On Thursday at 10pm, CNBC’s American Greed recounted the story of Maryland RIN fraudster Rodney Hailey—and how he exploited EPA’s broken RFS system by making a fortune out of selling millions of fake RINs between March 2009 and December 2010.
The scale of the fraud was astonishing. In less than two years, Hailey sold 32 million credits representing more than 21 million gallons of—as it turned out—absolutely nothing. His company, Clean Green Fuels, raked in $9 million. If he actually had been producing fuel, Clean Green Fuels would have been the third-largest producer of biofuel in the country.
Equally astonishing was the lack of EPA oversight of its own program. When Hailey set up Clean Green Fuels and registered it with EPA, he said he was converting cooking oil collected from more than 2,500 restaurants and turning it into fuel. However, EPA approved the registration without bothering to inspect inspect Hailey’s facility. Hailey realized very quickly that nobody from EPA was watching.
American Greed states that when asked, EPA said that Congress did not require or fund the inspection of new facilities, and it was up to the RIN buyers themselves to verify their sellers’ authenticity—even though the buyers were using the list of sellers that had registered on EPA’s own website. To make matters worse, EPA fined refiners for unknowingly purchasing these fraudulent RINs, and then adding insult to injury, required refiners to go back into the market and replace the fake RINs to stay in compliance! We’re aware of no other government program that penalizes the victims of fraud in this manner.
Needless to say, refiners didn’t share EPA’s opinion on who is to blame or who should bear the responsibility of correcting the situation. This episode is yet more evidence of a broken RFS system—and the real issue is that this program continues to be bad for consumers.