of renewable fuel. The RFS program was created under the Energy Policy Act of 2005 and expanded under the Energy Independence and Security Act of 2007.
"Enforcement actions such as the one we announce today are essential to ensuring the integrity of government programs," said Principal Deputy Associate Attorney General Jesse Panuccio. "Fraud in the RFS market will not be tolerated. I applaud the work of the EPA and DOJ enforcement team who achieved today's excellent result for the taxpayers."
Midstream energy provider NGL is headquartered in Tulsa, Oklahoma. It transports crude oil and markets and supplies refined products, natural gas liquids and other products. NGL was known as Gavilon LLC at the time of the violations.
The proposed settlement, lodged in the court today, is subject to a 30-day public comment period and final court approval.
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