There may be $1 billion worth of fraudulent biofuel credits circulating in the U.S., according to a former Environmental Protection Agency (EPA) criminal investigator.
“Based on my experience, I believe the cost of these fraud schemes to victims and consumers, including taxpayers and obligated parties, is approaching $1 billion,” Doug Parker, the president of E&W Strategies, wrote in a report on ethanol fraud, commissioned by the oil refining Valero Corporation.
Parker, who initiated investigations into ethanol credit fraud while at EPA, argued the federal ethanol mandate, or Renewable Fuel Standard (RFS), is “susceptible to large scale fraud” based on analyses conducted while he worked for the government.
Parker argued RFS fraud risks have grown as the ethanol credit, or RIN, market grew 15-fold in the last six years from $1 billion to $15 billion as federal law requires refiners to blend more ethanol into the fuel supply. It’s also an “opaque” market that allows fraud to flourish, he wrote.
“This level of transparency and market regulation is not present in the RINs market, and the opaqueness of the market is a critical factor that allows criminal conduct to continue,” Parker wrote.