EPA Considering Safe Harbor for Renewable Biofuel Purchasers
In the wake of a recent spate of RIN fraud cases involving a reported 140 million invalid RIN (renewable identification number) credits, EPA is considering revisions to the Renewable Fuels Standard (RFS2) program that would provide greater clarity for obligated parties (oil companies that refine and import gasoline and diesel). Although EPA has taken aggressive enforcement action against fraudulent RIN producers, EPA's current "buyer beware" policy also penalizes oil companies that are victims of RIN fraud by imposing civil penalties and requiring replacement of fraudulent RINs, thus adding insult to injury.
Responding to industry protest, EPA is now considering changes to the program that would enhance due diligence requirements and perhaps provide some level of protection for obligated parties such as an affirmative defense or "safe harbor" for oil companies that undertake sufficient due diligence or rely on third-party verification. EPA's anticipated rule is likely to provide for the accreditation of third-party verifiers and guidelines for undertaking voluntary due diligence through an approved Quality Assurance Program. EPA also may develop an enforcement policy applicable until the rule is finalized. In writing revisions to the RFS2 program, EPA may well draw on prior experience with fraud cases under the Clean Air Act Title VI (Montreal Protocol) refrigerant allowance program as well as more recent participation in design of greenhouse gas cap-and-trade legislation in Congress, such as the stymied Waxman-Markey bill, which included third-party verification provisions. However, EPA's attempts to fashion safe harbor provisions in the past have not always been a success, such as the stillborn bona fide prospective purchaser affirmative defense under the agency's brownfield redevelopment program. Accordingly, stakeholders should be participating actively to help EPA to carefully assess the practical and legal elements of a workable RIN policy. A draft rule is expected to be issued as early as October 2012, and a final rule could be promulgated as early as mid-2013.
For more information, contact Bruce Pasfield or Max Williamson at Alston & Bird, LLP.