Washington (Platts)--24May2012/608 pm EDT/2208 GMT

The number of bogus renewable fuel credits in the market could double to nearly 300 million in the coming months as investigations keep rooting out fraud in the US biodiesel industry, four Republican lawmakers said Thursday.

Representatives Fred Upton of Michigan, Cliff Stearns of Florida, Ed Whitfield of Kentucky and Michael Burgess of Texas criticized the Environmental Protection Agency's handling of the scandal that has so far exposed three companies for selling renewable credits without making the corresponding biodiesel.

"Unfortunately, the production of and trade in fraudulent or invalid RINs has developed into a large and growing problem," the four congressmen said in a letter to EPA Administrator Lisa Jackson. "And EPA's efforts to address the problem so far appear ineffective, and in some respects have harmed the renewable fuels marketplace."

EPA has accused three companies of selling fake renewable identification numbers (RINs) -- the 38-digit codes that refiners, blenders and fuel importers must use to prove compliance with federal renewable fuel mandates.

Since November, the agency has declared 140 million RINs invalid, including 60 million sold by Green Diesel of Texas, 48 million by Absolute Fuels of Texas, and 32 million by Clean Green Fuels of Maryland.

In the letter to Jackson, the lawmakers said House Energy and Commerce Committee staff had "credible sources" indicating that the number of fake RINs could double.

"However, it does not appear that the EPA has taken any steps to actually solve the problem," they wrote.

The lawmakers asked Jackson to respond to a number of questions about the agency's ongoing enforcement effort, including whether she would consider a policy that would distinguish good-faith buyers of RINs from those who make no attempt to verify the validity of credits.

In March, EPA notified refiners of a new fine structure charging them 10 cents for each invalid credit they use and 20 cents for each credit they fall short of the renewable fuel standard. Both violations would be capped separately at $250,000. The agency capped all fines for 2010 and 2011 violations at $350,000.

The agency acknowledged at the time the possibility of future crackdowns and reminded obligated parties of its "buyer beware" policy.

"The fact that EPA has not made a public statement about the validity of particular RINs is not, and should not be taken to be, evidence that those RINs are valid," EPA told the companies in March. "The decision to take enforcement action or to make public allegations about the validity of particular RINs involves fundamentally different issues than the decision to purchase or use RINs."

--Meghan Gordon, meghan_gordon@platts.com --Edited by Jason Lindquist, jason_lindquist@platts.com

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