HispanicBusiness

Fuel distributor Center Oil Co., one of the St. Louis region's largest private companies, unwittingly bought more than 1.3 million bogus renewable fuels credits in 2010, according to two lawsuits the company filed last month in St. Louis County Circuit Court.

The credits, worth hundreds of thousands of dollars, are tied to a much larger credit counterfeiting scandal wreaking havoc for biodiesel producers and petroleum companies across the country. The dustup has given new ammunition to critics of the six-year-old federal renewable fuel mandate.

Over the last four months, the federal government has identified two companies that allegedly sold millions of dollars worth of bogus credits. And the owner of one of the companies, Clean Green Fuels LLC of Baltimore, has been charged with selling $9 million of worthless fuel credits and spending the money on exotic sports cars, homes and jewelry.

The fallout from the scandal hasn't been fully realized. But already it has meant increased scrutiny for biodiesel producers and an expensive headache for more than two dozen companies facing possible fines for buying the worthless credits, even if they did so unknowingly.

The federal Renewable Fuel Standard was approved by Congress in 2005 and expanded two years later to require even larger volumes of biodiesel and ethanol as a way to reduce dependence on foreign oil, cut greenhouse gas emissions and create jobs in rural America.

For 2012, the law requires the use of 15.2 billion gallons of renewable fuel, an amount that will steadily increase to 36 billion gallons by 2022.

Oil refiners and fuel importers can meet obligations either by blending biodiesel and ethanol with petroleum-based or purchasing the credits from producers of the renewable fuels.

The fuel credits, known as renewable identification numbers, or RINs, are 38-digit serial numbers that represent biodiesel and ethanol made in or imported to the United States. For biodiesel, each RIN represents 1.5 gallons.

Center Oil didn't say in the lawsuits what consequences it might face for purchasing and re-selling the worthless biodiesel credits. The lawsuit doesn't specify the amount of damages it's seeking.

Company officials didn't return a call seeking comment.

Center Oil filed the lawsuits on Jan. 20 and Jan. 24, accusing separate companies of breach of contract and breach of warranty for selling bogus RINs.

The suits claim Center Oil bought 943,000 phony RINs from Miami-based International Exchange Services LLC in April 2010 and 441,000 bogus RINs from OceanConnect LLC, based in White Plains, NY, six months later.

Both of the companies being sued were identified by federal prosecutors as having bought RINs from Clean Green Fuels.

It's unknown how many companies and brokers unknowingly bought or sold some of the 80 million phony fuel credits so far identified by the EPA. Often, RINs are re-sold multiple times before they're retired.

But the EPA has already issued notices to two dozen companies, including some of the country's largest oil companies, warning them that they may have violated federal regulations for submitting worthless biodiesel credits.

Center Oil was not among those companies, and according to its lawsuit, it subsequently re-sold the credits.

Those who work in the biodiesel industry believe RIN fraud is rare. But the issue has nonetheless made oil companies and brokers more careful about whom they buy from.