The Problem of Invalidated RINs in the RFS

January 6, 2019 |

In California, Mike Newman of Parhelion Underwriting said that under the Renewable Fuel Standard, the EPA imposed a “buyer beware” approach to the purchase and sale of RINs. This creates a liability for any buyer of RINs, making them responsible for purchases of invalid RINS, even if it’s done inadvertently.

The liability includes the replacement cost of invalidated RINs as well as civil fines and penalties imposed by the EPA. The EPA has prosecuted millions of US$ worth of fraudulent RIN transactions, yet fraud continues to be a significant risk – and it’s a risk that is not covered by standard property and liability insurance policies; neither are RINs considered “goods” under the Uniform Commercial Code (UCC), so the Code’s warranty provisions do not apply.

The EPA sought to address the potential for fraudulent RIN transactions by encouraging third-party verification of the generation of RINs, the Quality Assurance Program (QAP) under which third-party auditors evaluate producers of renewable fuel to certify they were in fact producing the required product in compliance with RFS regulations.

Category: Policy

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