On February 21, 2013, the U.S. Environmental Protection Agency (“EPA”) opened the comment period on a proposed rule that would create a Quality Assurance Program (“QAP”) to combat fraudulently-created Renewable Identification Numbers (“RINs”) – a serial number assigned to a volume of biofuel for the purpose of tracking its production, use and, trade. A public hearing on the proposal was held in Washington, D.C. on March 19, 2013. Interested parties must submit their comments no later than 30 days thereafter, or by April 18, 2013, if they hope to influence the rulemaking process.
The QAP is intended to respond to the growing problem of fraudulently-created RINs, a practice wherein RINs are created and sold without the manufacture of the corresponding volume of biofuel. It aims to establish a set of options, or quality assurance procedures, to verify RIN validity and then also creates an affirmative defense against civil liability for obligated parties who purchase RINs under a QAP program that are later found to be invalid. This proposed change amends the EPA’s original “buyer beware” approach, which imposed strict liability on all obligated parties that transferred or used invalid RINs, no matter the RIN’s origin. The “buyer beware” approach failed to stem the tide of invalid RINs from entering the marketplace, as more than $100 million in fraudulent RINs were identified in the three years after the creation of the standard. Indeed, the “buyer beware” approach led to unintended consequences for smaller, less established biofuels producers, as the increased risk of EPA enforcement actions led obligated parties to favor more established producers.