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RIN FRAUD: EPA’S EFFORTS TO ENSURE MARKET 

INTEGRITY IN THE RENEWABLE FUELS PROGRAM 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

JULY 11, 2012 

Serial No. 112–161 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

CLIFF STEARNS, Florida 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

Vice Chairman 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

CHARLES F. BASS, New Hampshire 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

CLIFF STEARNS, Florida 

Chairman 

LEE TERRY, Nebraska 

SUE WILKINS MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

CORY GARDNER, Colorado 

H. MORGAN GRIFFITH, Virginia 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

DIANA DEGETTE, Colorado 

Ranking Member 

JANICE D. SCHAKOWSKY, Illinois 

MIKE ROSS, Arkansas 

KATHY CASTOR, Florida 

EDWARD J. MARKEY, Massachusetts 

GENE GREEN, Texas 

CHARLES A. GONZALEZ, Texas 

DONNA M. CHRISTENSEN, Virgin Islands 

JOHN D. DINGELL, Michigan 

HENRY A. WAXMAN, California (ex officio) 

(II) 

(III) 

C O N T E N T S 

Page 

Hon. Cliff Stearns, a Representative in Congress from the State of Florida, 

opening statement ................................................................................................ 1 

Prepared statement .......................................................................................... 4 

Hon. Diana DeGette, a Representative in Congress from the State of Colorado, opening statement ...................................................................................... 6 

Hon. Michael C. Burgess, a Representative in Congress from the State of 

Texas, opening statement .................................................................................... 7 

Hon. Lee Terry, a Representative in Congress from the State of Nebraska, 

opening statement ................................................................................................ 8 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 9 

Prepared statement .......................................................................................... 11 

Hon. Brian P. Bilbray, a Representative in Congress from the State of California, opening statement .................................................................................... 13 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

prepared statement .............................................................................................. 138 

WITNESSES

Jennifer Case, Chief Executive Officer, New Leaf Biofuel ................................... 15 

Prepared statement .......................................................................................... 17 

Additional responses for the record ................................................................ 88 

Answers to submitted questions ...................................................................... 139 

George Andrew Sprague, Owner, Union County Biodiesel Corporation, LLC ... 21 

Prepared statement .......................................................................................... 23 

Answers to submitted questions ...................................................................... 142 

Thomas Paquin, President, VicNRG, LLC ............................................................ 30 

Prepared statement .......................................................................................... 32 

Additional responses for the record ................................................................ 105 

Answers to submitted questions ...................................................................... 144 

J.P. Fjeld-Hansen, Managing Director, Musket Corporation ............................... 54 

Prepared statement .......................................................................................... 56 

Answers to submitted questions ...................................................................... 148 

Joe Jobe, Chief Executive Officer, National Biodiesel Board ............................... 62 

Prepared statement .......................................................................................... 64 

Additional responses for the record ................................................................ 110 

Answers to submitted questions ...................................................................... 150 

Charles Drevna, President, American Fuel and Petrochemical Manufacturers 73 

Prepared statement .......................................................................................... 75 

Answers to submitted questions ...................................................................... 152 

Byron Bunker, Acting Director, Compliance Division, Office of Transportation 

and Air Quality, Office of Air Radiation, Environmental Protection Agency . 115 

Prepared statement .......................................................................................... 118 

Answers to submitted questions ...................................................................... 155 

Phillip Brooks, Director, Air Enforcement Division, Office of Enforcement 

and Compliance Assurance, Environmental Protection Agency 1 ....................

SUBMITTED MATERIAL

Subcommittee exhibit binder .................................................................................. 159 

1Mr. Brooks did not present a statement for the record. 

(1) 

RIN FRAUD: EPA’S EFFORTS TO ENSURE 

MARKET INTEGRITY IN THE RENEWABLE 

FUELS PROGRAM 

WEDNESDAY, JULY 11, 2012 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:05 a.m., in room 

2123, Rayburn House Office Building, Hon. Cliff Stearns (chairman 

of the subcommittee) presiding. 

Members present: Representatives Stearns, Terry, Myrick, Sullivan, Burgess, Blackburn, Bilbray, Gingrey, Gardner, Griffith, 

Barton, Whitfield, Degette, Castor, Markey, Green and Waxman 

(ex officio). 

Staff present: Nick Abraham, Legislative Clerk; Charlotte Baker, 

Press Secretary; Andy Duberstein, Deputy Press Secretary; Todd 

Harrison, Chief Counsel, Oversight and Investigations; Cory Hicks, 

Policy Coordinator, Energy and Power; Heidi King, Chief Economist; Ben Lieberman, Counsel, Energy and Power; Monica Popp, 

Professional Staff Member, Health; Krista Rosenthall, Counsel to 

Chairman Emeritus; Alan Slobodin, Deputy Chief Counsel, Oversight; Sam Spector, Counsel, Oversight; Peter Spencer, Professional 

Staff Member, Oversight; Alvin Banks, Democratic Investigator; 

Alison Cassady, Democratic Senior Professional Staff Member; 

Brian Cohen, Democratic Investigations Staff Director and Senior 

Policy Advisor; and Alexandra Teitz, Democratic Senior Counsel, 

Environment and Energy. 

OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA 

Mr. STEARNS. Good morning, everybody, and welcome to the Subcommittee on Oversight and Investigations of the Energy and Commerce full committee. 

My colleagues, today we will examine the Environmental Protection Agency’s handling of fraud in its program to implement the 

Renewable Fuel Standard. Specifically, we will look at the impacts 

on the biodiesel marketplace from the fraudulent production and 

trade in renewable fuel credits, or Renewable Identification Numbers, RINs, and the impact from EPA’s efforts to address this serious problem. 

This hearing is part of the subcommittee’s ongoing investigation 

into RIN fraud and should spotlight potential solutions to the most 

2 

urgent problems confronting the biodiesel market. This hearing 

should also serve to identify additional challenges from fraud within the Renewable Fuels Program in general. 

EPA is responsible for developing and implementing regulations 

to ensure that the United States national transportation fuel supply during a given year contains certain mandated volumes of renewable fuel. The RIN credit trading program is designed to add 

flexibility to the system and facilitate compliance by petroleum refiners and importers, known as, quote, ‘‘obligated parties,’’ end 

quote, with renewable fuel standards that were created under the 

Energy Policy Act of 2005 and expanded under the Energy Independence and Security Act of 2007 to cover gasoline and diesel 

transportation fuels. 

Now, in recent years a sizeable market for biomass-based diesel 

has developed. This market is second only to corn ethanol in size, 

producing more than 1 billion gallons of biodiesel fuel last year. 

As we will hear in testimony this morning, unlike ethanol fuels, 

the price for RINs is critical to making ends meet for small biodiesel producers, the marketers who collect and distribute the fuel, 

and small blenders of the fuel, especially travel centers and truck 

stops. RIN prices have ranged from $1 to $1.50 per gallon of biodiesel, compared to about 2 pennies per gallon for ethanol. 

Unfortunately, my colleagues, when the price for RINs is relatively high, so is the incentive to game the system. Since November 2011, EPA has identified some 140 million invalid or fraudulently created biodiesel RINs generated by three producers. Additionally, EPA investigations could amount to tens of millions of 

more invalid RINs identified. 

Just last month, a Federal jury in Maryland found Rodney 

Hailey of Clean Green Fuel guilty of selling $9 million worth of 

fraudulent RINs to brokers, oil companies, and producers, and then 

using the money to go on a spending spree that included the purchase of luxury cars and high-end jewelry. Mr. Hailey had generated 32 million credits for fuel that never existed. 

Meanwhile, EPA does not certify or validate the fuel produced 

and registered in its systems that track RINs. The Agency maintains that obligated parties are responsible for conducting their 

own due diligence when conducting RINs transactions. This approach makes sense, to a point; however, to date EPA has not indicated what is acceptable for due diligence investigations by the 

companies. 

On top of this uncertainty, EPA effectively penalized companies 

that were, quote, ‘‘victims of fraud’’ by requiring them to replace invalid RINs for compliance purposes. As we will hear from witnesses 

on our first panel this morning, this current approach to fraud has 

thrown the biodiesel marketplace into turmoil, creating significant 

uncertainty for small players, locking some innocent companies out 

of the markets altogether. 

Clearly there is a problem with the current situation. Today we 

will discuss how to fix the problem and how to do so with appropriate urgency. As we do so, we must recognize the range of fraud 

that may occur in the Renewable Fuels Program. Testimony today 

will indicate other types of fraud and abuse, such as with exports, 

3 

which we should be sure EPA seeks to address effectively and 

quickly. 

We will hear from two panels of witnesses this morning. On the 

first panel we will hear from stakeholders with important perspectives across the life cycle of a RIN, two small biofuel producers, a 

marketer of biofuel, and a blender of the fuel for a major truck stop 

chain, all of whom have firsthand experience with the impact of 

fraud. We will also hear from respective representatives of the obligated parties and the biofuel production industry overall about industry efforts to respond to fraud risk. 

On the second panel we’ll hear testimony from two EPA officials 

who have been involved in devising compliance requirements and 

ensuring those requirements are met. 

So I am pleased to learn that EPA appears to recognize the legitimate concerns of stakeholders and may be amenable to implementing some of their suggestions. That’s a positive sign, but 

much, much remains to be worked out, and uncertainty continues 

to reign in this market, putting many small operators at risk. 

[The prepared statement of Mr. Stearns follows:] 

4 


81890.001
5 


81890.002
6 

Mr. STEARNS. With that, I recognize the distinguished ranking 

member from Colorado Ms. DeGette. 

OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF COLORADO 

Ms. DEGETTE. Thank you, Mr. Chairman, for holding this hearing today. 

The EPA’s Renewable Fuel Standards Program was created and 

amended under President Bush, first by the Energy Policy Act in 

2005 and then by the Energy Independence and Security Act of 

2007. I support this program, and I want it to be a productive hearing today that results in real improvements to that program, but 

all too often, as we have found in the last year and a half, these 

hearings have turned into excuses to make political points and beat 

up on regulatory agencies, in this case a little bit blaming the victim, the EPA, for fraud by some of the other outside private businesses. I hope it doesn’t happen today as we go along, because this 

hearing in particular should not be used just to bash the EPA. 

Again and again, when we consider environmental protection, we 

hear about the need for market-based programs. Industry wants 

government out of the way so the magic of the market can clear 

up our air and water. 

Well, Mr. Chairman, here is a program right here today that 

uses a market-based approach. Congress established specific goals 

for adding renewable fuels to the fuel supply. The EPA worked 

closely with the petroleum sector to develop a flexible credit-trading program that allows refiners and other obligated parties to 

comply with the renewable fuel standard. Under the program, as 

the chairman said, they can buy credits on the open market, which 

sets prices on the basic laws of supply and demand. 

Now, as in any market, there are bad actors. That’s what happened here. Three companies, Clean Green, LLC; Absolute Fuels, 

LLC; and Green Diesel, LLC, sold fraudulent renewable fuel credits 

via EPA’s trading system. Many big-name oil companies bought 

these credits, and EPA did what it was supposed to do: It uncovered and investigated this fraud and, as the chairman said, in one 

case so far filed criminal charges. 

Today we are going to hear from the trade association representing the petroleum refiners that bought these fraudulent credits. They want relief from the EPA for the fact that they were 

duped. Well, Mr. Chairman, I would submit this proposition: You 

can’t have it both ways. You can’t ask the government for a market-based compliance program and then blame the government or 

ask the government to not fully enforce the law because you were 

fooled by the free market. 

I want to specifically talk about Mr. Drevna’s testimony. He’s the 

president of the American Fuel and Petroleum Manufacturers. And 

I read your submitted testimony. It paints the petroleum refiners 

as the real victims. It claims that they shouldn’t be held responsible for the fraud they didn’t commit. Of course, that makes sense 

without any context. Nobody should be blamed for fraud that they 

didn’t commit. But while these refiners didn’t commit the fraud, 

they weren’t helpless victims either. 

7 

These are some of the most sophisticated petrochemical companies in the United States, and, to be honest, if they’re going to participate in a market-based system from which they benefit, they 

have a duty to investigate the people who they’re doing business 

with. That would happen in any private market. 

Now, the EPA set clear rules for this market. The regulations 

clearly state that fraudulent renewable fuel credits can’t be used 

for compliance, and they clearly state that the system is a buyer 

beware system. This buyer beware approach was not a secret, but 

yet the refiners failed to do basic research on the renewable fuel 

credits they were buying. 

Two of the companies accused of the fraud, I am sorry to say, Mr. 

Green and Mr. Barton, they are based in Texas. Now, presumably 

many of the Texas-based refiners could have inspected the facility, 

knocked on the doors of the companies that falsely claimed to be 

producing large quantities of biodiesel, and concluded pretty quickly that things looked fishy. An article in The New York Times described one of the facilities as, quote, ‘‘a few plastic tubes’’ in, 

quote, ‘‘a tiny ramshackle building.’’ 

So it wouldn’t have been hard for these big, sophisticated refiners 

to do their due diligence, but they didn’t do their part, and now 

they are here today saying the EPA is punishing them unjustly, 

even though they were in clear violation of the Clean Air Act 

standards. Mr. Chairman, these companies should not be let off the 

hook for their failure to do their own due diligence. 

I do think, though, that we have a lot to learn from this hearing. 

We do need to hear from the affected refiners about why they did 

not identify this fraud as apparently they could have easily done; 

we need to hear from other sellers of renewable fuel credits to 

learn how they are affected; and we need to hear from the EPA 

about how the Agency uncovered this fraud and how to prevent it 

in the future. 

The EPA continues to work with affected stakeholders to ensure 

compliance and identify solutions to problems that have arisen in 

the wake of the fraud. I hope the witnesses today can give us a full 

picture of the challenges they faced in the wake of these fraud 

cases and constructive ideas for how the EPA can help the market 

recover as quickly as possible. 

Thank you, Mr. Chairman. 

Mr. STEARNS. I thank the gentlelady. 

And I recognize Dr. Burgess for roughly about a minute. We’re 

waiting for the full chairman Mr. Upton. 

Mr. BURGESS. I can filibuster until he gets here. 

Mr. STEARNS. You can filibuster. We have two others, Mrs. 

Blackburn and—— 

Mr. BURGESS. I will be brief. 

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

You know, the renewable fuel standards law, we had a big hearing about it yesterday in the energy hearing. Whether we agree 

with the merits or not, and many of us do not agree with the merits, still if it’s there, it should be administered fairly to all concerned. 

8 

In my district in north Texas, a number of small businesses are 

participants in the RIN program. One company, VicNRG, is testifying with us here today, and thank you for your participation, sir. 

As a result of the Environmental Protection Agency’s poor enforcement and their lack of due diligence in vetting fraudulent companies participating in the program, legitimate businesses are put 

in a position where they face staggering economic losses due to a 

system that—I mean, Lisa Jackson was here. She was here in this 

very committee, sitting at this very witness table, and she said, no, 

this is a buyer beware program. 

Now, look, this is the same EPA that in the last Congress assured us that they could properly manage a carbon-based trading 

scheme called cap and trade. This program is infinitesimally smaller, and yet the EPA seems to have fallen flat on its face. 

They have successfully taken everything that was bad—the EPA 

has successfully taken everything that was bad about mortgagebacked securities and brought it to the energy sector. To place the 

burden of this poorly administered program on the backs of honest 

businesses is unconscionable. I hope our hearing today will shed 

light on the problems that the companies have faced with the trading program and that real reforms are achieved with what we’re 

going to do today. 

I’ll yield to whoever is next. 

Mr. STEARNS. Mr. Terry, the gentleman from Nebraska. 

OPENING STATEMENT OF HON. LEE TERRY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEBRASKA 

Mr. TERRY. Thank you, Mr. Chairman, for holding, I think, this 

important hearing. 

I am a believer that if we are going to eliminate our addiction 

to OPEC oil, that we need to diversify our fuel portfolio, and that 

has to include biofuels. Now, of course, I could be accused, since I 

come from a Cornhusker State, of having a bias, of which I do, but 

the bias is that we need diversity, and we need biofuels to be part 

of that portfolio. 

There are many that I serve with on both sides of the aisle that 

disagree with that statement, and, unfortunately, because of unquestionable RIN fraud, RINs have become one of the discussion 

points on eliminating biofuels altogether. So this is an important 

hearing so we can figure out how to fix the RIN fraud problem that 

we all know on both sides of the aisle exists. We are here today 

to find solutions to this fraud problem, and I want to thank our 

panel for being part of a solution here today. 

I yield my time back to the chairman. 

Mr. STEARNS. We have roughly 2 minutes. Does anyone else on 

the subcommittee seek recognition? 

Mr. WAXMAN. Mr. Chairman, I ask unanimous consent that 

when the full committee chair comes in, that he be given 2–1/2 

minutes. 

Mr. STEARNS. Sure. All right. We’ll reserve that balance, and, by 

unanimous consent, so ordered. 

I recognize the ranking full chairman, the gentleman from California, Mr. Waxman. 

9 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you, Mr. Chairman. I’ll take a full 5. 

Congress established the Renewable Fuels Program to reduce the 

country’s dependence on petroleum-based fuels and cut greenhouse 

gas emissions from the transportation sector. These are laudable 

goals. Unfortunately, a few bad actors selling fraudulent biodiesel 

fuel credits have created a crisis of confidence in the biodiesel fuels 

market that risks undermining the whole program. 

The reported cases of fraud have left petroleum refiners understandably skittish about purchasing biodiesel credits from small 

and unfamiliar biodiesel producers. As a result, through no fault of 

their own, many small legitimate biodiesel producers are struggling 

to sell their products and make a profit. Others along the fuel 

chain, such as the distributors of biodiesel and credit brokers, are 

feeling the pinch as well. We will receive testimony from a few of 

these affected parties today, and I look forward to hearing their 

suggestions for how to restore certainty and integrity to the market. 

We’ll also hear from the American fuel and petrochemical manufacturers. To hear them tell it, they were helpless victims of this 

fraud. This is revisionist history. The statutory renewable fuels 

provisions allow petroleum refiners to meet their renewable fuel 

obligations by purchasing renewable fuel credits. 

In 2007, the Bush EPA set up the required Credit Trading Program. EPA had two basic options when designing this program. 

EPA could have required that each credit be verified by EPA prior 

to its sale. This approach is more burdensome, but would make the 

government, not industry, responsible if a credit turned out to be 

fraudulent. Or EPA could allow the industry itself to generate and 

verify the credits, which is how most markets operate. 

EPA consulted extensively with industry stakeholders and chose 

the approach with the least amount of government involvement. 

The Petroleum Refiners Trade Association endorsed this approach. 

But that flexibility for industry carried with it an important and 

clear responsibility. The oil refiners and other obligated parties had 

to ensure that they were using valid credits to comply with the 

law. They didn’t. 

As we now know, several of the country’s largest oil companies 

purchased millions of fraudulent renewable energy credits. This 

happened because they didn’t do the basic due diligence they would 

do in purchasing any other product. With any due diligence they 

would have quickly discovered that the accused biofuel producers 

weren’t producing any biofuel at all. 

I find it ironic to hear my Republican colleagues criticize a program that is run by the industry and, more importantly, criticize 

EPA for not doing what the program did not intend them to do. 

EPA plays a crucial role in establishing clear rules and obligations for the credit-trading system, and EPA carried out this responsibility. But recent events show that the system, as currently 

operated by industry and EPA, needs to be improved. 

EPA has been meeting extensively with stakeholders to identify 

solutions for problems in the renewable fuels credit market. But it 

10 

is not just up to EPA. Buyers and sellers must be active and vigilant participants in the marketplace, and if things go wrong, the 

industry can’t demand that the government bail them out by 

waiving the law. 

Market-based approaches to meeting environmental requirements are often preferable because they are less costly and less 

burdensome than traditional regulation, but market-based approaches are only acceptable if they produce at least equivalent environmental results. Waiving the requirement for industry to replace fraudulent credits basically says that if something goes 

wrong, the public, not industry, must pay the price. That kind of 

response gives market-based approaches a bad name and is not acceptable. 

I hope that today’s hearing helps all the affected parties continue 

their work toward real solutions that protect the functioning and 

integrity of the Renewable Fuels Program. We can’t criticize EPA 

for a market-based approach, which I usually hear people on the 

Republican side of the aisle support, and now they want to criticize 

EPA for not running it the way they would have liked EPA to run 

it. But EPA followed the advice of so many, and the Bush EPA 

turned it over to the industry itself to monitor the program. 

I yield back my time. 

[The prepared statement of Mr. Waxman follows:] 

11 


81890.003
12 


81890.004
13 

Mr. STEARNS. The gentleman yields back. 

Anyone else seek recognition? We have roughly a little over 2 

minutes. 

The gentleman from California, Mr. Bilbray. 

OPENING STATEMENT OF HON. BRIAN P. BILBRAY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. BILBRAY. Mr. Chairman, I think it’s only fair to point out 

that there is so much that the industry can work with that we give 

them the infrastructure for the practical application of the theory 

of how this is approached. 

I think both sides of the aisle should remember that after 9/11 

there was a bipartisan effort that saw a need for the Federal Government and State governments to cooperate at changing the way 

we operated so that this country could be safe. The product of that 

was REAL ID legislation. We upgraded the identification to reduce 

fraud, reduce the risk to this country, and both sides worked on 

that. 

Something comparable that we may want to talk about here, and 

Ms. Case and I were talking about the fact that just as much as 

REAL ID helped with national security, maybe the fact of upgrading the way to be able to identify true renewables as opposed to 

those fraudulent ones is to improve the documentation so that 

fraud can be detected better in the process. 

In fact, I would ask my colleagues to consider the fact that 

maybe what we need here is an E–Verify for environmentally 

friendly fuels and the use of technology and computerization as a 

way of allowing those who want to play by the rules set by this 

Congress and stay within those boundaries to be able to verify that 

they are actually within the boundaries. 

Just as much as REAL ID brought security to the country, and 

just as much as everyone knows that if we want to enforce, you 

know, our employment laws, E–Verify is going to be the vehicle, 

maybe with this crisis we should look at changing our procedures 

and giving the private sector a secure way of knowing what is truly 

an environmental fuel and what isn’t. And I’d ask both sides of the 

aisle to cooperate on this, like we have done in the past, so that 

the private sector can play within the rules that we have set. 

I yield back. 

Mr. STEARNS. Anyone else wishes to speak on this side? If not, 

Mr. Green is recognized for 5 minutes. Do you have an opening 

statement? 

Mr. GREEN. No, Mr. Chairman, I don’t have an opening statement. 

Mr. STEARNS. OK. All right. We’ll go to our witnesses now. I say 

to Mr. Bilbray, I am glad that the subcommittee chair, Mr. 

Whitfield from Kentucky, is here to hear your eloquent presentation. That would be legislation in his purview. We, and you particularly, would like to lead the charge for this E–Verify in the RIN 

program. I think it’s an excellent idea, and I think many of us 

would support that idea. So—— 

Ms. DEGETTE. Mr. Chairman, would that be a new governmentrun program? 

14 

Mr. STEARNS. This is in the early stages. 

I ask the gentlelady unanimous consent to let Mr. Whitfield, 

who’s from Kentucky, introduce Mr. Sprague. 

With no objection, Mr. Whitfield, you are welcome to introduce 

your distinguished witness. 

Mr. WHITFIELD. Mr. Chairman, thanks very much. And I am delighted to be here this morning, and I appreciate the opportunity 

to introduce a constituent of mine, Mr. Andy Sprague, who is a 

farmer, who is an engineer, who is a biodiesel entrepreneur. 

It has been interesting listening to the discussion this morning, 

because I’m so delighted that you all asked Mr. Sprague to testify, 

because he is not a major oil company, he is not a gigantic refiner, 

but he is producing a significant amount of biodiesel, and the lack 

of confidence in EPA’s RIN program is particularly troublesome for 

those smaller people involved in this business. 

So he’ll be a spectacular witness. He’s quite knowledgeable in 

every aspect of this subject matter, and I’m delighted that he’s here 

with us today to provide his expertise. 

Thank you very much. 

Mr. STEARNS. And I thank the gentleman. 

So, Mr. Sprague, you’re a spectacular witness, not to put any 

pressure on you. 

We also have Ms. Case, who is cofounder and CEO of New Leaf 

Biofuel located in San Diego, California. 

We have Mr. Thomas Paquin, the president of VicNRG, LLC, 

which markets and trades commodities in the diesel industry as 

well as RINs. 

Mr. J.P. Fjeld-Hansen is the managing director of the Musket 

Corporation, affiliate company of Love’s Travel Stop and Country 

Stores, Incorporated. They purchase biodiesel fuel from a variety of 

producers and transport it to the Love’s Travel Centers. 

Mr. Joe Jobe is the chief executive officer of the National Biodiesel Board. The National Biodiesel Board is a national trade association representing the biodiesel industry. 

We have Mr. Charles Drevna, president of American Fuel and 

Petrochemical Manufacturers. Its members are the obligated parties responsible for meeting the requirements of the Renewable 

Fuel Standard. 

So thank you all for your time. I know coming here to Washington takes you away from your work, so you’re very much appreciated. 

We’ll start out with you, Ms. Case, for your opening statement, 

but I have to swear you in first. So if you’ll please stand. 

Before you stand, as you know, the testimony you’re about to 

give is subject to Title XVIII, Section 1001, of the United States 

Code. When holding an investigative hearing, this committee has 

a practice of taking testimony under oath. Do you have any objection to testifying under oath? 

It appears none. 

The chair would advise you that under the rules of the House 

and the rules of the committee, you are entitled to be advised by 

counsel. Do any of you wish to be advised by counsel? 

In that case, please rise and raise your right hand. 

[Witnesses sworn.] 

15 

Mr. STEARNS. With that, Ms. Case, we’ll welcome you with your 

opening statement. 

STATEMENTS OF JENNIFER CASE, CHIEF EXECUTIVE OFFICER, NEW LEAF BIOFUEL; GEORGE ANDREW SPRAGUE, 

OWNER, UNION COUNTY BIODIESEL CORPORATION, LLC; 

THOMAS PAQUIN, PRESIDENT, VICNRG, LLC; J.P. FJELD– 

HANSEN, MANAGING DIRECTOR, MUSKET CORPORATION; 

JOE JOBE, CHIEF EXECUTIVE OFFICER, NATIONAL BIODIESEL BOARD; AND CHARLES DREVNA, PRESIDENT, AMERICAN FUEL AND PETROCHEMICAL MANUFACTURERS 

STATEMENT OF JENNIFER CASE 

Ms. CASE. Good morning. Chairman Stearns, Ranking Member 

DeGette and members of the committee, thank you for having me 

here to testify today. My name is Jennifer Case. I am the CEO and 

one of the owners of New Leaf Biofuel in San Diego. 

We began our company in 2006 with the mission to utilize a 

former waste stream, used cooking oil, and convert it into an energy source that would displace some of the petroleum used in our 

area and improve local air quality. Since selling our first batch of 

biodiesel in 2008, we have experienced some drastic ups and 

downs. As with any commodity business, we are at the mercy of 

ever-changing markets, which makes planning for the future challenging. The past few years have been even more unpredictable 

with the expiration of the biodiesel tax incentive, followed by its reinstatement, followed by its expiration once again. 

With each policy change, our ability to price biodiesel competitively with petroleum diesel is affected. Fuel customers are eager 

to use renewable fuels, but not if it means they have to pay more 

per gallon. 

The saving grace for the biodiesel industry was the Renewable 

Fuel Standard. Finally we had a long-term policy put in place by 

the Federal Government to ensure that biodiesel would be part of 

our energy future. The producers and importers of fossil fuels 

would be forced to blend renewable fuels made in the USA into the 

fuel supply, and over time the mandate would increase, which 

would encourage investment in our previously uncertain business. 

2011 was a banner year for New Leaf Biofuel. We were able to 

produce and sell biodiesel with Renewable Identification Numbers, 

RINs, for a profit, and we were able to pass savings downstream 

to our distributors and the end users of our fuel. Finally biodiesel 

was cheaper than diesel. At New Leaf, we nearly tripled our workforce and finally obtained low-interest financing to increase production at our local plant. 

Things took a devastating turn for our small business around 

November of 2011 when the EPA announced that there were individuals perpetrating fraud in the RIN market. Prior to the fraud 

announcement, New Leaf produced biofuel, generated RINs, and 

then transferred both the fuel and the RIN to our fuel distributors, 

who blended the biodiesel with petroleum diesel and delivered the 

blended fuel to customers such as the cities of San Diego and 

Chula Vista and the local military bases. The distributors would 

16 

then separate or monetize the RIN and sell them up the chain to 

the obligated parties. 

Once the fraud was announced, my customers were no longer 

able to sell New Leaf RINs. Obligated parties now only buy from 

top-tier producers, producers who are financially capable of replacing RINs should they be deemed invalid. Despite the fact that New 

Leaf’s RINs were generated at a legitimate plant that had been 

producing quality fuel for 4 years using approved feedstocks and 

technologies, our RINs were suddenly worthless, as if New Leaf 

was in the same category as the criminals who never produced a 

drop of biodiesel. 

The months immediately following the fraud were very difficult. 

We had to adjust once again to a market without a tax incentive, 

and then we were stripped of the RIN value. Once again, petroleum 

diesel was cheaper than biodiesel, and many of New Leaf’s customers switched back to fossil fuels. 

2012 was supposed to be a year of growth for New Leaf, but unless our industry can come together to find a solution that will get 

New Leaf’s RINs marketable again, our days and the days of the 

small biodiesel producers across the country are numbered. 

The Renewable Fuel Standard is a good policy for businesses 

large and small. It creates jobs, it encourages the use of homegrown energy, and it reduces greenhouse gases from the transportation sector. As with any new policy, especially a policy this comprehensive, there are going to be issues to iron out. Clearly we 

need to figure out a way to avoid more fraudulent RINs entering 

the marketplace, and, most importantly, we need a system that 

will restore the confidence in the RIN market so that obligated parties will once again be willing to buy RINs generated at small 

plants like mine. 

The private sector is already working on solutions that will likely 

resolve most of these issues. We have seen a plan introduced that 

would provide obligated parties with a subscription to a service 

that would allow them access to RINs produced at plants that have 

been audited by a third party, and they will have realtime data 

available as to the capacity of a given plant to produce quality biodiesel and RINs. 

I believe the various industry representatives on this panel have 

the ability and the wherewithal to improve this system. What 

doesn’t kill us makes us stronger, and with more due diligence and 

transparency in the market, biodiesel will be stronger in the end. 

Thank you. 

Mr. STEARNS. I thank you. 

[The prepared statement of Ms. Case follows:] 

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Mr. STEARNS. Mr. Sprague. 

STATEMENT OF GEORGE ANDREW SPRAGUE 

Mr. SPRAGUE. Thank you, Chairman Stearns, Ranking Member 

DeGette and other committee members. My name is George Andrew Sprague. I am the owner of Union County Biodiesel along 

with my partner, Terry Zintel, who is here with me today. We represent three biodiesel plants, one that is currently located in Newburgh, Indiana; one in South Roxana, Illinois; and we have begun 

to work with a biodiesel plant that is owned by 300 farmers in 

Moberly, Missouri. So we employ about 30 people in our small biodiesel company. 

For the purpose of this testimony, I am here, as Congressman 

Whitfield said, as a farmer, an engineer and now a biodiesel entrepreneur. I hate to say it, that part is not working out real good 

right now, and that’s why we’re obviously here before you. 

As small producers and private business owners, we do not have 

corporate war chests to weather business and governmental calamities that occur. When these issues happen, we go to the bank. And 

many of you have reviewed issues with the banking industry, so 

you know how well that works right now, going to banks for loans. 

We have to liquidate personal assets. My children’s college fund is 

invested in my biodiesel plant. While that is meant to tug on your 

heartstrings, and hopefully it does, it does bring light to the fact 

that this is a very, very serious issue, one that can’t be taken lightly. 

A little bit of history about the RIN fraud program. In 2011, we, 

like New Leaf, had a banner year. All of our facilities did well. We 

were selling our RINs to our customers via transfer of a wet gallon, 

and those RINs were being disposed of to the obligated parties either via brokers or through direct contracts with the obligated parties. 

We had heard the rumblings of problems, of fraud, and that 

started to make everyone nervous. Literally January 2nd of this 

year, I had customers on the phone calling me saying, we can’t sell 

your RINs. If we can’t sell your RINs, we can’t buy your biodiesel. 

So literally on January 2nd, we were out of business. 

We did begin a process of our own due diligence with obligated 

parties, and were able to make contacts with obligated parties, and 

were able to get some obligated parties receiving our RINs again, 

and to date we are in business, but it’s not as good as it should 

be. 

As an example of how this problem is very serious, we had 1 customer who sold—or purchased 60 million gallons of biodiesel from 

many producers, obviously not from us specifically, who has yet to 

buy a gallon of biodiesel this year. That’s a large quantity that’s 

just taken out the markets. 

In January, I spoke with my Congressman Mr. Whitfield to try 

to get an audience with EPA to discuss this problem, and he helped 

me get that audience with several members of EPA who are on the 

panel in the second panel. First I would like to say that my experience with them was very positive. They were very cooperative, they 

explained why things were the way they were, but they also said 

22 

they’re bound by certain rules and restrictions that they have to 

operate under as well. 

Cutting to the chase, we have a problem. We can point fingers. 

We can say who did what, and why we did it, and why we didn’t 

do it. But ultimately we’ve got to fix the problem. The program is 

not broke. Many people may want to use this as a reason to abandon the program. This program is not broke. 

In late 2011, most of us were quite surprised that it was working 

as well as it did. I hate to say this, but from the private sector, 

when something in government works really well, you kind of 

scratch your head a little bit and go, well, they did do a good job. 

So most of us in the industry felt like we had a good program. Industry-based, it was meeting the needs that it needed to, but we 

did have a problem. So hopefully here today through our testimonies, both written and oral, we can talk about those. 

I think one thing we must admit is that nobody really saw this 

coming, and because nobody saw it coming, we really don’t need to 

be pointing fingers. But the industry is coming up with an independent third-party verification program that is going to fix the 

problem if left to its own accord. 

What we hope for is an even playing field, though. EPA needs 

to be involved in what the rules of this program are going to be. 

The private sector will solve this problem. The obligated parties, 

they did not do their due diligence as they should. We did not get 

calls from due diligence providers until late in 2011. That water is 

under the bridge. But obviously this independent third-party methodology will fix the program. 

So we ask that you consider our testimonies and allow industry 

to step forth and fix this problem. Thank you. 

Mr. STEARNS. I thank you. 

[The prepared statement of Mr. Sprague follows:] 

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Mr. STEARNS. Mr. Paquin. 

STATEMENT OF THOMAS PAQUIN 

Mr. PAQUIN. Good morning, Chairman Stearns, Ranking Member 

DeGette and members of the subcommittee. My name is Tom 

Paquin, president of VicNRG, LLC, headquartered in Keller, Texas. 

Thank you for allowing me the opportunity to discuss the current 

status of the renewable fuel industry, RIN fraud, and ensure that 

there are efforts to ensure RIN integrity. 

VicNRG is a marketer and distributor of biofuels and other commodities. The company provides infrastructure and logistics solutions that are critical to the distribution of biofuels. We are a small 

business that has been expanding our national footprint by adding 

transit facilities, rail cars and other infrastructure assets. Each of 

our terminals offer high-quality, full-time employment, and economic benefit extends well beyond the fence of each of those facilities. 

We are also an active participant in the RIN market. Our leadership in this market has been critical to identifying fraud and communicating our findings to the EPA. We consider ourselves a partner with the EPA, and I offer continued service. 

To date, the fraud in the RIN market has resulted in serious 

hardship for many in the biofuel sector, including the ultimate fate 

of bankruptcy for numerous law-abiding businesses. Fraudulent 

RINs created a liability in the industry in excess of $200 million. 

Approximately 85 percent of the biodiesel producers are struggling 

to keep their doors open. Some, like R–3 Energy and Green Light 

Biofuels, have shut down operations completely. Biodiesel distributors and blenders are equally threatened with liabilities which they 

cannot meet. 

Unfortunately, the fraud that has currently been discovered only 

addresses the low-hanging fruit. The EPA created an interim enforcement and response policy to restore faith in what was a dysfunctional RIN-trading system. However, this policy fails to restore 

the confidence required. Since the policy’s release, the RIN market 

has actually become more dysfunctional. The obligated parties and, 

by default, marketing companies like ours cannot purchase fuel 

from small producers, just like the ones on the panel today. We 

cannot do this because the risk of being held liable to replace RINs 

is too great. 

Because of these issues, VicNRG proposes the EPA broaden its 

interim policy. We feel the EPA has the flexibility and can use several regulatory approaches to restore confidence. To improve the 

situation, we offer the following proposal. First, we propose that 

the EPA revise its interim policy as it relates to invalid RINs so 

that no further RIN substitution would be required. 

The congressional intent of the RFS is clear, and one of the key 

tenets is to build an alternative fuel industry and its related infrastructure. In fact, it is stated in the U.S. Code that many factors 

should be taken into consideration when setting volumetric goals, 

to include job creation. 

Additionally, the EPA has the ability to average annual compliance, and according to the National Biodiesel Board’s written testimony, the biodiesel industry exceeded last year’s volumetric tarVerDate Aug 31 2005 10:33 Jul 29, 2013 Jkt 037690 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 F:\112-16~2\112-16~1 WAYNE
31 

gets. One could argue that RFS goals have been met, and there is 

no reason to require RIN replacement. RIN replacement is destroying jobs today, which is 180 degrees out from the congressional intent. We also feel the EPA must continue to aggressively pursue 

and prosecute fraudulent activity. 

Secondly, the EPA should undertake a 2013 rulemaking to establish a permanent due diligence process and an affirmative defense. 

Diligent and innocent companies should not be penalized for the 

acts of others. This affirmative defense may be structured by the 

EPA to impose reasonable compliance burdens on industry participants. 

Clean Air Act case law establishes limits on EPA’s authority to 

impose sweeping systems of presumptive liability. While Congress 

has delegated expansive powers to EPA to regulate, it is a fundamental tenet of American law that there must be at the very least 

the right to prove oneself innocent of an offense. 

Finally, if EPA is willing to facilitate any of these remedies, the 

Agency should consider whether a petition to waive the RFS would 

be appropriate in these circumstances. The economic cost to U.S. 

businesses resulting from enforcement policy will force many legitimate companies that are currently operating out of business and 

eliminate countless jobs, at which point a severe harm threshold 

may have been met. 

In summary, to immediately restore confidence in the RIN market and save tens of thousands of jobs, the EPA must consider immediate changes in the enforcement of the RFS program. Specifically, the EPA needs to expand its interim policy, to define due diligence, provide for affirmative defense, and eliminate the requirement to replace RINs for those who are good-faith participants. 

This is the foundation necessary to save the system, its associated 

investment and ultimately jobs in a struggling U.S. economy. 

Thank you. 

Mr. STEARNS. Thank you. 

[The prepared statement of Mr. Paquin follows:] 

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Mr. STEARNS. Mr. Fjeld-Hansen, you are recognized. 

STATEMENT OF J.P. FJELD–HANSEN 

Mr. FJELD-HANSEN. Thank you very much. Chairman Stearns, 

Ranking Member DeGette, thank you for the opportunity to appear 

before the subcommittee today. My name is Jon Peter Fjeld-Hansen, and I am the managing director of Musket Corporation. Musket is an affiliate company of Love’s Travel Stop & Country Stores, 

Inc. Love’s today owns and operates a nationwide chain of 300 

travel centers and convenience stores in 39 States. Love’s sells diesel fuel to the Nation’s trucking fleets that deliver goods and services to businesses across the United States. We are committed to 

meeting, then exceeding the needs of our many customers by providing the highest-quality fuel at competitive prices. Biodiesel 

blends are an important part of that commitment. 

One of the primary functions of Musket is to manage the fuel 

supply, including biodiesel, for Love’s. Musket purchases biodiesel 

from a wide variety of producers and transports the product directly to the Love’s Travel Centers or to various bulk facilities for 

blending into the diesel. In order to create blending capacity, Musket has completed 76 construction projects in 25 States since the 

inception of the Renewable Fuel Standard. Many of these projects 

have brought jobs to the constituents of the members of this committee. 

Under RFS2, every properly produced gallon of biodiesel comes 

with 1.5 RINs. The value of the RIN is what creates sufficient 

value to make biodiesel cheaper than diesel. Upon blending biodiesel with clear diesel, Musket separates the RIN from the associated physical gallon of biodiesel and sells those RINs to obligated 

parties, which are typically large petroleum refiners. In short, the 

RINs create for Musket and discretionary blenders an economic incentive to provide biodiesel at a competitive price to our Nation’s 

transportation system. 

Musket believes the value and integrity of RINs are essential to 

the implementation of EISA; however, RIN fraud in its various 

forms frustrates the purpose of the law and perpetrates a theft 

upon those businesses who have invested jobs and capital in our 

Nation’s biodiesel infrastructure, and reduces the economic incentive for Musket to make further investments. 

We believe that fraud in the RIN market is damaging to the legitimate market participants, such as the participants on this 

panel, who have invested substantially to bring biodiesel into onroad diesel within the spirit and letter of RFS2. 

To date, EPA has brought enforcement actions alleging the generation and sale of 130 million fraudulent RINs. As a participant 

in the market, Musket has been directly impacted by fraud. Having 

bought RINs from Clean Green, Absolute Fuels and Green Diesel, 

Musket has incurred significant expenses with respect to RINs 

deemed invalid by the EPA. However, Musket has responded aggressively to the EPA’s buyer beware policy by scrutinizing every 

producer of biodiesel it transacts with, every RIN that it separates, 

and every counterparty with whom it transacts downstream. 

Fraud in the RIN markets takes many forms, though, and Musket believes there’s a problem that is considerably larger than the 

55 

above-mentioned cases, namely biodiesel exports. Musket believes 

there are many who are exporting biodiesel, either blended as diesel blend, blended into heating oil or bunker fuel, or as straight 

D100 biodiesel, and that they are not declaring their obligation to 

retire RINs pursuant to the rules. Internally we refer to this practice as ‘‘strip and ship’’ to extend to the ‘‘splash and dash’’ which 

we dealt with a few years back. 

Musket believes the magnitude of this exporting activity far overshadows the fraud cases brought forth today. Although the statute 

mentions only gasoline and diesel blend exports specifically, we believe many people have exploited the lack of clarity in regard to 

heating oil and bunker fuel exports blended—having exported significant volumes of biodiesel without declaring an obligation to retire the RINs, in blatant contravention of the spirit and purpose of 

the RFS. 

Since these exporters are not buying the RINs back from the 

market, an excess of RINs are left, depressing the RINs, and this 

is further threatening the existence of the small biodiesel producer 

and undermining the entire purpose of the EISA. 

While some may have ignored the impact of the biodiesel exports 

on the market—I’ll jump forward a little to the conclusion since I 

am running out of time. 

To address this policy flaw, we recommend three commonsense 

changes for Congress to consider immediately. Require RINs to be 

retired immediately upon export of biodiesel and renewable diesel; 

require the EPA to coordinate monitoring and enforcement actions 

with U.S. Customs and Border Protection and the Department of 

Energy; and require all sellers of diesel sold in the U.S. to disclose 

the biodiesel content. 

Under the current ASTM standard, wholesalers are not required 

to disclose biodiesel content up to 5 percent. This frustrates upstream buyers, blenders and ultimately truck owners. Accordingly, 

exporters of ASTM diesel may not know that they are exporting 

biodiesel and thereby creating an obligation to retire RINs. 

We believe that if these changes are made, the true intent of the 

EISA will be upheld, and the U.S. biodiesel industry will remain 

vibrant. 

Again, Chairman Stearns and Ranking Member DeGette, thank 

you for the opportunity to appear before the committee today. 

Mr. STEARNS. Thank you. 

[The prepared statement of Mr. Fjeld-Hansen follows:] 

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Mr. STEARNS. Mr. Jobe, you are welcome for your opening statement. And just pull the mic a little closer, if you don’t mind. 

STATEMENT OF JOE JOBE 

Mr. JOBE. Chairman Stearns, Ranking Member DeGette and 

members of the committee, thank you for the opportunity to testify 

today regarding the Renewable Fuel Standard and our efforts to 

ensure RIN integrity in the fuel marketplace. I am Joe Jobe, CEO 

of the National Biodiesel Board. I represent the U.S. trade association for the biodiesel industry. 

We are pleased to see that Congress is interested in the success 

of the Renewable Fuel Standard, which, as you know, was created 

just 7 years ago under the Bush administration with overwhelming 

bipartisan support here in Congress. 

We are here to address a problem today, but the policy really has 

been an unquestioned success for the biodiesel sector. It is stimulating production. Last year, we exceeded over 1 billion gallons at 

plants across the country. We have plants in virtually every State. 

Today you would like us to focus our discussion on improving the 

EPA’s enforcement of the RIN trading. Make no mistake about it, 

we take this issue very seriously. As we’ve already heard, RIN 

fraud has caused significant disruptions in the distribution and 

marketing of biofuels, and we are committed to preventing it in the 

future. 

Biodiesel is a renewable diesel replacement fuel made from an 

increasingly diverse mix of agricultural byproducts, including vegetable oils, recycled cooking oils and animal fats. It is the first and 

currently the only EPA-designated advanced biofuel that is produced on a commercial scale all across the county, meaning that it 

reduces greenhouse gas emissions by at least 50 percent. It meets 

strict fuel specifications and is used in any existing diesel engine 

without modification. It’s primarily used in blends up to 20 percent 

where it actually exhibits premium diesel characteristics. In fact, 

the current diesel land speed record was set just last year using 

B–20. 

Nobody is more interested in eliminating bad actors from the 

RFS program than we are, and we have gone to exceptional lengths 

in recent months to develop practical private-sector solutions. We 

believe the EPA has a difficult job ensuring RIN compliance, and 

overall we believe they have done a good job in cracking down on 

fraud, as was demonstrated with the recent conviction of Rodney 

Hailey in Maryland. We have strongly encouraged the EPA and 

other authorities to continue enforcement action so that the handful of bad actors who have disrupted the biodiesel marketplace are 

removed from the system and punished. 

Additionally, we are not interested in seeing obligated parties 

being overly fined and penalized for unwittingly using RINs that 

they thought were valid. By the same token, however, we believe 

obligated parties should be required to exercise an appropriate 

level of due diligence before they submit RINs for compliance, and 

we’re committed to ensuring that actual volumes of biofuels are 

produced and sold in the U.S. as envisioned by Congress. Last year 

the biodiesel industry exceeded those targets, and we hope to continue that success in the coming years. 

63 

Perspective is important, and we have to remember that the biomass-based diesel category in the RFS2 is effectively only 1 year 

old. Effectively, 2011 was really the first year that the program 

was implemented and came online. And the cases of fraud are isolated cases involving past activity. The vast majority of biofuel producers are honest companies producing quality fuels for the U.S. 

marketplace. What we have seen is no different from fraud in other 

financial markets where criminals have come in and found a way 

to take advantage of the system. 

Looking forward, we believe the EPA’s strong enforcement, along 

with increased due diligence and the private sector’s RIN integrity 

efforts, will ensure that this kind of fraud doesn’t happen in the future. Specifically, in the first case to be prosecuted, Mr. Hailey was 

quickly convicted last month in Baltimore and faces up to 32 years 

in prison. This conviction should send a strong signal to would-be 

fraudsters that this kind of criminal activity will be punished severely. 

Separately, NBB responded quickly to allegations of fraud last 

year by forming a RIN Integrity Task Force, which includes a 

broad cross-section of stakeholders. The task force has been advising on, among other things, the development of a comprehensive 

auditing and realtime monitoring program. 

Through the work of the task force, the private sector has 

launched the Genscape RIN Integrity Network Dashboard. We are 

confident that this third-party verification program that offers 

verification in real time electronically will be effective in protecting 

the system from bad actors and giving the market confidence. And 

I would say that we’re hopeful that this program will respond in 

sort of an E–Verify way that Mr. Bilbray referred to. 

We’re also working closely with both the EPA and obligated parties to look at whether additional regulatory modifications can better focus enforcement efforts on bad actors while ensuring that the 

goals of the program are met. 

To conclude, I want to repeat that we take RIN fraud very seriously and are committed to eradicating it. As we move forward, we 

anticipate continuing to work with our colleagues from the petroleum sector and the EPA to develop practical solutions. 

We appreciate this opportunity and welcome any questions you 

have. 

Mr. STEARNS. Thank you. 

[The prepared statement of Mr. Jobe follows:] 

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Mr. STEARNS. Mr. Drevna, you are welcome with your opening 

statement. 

STATEMENT OF CHARLES DREVNA 

Mr. DREVNA. Chairman Stearns, thank you, Ranking Member 

DeGette, thank you, and members of the committee, for allowing 

me to testify here today. I am Charlie Drevna, president of AFPM, 

the American Fuel and Petrochemical Manufacturers. We are the 

obligated parties, my members, under the Renewable Fuel Standard. As such, we are required to blend ever-increasing volumes of 

biofuels into the transportation supply. There are several nested 

mandates within the RFS, including this—why we are here today, 

the 1 billion gallons of biomass-based diesel. 

Each year obligated parties must submit a number of Renewable 

Identification Numbers, or RINs, as the Chairman stated, to EPA 

to demonstrate compliance with the program. RINs are created 

theoretically by biofuel producers and correspond to gallons, theoretically gallons, of biofuels. RINs can be separated from the 

biofuels and act as credits and are bought and sold, as was mentioned earlier, in a free and open market. 

In order to facilitate RIN trading, EPA established the EPA Moderated Transaction System, EMTS, through which all RINs must 

be generated and traded. Only EPA-registered—that is, EPA-registered—biofuels producers that have submitted third-party engineering reports are eligible to generate RINs on the EMTS, although other EPA-registered parties are then able to trade the 

RINs, as has been mentioned earlier in the testimony. 

Unfortunately, as we now know, some biodiesel producers have 

taken advantage of the weak oversight and have generated RINs 

without producing any biofuels. While EPA properly issued Notices 

of Violation to these so-called bad actors, the Agency went a step 

further and actually fined the obligated parties who unknowingly 

used these invalid RINs to comply with their 2010 biomass diesel 

obligations. 

In one case, EPA responded to a tip and conducted a site visit 

of a registered biodiesel producer. During its visit EPA found the 

company did not even have biodiesel production machinery on site. 

It then took EPA about a year to issue a Notice of Violation to that 

company of 32 million invalid RINs. However, during its investigation of Clean Green Fuels, EPA provided no indication to obligated 

parties that they may be inadvertently—that they may be buying 

invalid RINs. 

Now, I could give you any number of both criminal and jurisprudence kinds of analogies here, but I won’t bore the committee with 

all of them. 

In fact, EPA stood by while obligated parties accessed EMTS 

data and continued to purchase Clean Green RINs that EPA knew 

were invalid. Then to add insult to injury—I may more clearly say 

injury to injury—EPA issued NOVs not just to Clean Green, but 

also to the obligated parties that purchased these RINs. 

Now, the obligated parties go through a wide spectrum; the biggest of the big companies, the household names, all the way down 

to the small refiners and everything in between. 

74 

And the free market today is working. It’s working so well that 

we have a panel here of people saying that they can’t get into the 

marketplace because the members, my members, are doing due 

diligence. They’re out there looking at who they can trust and who 

they know can get validated RINs. 

That’s how the free market system is working today, ladies and 

gentlemen. We need to fix it. If you want this program to go on, 

as many of the Members said, stop pointing fingers. As you all 

know, we all have problems. My industry has problems with the 

total RFS, but right now this thing is the law of the land. And to 

categorize the refiners who were victims as either lazy or criminal 

is totally, in my opinion, our opinion, unfair. 

Again, the free market is working because my members are 

being very careful who they buy the RINs from. And they are doing 

their due diligence. They are assuring each other that they’re complying with the law so we don’t get slapped with going backwards 

and buying RINs again and paying six-figure fines. 

One hundred forty million gallons of this stuff just discovered 

this year, so if the system is working, I’d hate to see when it is not 

working, as some of the panelists have said. 

Now, we have been discussing with the EPA and the obligated 

parties a way to go on this thing, how are we going to get out of 

this mess, how are we going to be assured that the program continues as long as Congress says it should continue. And the program protects not only small producers of biofuels, biodiesel, but 

everyone, everyone along the food chain. 

In particular we appreciate the efforts of the next panel, Mr. 

Bunker and Mr. Brooks and their staff. We have been working diligently with them, with others on the panel trying to get a way out 

of this thing. But as mentioned previously, we need an affirmative 

defense. Now, the affirmative defense can either be let’s work together and go through this system, or the affirmative defense is 

going to be the marketplace is going to say who’s going to buy RINs 

from whom. That’s the choice we have right now. 

So, you know, we can get the RINs from somewhere. It depends 

upon how we are going to work with Congress, work with the EPA 

and work with the other folks. 

So the promise of these talks have been no resolution. We’re 

going into 2013 very quickly. So we have to get this solved, work 

together, figure out a way to do it. 

Thank you, Mr. Chairman. 

Mr. STEARNS. I thank the gentleman. 

[The prepared statement of Mr. Drevna follows:] 

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Mr. STEARNS. I will start with my opening questions. I just 

thought I’d put in perspective the question is how long has this 

been going on, and perhaps many of you might know better than 

I, but a Secret Service agent with Homeland Security testified 

under oath that on or about January 2010, and he names Absolute 

Fuels and Gunselman and others known and unknown at times 

fraudulently created and sold credits for renewable fuels that were 

never produced, thus violating the law. So it goes back to January 

2010. 

And I guess the question I would have for Mr. Jobe, recently the 

Renewable Fuels Association testified before our Energy and Power 

Subcommittee, yesterday, in fact, that the RIN fraud problem is 

overblown. Do you think that’s true or not, yes or no? 

Mr. JOBE. Um—— 

Mr. STEARNS. Yes or no? 

Mr. JOBE. Yes. 

Mr. STEARNS. Do you want me to repeat the question? 

Mr. JOBE. Yes. 

Mr. STEARNS. So you agree with the Renewable Fuel Association 

that this whole thing is overblown. 

Mr. JOBE. I wouldn’t characterize it exactly that way. 

Mr. STEARNS. No, I’m asking the questions. So your answer is 

yes, it is overblown? 

Mr. JOBE. Yes. 

Mr. STEARNS. OK, I just want to—because your opening statement indicated that. Then as you moved to your closing, you sort 

of indicated differently, so I thought I’d put you on record. 

And I think in this case, and it is Mr. Fjeld-Hansen—pull the 

mic up a little bit closer to you—and Mr. Paquin can tell me do 

you think the problem of RIN is overblown, yes or no? 

Mr. FJELD-HANSEN. I think the problem has not fully surfaced 

until the export issues have been addressed as well. 

Mr. STEARNS. So, is your answer yes or no, it’s overblown? 

Mr. FJELD-HANSEN. I would say it’s not overblown. 

Mr. STEARNS. Not overblown. 

Mr. Paquin? 

Mr. PAQUIN. Sir, the situation is not overblown. 

Mr. STEARNS. OK. And this case, Mr. Sprague, what do you think 

about this fraud problem? Do you think—Mr. Jobe thinks it’s overblown. What’s your opinion? It is overblown, yes or no? 

Mr. SPRAGUE. Yes, I think it’s overblown. 

Mr. STEARNS. You think it’s overblown. 

Ms. CASE. I think it’s a serious issue, but it reflects a very small 

amount of the market, so it is overblown. 

Mr. STEARNS. Does anyone feel a strong compunction that it is 

unfair for me just to put you on yes or no, that you would like to 

have an opportunity? If so, who would like to say? 

OK, Mr. Jobe, can you make it in 30 seconds? 

Mr. JOBE. Yes. 

Mr. STEARNS. Normally if you’re the gentleman from Michigan, 

Mr. Dingell, who has been chairman of this committee many years, 

he gives no opportunity to talk after he asks a yes or no, but I’m 

going to give you 30 seconds. 

85 

Mr. JOBE. It is a very, very serious issue, and we are committed 

to addressing it. I had to answer yes only to the extent that—only 

to the extent that it—— 

Mr. STEARNS. You said it is a serious issue. Who else? Mr. 

Paquin, did you want to say something? I have a lot of questions 

here, but keep moving. 

Mr. PAQUIN. Yes, sir. At this point, yes, it is a definitely a serious 

issue. The fraud that is committed up to this point is significant. 

And I—— 

Mr. STEARNS. OK. Let me ask Mr. Fjeld-Hansen. Musket Corporation, I guess, is the second largest truck stop chain in the 

United States. Is that true? 

Mr. FJELD-HANSEN. That’s right. 

Mr. STEARNS. They’re a large player in the market for biodiesel 

fuel. Especially as compared in this case to Mr. Sprague’s company, 

you’re the big honcho here. But you say in your testimony that 

Musket is still, you are still greatly affected, just like Ms. Case 

talked about what has taken place. In what ways has Musket been 

impacted? 

Mr. FJELD-HANSEN. Well, as you were saying, due to our size, 

when we have been in transaction chains of fraudulent RINs, we 

tend to be the epicenter of it. We are the ones who are buying the 

fuel from the producer. We also are the ones selling the RIN to the 

obligated party. And we are also the one making the investments 

in the blending equipment. And we are also the ones selling the 

fuel to the consumer. So we carry the quota risk of the consumer, 

the credit risk of the producer. 

Mr. STEARNS. So you’re involved with all the transactions. 

Mr. FJELD-HANSEN. So we are where everything meets. 

So our impact from a damage perspective has been that we have 

had to replace fraudulent RINs that we had sold to obligated parties. So whatever damages they incurred, we replaced RINs at our 

cost. 

Mr. STEARNS. OK. Mr. Sprague, in your testimony you state that 

the inception of the EMTS program, which, I guess, is a computer 

system that the EPA set up, many in the industry thought that the 

EPA would be providing oversight, and guidance, and validation for 

all RIN transactions, but as you’ve pointed out quickly after the 

fact that EPA—this is not the case, and that caveat emptor is really what you’re facing when you’re dealing with this EMTS program. Is that correct that you had the impression somebody was 

looking after this? 

Mr. SPRAGUE. Exactly. The general perception in the industry 

was through the third-party engineering studies that were done for 

each facility to become registered, through the attestment, through 

all of the documentation that we provide, which is quite extensive, 

that the EPA, for lack of a better word, was the gatekeeper, and 

that somehow the system—maybe that was the flaw that many of 

us had—somehow, without actually figuring out how, that the system would remain pure. 

I think the obligated parties didn’t take their due diligence job 

seriously. I don’t think the EPA intentionally didn’t provide the 

oversight that maybe we feel now that could have been more substantial, but I think we all kind of felt like the system was sound, 

86 

and we found that it’s not. It has a few holes that need to be 

plugged. 

Mr. STEARNS. All right. My time has expired. 

The gentlelady is recognized for 5 minutes. 

Ms. DEGETTE. Mr. Sprague, following up on that, this Clean 

Green case was a wake-up call for everybody, correct? 

Mr. SPRAGUE. I’m sorry, ma’am. 

Ms. DEGETTE. The Clean Green case was a wake-up call for everybody that due diligence needed to happen, and people need to 

pay attention, right? 

Mr. SPRAGUE. That’s correct. 

Ms. DEGETTE. OK. Mr. Drevna, I want to ask you a couple of 

questions. I understand that numerous companies like ExxonMobil, 

Marathon, Shell, Sunoco and Tesoro bought invalid diesel RINs 

from Clean Green, which has now been convicted, and submitted 

them to the EPA for compliance with their with renewable fuel obligations, correct? 

Mr. DREVNA. Yes, ma’am. 

Ms. DEGETTE. And EPA’s regulations clearly state, quote, ‘‘Invalid RINs cannot be used to achieve compliance with the renewable volume obligations of an obligated party or exporter.’’ Is that 

correct? 

Mr. DREVNA. The regulations say that, yes. 

Ms. DEGETTE. They say that, yes. 

Mr. DREVNA. Yes, ma’am. 

Ms. DEGETTE. And, Mr. Drevna, EPA’s regulations clearly say— 

or I just said that—that they can’t be used to achieve compliance, 

and so here’s my question: Do you know if those companies that 

I just talked about, ExxonMobil and the other ones, were aware of 

that EPA regulation, yes or no? 

Mr. DREVNA. Yes, I’m assuming that they did, they do. 

Ms. DEGETTE. I would think so. 

And so here’s my question: Yes or no, do you know think the 

companies have any responsibility to conduct due diligence and to 

investigate biofuel producers from whom they are buying RINs? 

Mr. DREVNA. I believe that there has to be a system where—— 

Ms. DEGETTE. Yes or no, do you think they should be conducting 

due diligence? 

Mr. DREVNA. Depending upon what your definition of due diligence is. 

Ms. DEGETTE. Do you think they should be conducting due diligence, yes or no? 

Mr. DREVNA. To a point. 

Ms. DEGETTE. To a point. Only to a point? Which point? 

Mr. DREVNA. The point where it makes sense. 

Ms. DEGETTE. OK. Do you know whether those companies had 

due diligence processes in place before the Clean Green case? 

Mr. DREVNA. I believe they must have looked at—— 

Ms. DEGETTE. Do you know whether they had due diligence in 

place? 

Mr. DREVNA. I cannot address individual companies. 

Ms. DEGETTE. You don’t know. 

Mr. DREVNA. No, I don’t know. 

Ms. DEGETTE. OK. Thank you. 

87 

Now, do you know if the company’s attention to due diligence has 

increased since this Clean Green case came up? 

Mr. DREVNA. As I said—— 

Ms. DEGETTE. Yes or no? 

Mr. DREVNA. Yes. 

Ms. DEGETTE. Thank you. 

Now, I want to say to you, Mr. Paquin, due diligence is important to you, and I think you said in your testimony improving due 

diligence is important in the wake of this Clean Green case, correct? 

Mr. PAQUIN. That is correct. 

Ms. DEGETTE. OK. Now, I think you believe that there are certain red flags that one can identify in this whole process to tell if 

there’s fraud in these RINs, correct? 

Mr. PAQUIN. There are red flags and—— 

Ms. DEGETTE. Would you be willing to supplement your testimony—excuse me—would you be willing to supplement your testimony, Mr. Paquin, to tell us what those red flags could be as we 

work along this process? 

Mr. PAQUIN. Actually there are many red flags and indicators 

that we can look at. 

Ms. DEGETTE. Can you submit that to this committee? That 

would be really helpful. 

Mr. PAQUIN. I can do that. 

Ms. DEGETTE. Thank you very much. 

[The information appears later in the hearing.] 

Ms. DEGETTE. Now, Ms. Case and Mr. Sprague, you know, I listened so sympathetically to your testimony because you’re—just 

like everybody else, you’re victims in all of this because you’re legitimate operators who are trying to operate under this law, and 

now your markets have fallen out because you’re small producers, 

and people are worried, right? Ms. Case, yes or no? 

Ms. CASE. Yes. 

Ms. DEGETTE. And Mr. Sprague? 

Mr. SPRAGUE. Yes, ma’am. 

Ms. DEGETTE. Now, Ms. Case, you said that when the EPA announced this fraud, the market fell apart; is that right? 

Ms. CASE. Yes. 

Ms. DEGETTE. And you also said that there are solutions in the 

private sector that had been proposed because everybody’s awareness has gone up since this Clean Green case; is that right? 

Ms. CASE. Yes, that’s correct. 

Ms. DEGETTE. Would you be willing to supplement your testimony to talk about some of those private-market solutions that 

have been proposed? 

Ms. CASE. Of course. 

Ms. DEGETTE. Thank you very much. 

[The information follows:] 

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Ms. DEGETTE. Now, what can the EPA do to restore the confidence in the program so you can start selling your product again? 

Ms. CASE. I think what we’re doing right now, the National Biodiesel Board’s obligated parties and the EPA working together, for 

example, on the RIN Integrity Task Force, is exactly what we need 

to do. We need to clarify what due diligence is absolutely. There 

needs to be more due diligence. And I think that the EPA just 

needs to make sure that all the information gets out there so that 

we can identify who the people are who are perpetrating the fraud 

and eliminate them from the system so we can move on. The more 

information we get, the better. 

Ms. DEGETTE. OK, great. 

Now, I’m sorry, Mr. Drevna, I forgot to ask you one question, and 

I don’t know if you know the answer to this, but as I said, 

ExxonMobil, Marathon, Shell, Sunoco, and Tesoro and others 

bought these invalid RINs from Clean Green Fuels. And so my 

question is Clean Green was the one that was operating in Maryland with a few plastic tubes in a tiny ramshackle building. Do you 

know if those companies did the due diligence to find out about 

Clean Green before they bought the RINs? 

Mr. DREVNA. I can’t talk individual companies. I can’t say. 

Ms. DEGETTE. Well, I just listed a whole bunch of them. 

Mr. DREVNA. Well, EPA was there a year before they announced 

that there was a lot of fraud. 

Ms. DEGETTE. My question to you, sir, is do you know if those 

companies—— 

Mr. DREVNA. No, I don’t. No, I don’t know. No, I don’t. 

Ms. DEGETTE. Thank you very much. 

Thank you, Mr. Chairman. 

Mr. STEARNS. Mr. Terry is recognized for 5 minutes. 

Mr. TERRY. Thank you, Mr. Chairman. 

I came here under a different impression. I thought we were all 

getting together so we could figure out solutions here. I’m kind of 

stunned actually. 

Anyway, a couple folks in a question, I think, by Mr. Stearns 

about whether the fraud was significant, just my little editorial before I ask questions. It may have been insignificant in the sense 

of the amount of fraud to the entire industry, but its consequences 

have been very, very significant, so therefore it is significant. And 

that’s what we’re trying to do here today, because as I mentioned 

in my opening, this is also then being used as the primary weapon 

against biofuels in general. Because there’s fraud, eliminate 

biofuels. And so we need to have the discussion more about how 

do we correct the fraud, because any fraud should be dealt with 

swiftly and harshly. 

Anyway, now I’ll get to a couple of my questions. Mr. Paquin, I 

understand, though, that in validation you did your work and discovered fraud. Could you be more specific in what remedies then 

you brought to the table? 

Mr. PAQUIN. Yes, sir, absolutely. 

First of all, I want to correct the record. The first RIN fraud case 

was not in 2010 for Clean Green. Actually when I was the president of Paquin Energy & Fuel in 2009, we actually saw the first 

fraud case. So in July of 2009, we discovered through our due diliVerDate Aug 31 2005 10:33 Jul 29, 2013 Jkt 037690 PO 00000 Frm 00094 Fmt 6633 Sfmt 6633 F:\112-16~2\112-16~1 WAYNE
91 

gence process that some of the numbers we were receiving for renewable credits did not make sense. They were rounded off, and 

those numbers just appeared to be inconsistent with any product 

we saw in the marketplace. In 2009, a local prosecutor actually immediately prosecuted an individual and limited the fraud to about 

100,000 total dollars. 

Mr. TERRY. This is a local prosecutor. 

Mr. PAQUIN. This was a local prosecutor. 

Mr. TERRY. And someone informed the local prosecutor of what 

they discovered? 

Mr. PAQUIN. Yes, sir. At Paquin Energy & Fuel, when I was the 

president there, we immediately called the EPA as well as the local 

prosecutor to see if we can get some of the financial and some of 

the money back from the company. They responded immediately 

and, like I said, limited that case to about $100,000 total liability. 

He was convicted of a felony, so the case was successfully prosecuted. 

Fast forward to Clean Green in 2010. Our company once again 

went through an extreme due diligence process and identified the 

fact that Clean Green was not producing product. We actually sent 

someone on site. They looked at that facility and identified the fact 

that it was nonexistent. We reported that to the EPA in July of 

2010 and again in a meeting in August of 2010. 

I will also say that the due diligence process that we execute, we 

rely on other individuals just based on information from brokers, 

the total amount of fuel that’s used, and we also pass on that information to obligated parties. So they—and, in fact, default will rely 

on us to tell them and give them what due diligence we’ve done as 

we purchase and resell RINs. 

So I think that’s an important distinction to make that there is 

a significant due diligence process in the marketplace currently; 

however, it’s nearly impossible to root out all the criminals who actually defraud other people and individuals in the system. That’s 

why affirmative action or affirmative defense is extremely important as we move forward so an innocent, good-faith company has 

the ability, like ours who went out and did the due diligence, 

doesn’t have that extreme liability. 

Mr. TERRY. I appreciate that. 

Ms. Case, I appreciate your position in the market. You had 

mentioned in your testimony, and so did Mr. Sprague, that when 

there is something like this fraud controversy, it tends to impact 

the smaller producers more significantly. Tell us specifically how it 

affected you and why you think it affects the smaller producers, in 

42 seconds. 

Ms. CASE. Sure. We sell—prior to the fraud we sold our RINs 

with the fuel, so our distributors would be the one who would actually separate the RIN and sell it up the chain to the brokers or to 

the obligated parties. 

Once the fraud occurred, the ultimate owner of that RIN, an obligated party, doesn’t know New Leaf. They’ve never been to my 

plant. They don’t buy fuel directly from me. They would just get 

the RIN through some brokers. So once the fraud was discovered, 

they just put a stop to buying any RINs from any producers they 

didn’t know about. 

92 

When the due diligence kind of got more intense, there were 

auditors that were sent out to verify that a plant like ours is in 

existence, and the marketplace has allowed at this point to start 

getting RINs moving again. However, obligated parties are still focusing on the plants that have the financial backing to replace 

those RINs, or maybe an intermediary, a broker, who can put their 

balance sheet on the line to say if these RINs do turn out to be invalid, they can replace them. 

Nobody is going to look at my company and think I could replace 

$5 million worth of invalid RINs if they turn out to be invalid, so 

therefore obligated parties are still not buying directly from me. 

There are some market things that have been put together, 

verification purposes—for verification purposes, and I think eventually they will again. 

Mr. TERRY. Thank you. 

Mr. STEARNS. Mr. Green, you’re recognized for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. 

My colleagues, I appreciate your being here today. And unlike 

the chairman, I don’t get to run over my 5 minutes, so I’m going 

to ask for a yes or no answer on my first question. 

Conception. Do each of you agree that there should be some sort 

of affirmative defense for obligated parties as warranted, recognize 

that may depend on some sort of agreed due diligence criteria? If 

you could just answer yes or no. 

Ms. Case, would that bring stability to your market. 

Ms. CASE. I believe so, yes. 

Mr. SPRAGUE. Yes, absolutely. 

Mr. PAQUIN. Yes. It has to extend to all participants. 

Mr. GREEN. Mr. Fjeld-Hansen? 

Mr. FJELD-HANSEN. I’m not certain about it. I think the buyer 

beware is actually working quite well, and proper prosecution is 

going to clean up a lot of this. 

Mr. STEARNS. Mr. Jobe? 

Mr. JOBE. Yes. 

Mr. DREVNA. Absolutely. 

Mr. GREEN. And I guess my concern is that we’ve heard the 

questioning, and we’ll get to the EPA panel in a few minutes, but 

for almost a year the EPA knew there was a fraudulent access out 

there, and didn’t ring the bell, and said it is buyer beware. I’m just 

shocked that we’re saying, wait a minute, Congress created this 

program, and yet we don’t want some follow-up by someone other 

than a private sector to do it. It should be also verified. And I think 

due diligence with some kind of affirmative defense may be what 

we are looking for. 

Mr. Drevna, do you think that the risk for invalid RINs could be 

significantly minimized if the EPA approved a third-party independent auditor that visited the facilities unannounced? 

Mr. DREVNA. Well, that’s the question, Congressman Green, 

about what due diligence is and what it isn’t. We can’t go out and 

look at 50,000 or how many different producers are out there. We 

need something that says, OK, we’re in this together, we have to 

have an affirmative defense, we have to define what that due diligence is. 

93 

Now, we have been going back and forth with EPA, and actually 

we’ve been going forth with EPA, we haven’t gotten a lot anything 

back—I mean, good conversation, but we haven’t gotten anything 

back from the good folks at EPA about what they believe would be 

a due diligence, you know, how many boxes do you have to check 

in order for you to qualify for that affirmative defense? That’s 

where we are right now. 

Mr. GREEN. And I know and my ranking member is a good 

friend. Obviously your members are big boys. They can take care— 

and big ladies, too, I guess. They can take care of themselves. But 

the problem with these RINs is that you may not know from that 

purchaser you’re buying from where it actually came from because 

these are traded. You know, it’s almost like if I buy stock, no telling who else has had that stock. And that’s my concern. 

Does anyone else on the panel want to answer on do you think 

that the risk for invalid RINs would be significantly minimized if 

the EPA approved a third-party independent auditor that visited 

the facilities? Anybody else have a response? 

Mr. SPRAGUE. I would like to make a comment on that, sir. We 

in the private sector have lots of audits by lots of different agencies, IRS, State and local, so we get audited a lot. By no means are 

we fearful of having that auditor come in. The question is is it really needed, and is it going to accomplish anything? 

My greatest fear is that we create a bureaucracy to where—— 

Mr. GREEN. We already got one at EPA. 

Mr. SPRAGUE. Yes, I guess that’s true—where we create even 

more bureaucracy inside a program that was meant to be a privatesector, market-based type of approach. So my comment to that is 

that’s not necessarily, in my opinion, needed, and that’s just an 

opinion. 

The one thing that—— 

Mr. GREEN. If somebody else on the panel may want to respond, 

because I’m down to a minute 15. Anybody else? 

Mr. FJELD-HANSEN. Thank you. 

You know, when you look at a lot of these increase or some kind 

of a process like you’re talking about, an audit, I don’t think we 

want to put a system in place that relieves people of liability. Everyone who’s entering into this industry are doing it because of 

some kind of business idea or plan and some kind of return 

metrics, and with those come certain risks. You’re mentioning all 

the traders that are in this—— 

Mr. GREEN. I only have a couple seconds. I need to ask Mr. 

Drevna, why is it critical for EPA to act by January 1st of 2013? 

Mr. DREVNA. We don’t want to see a redux of 2000, what we saw 

in 2012, Congressman Green. We have to have certainty out there. 

And in order to—you know, just a couple weeks ago the FBI raided 

another place. We don’t know how many more are out there right 

now. We need to have certainty that whatever we do is going to 

be satisfactory, or, as I mentioned earlier and then probably in opposition here, the free market is working right now because we’re 

not buying RINs from people we don’t trust. 

Mr. GREEN. Well, and that’s the concern, because without that 

certainty you’re hurting a lot of companies, and maybe we really 

94 

need somebody that’s a traffic cop saying this is OK so some of 

these companies could actually participate. 

Mr. Chairman, thank you for your patience. 

Mr. STEARNS. Thank you. 

Dr. Burgess, you’re recognized for 5 minutes. 

Mr. BURGESS. I thank the chair for the recognition. 

Mr. Sprague, I was particularly taken with your testimony 

that—your observation that there were a lot of forms to fill out, 

there were a lot of people that you had to reply to. And it was your 

impression, whether it was rightly or wrongly, that someone really 

didn’t have their hand on the tiller as far as all of this was concerned. Did I discern that correctly? 

Mr. SPRAGUE. Yes. 

Mr. BURGESS. And, Mr. Paquin, you have pointed out how as 

early as 2009 saw the numbers didn’t add up. Were you the one 

that then alerted a local prosecutor? 

Mr. PAQUIN. Well, in 2009, Paquin Energy & Fuel alerted the 

local prosecutor as well as the EPA at that time. 

Mr. BURGESS. So I guess what I’m having trouble with here is 

EPA gave the impression that they were in charge. They gave you 

the impression, Mr. Sprague, that you got to fill out all this stuff, 

you got to do all these things in order to be in compliance, so surely 

there is a penalty or there is a problem—if a problem is found, they 

are going to fix it in short order. Did you have that impression? 

Mr. SPRAGUE. That was definitely the impression. And I will go 

back to a comment Mr. Jobe said that this program is effectively 

1 to 2 years old, and with any—with any system there is going to 

be problems, corrections. If anything, it’s my opinion that the problem that is occurring is there’s not a mechanism to address problems that are unforeseen. 

Mr. BURGESS. Well, that’s your impression today, but when you 

were filling out all those forms, having to answer all those questions, it really looked like the heavy hand of Big Brother was on 

this program, didn’t it? 

Mr. SPRAGUE. That is a true statement. 

Mr. BURGESS. And that would have been my impression coming 

at it from the same angle, that here you have the heavy hand of 

the Federal Government, you’ll have the full weight of the Department of Justices, inspector generals, Federal prosecutors, who 

know else, if you come in and do this incorrectly, so you better 

cross all the Ts and dot all the Is. Wasn’t that your impression? 

Mr. SPRAGUE. Yes. 

Mr. BURGESS. And so it was kind of a shock. 

I don’t know, Ms. Case, did you have the similar impression 

when you applied for this program? 

Ms. CASE. You know, on one hand yes. Obviously we had an engineering review. We had someone come out to the plant and make 

sure we had the technology in place. But on the other hand, you 

know, I’m sure in hindsight there could have been more. That’s the 

benefit of hindsight. 

Mr. BURGESS. Yes, but even at that level, could you have ever envisioned that someone could put a barrel in a church parking lot 

with a couple of hoses coming out of top and say, hey, I’m in the 

biodiesel business? 

95 

Ms. CASE. No, but I don’t think like a criminal. 

Mr. BURGESS. Yes, and that’s a lot of our problems. 

But here is the problem: You guys entered into this. You risked 

your own capital, your own time. You could have been doing other 

productive pursuits. I don’t know whether it was a desire to make 

money or a desire for social justice, but you did what the government asked in producing these, and then in turn—I mean, you’re— 

honestly, you’re the bottom of the food chain. Mr. Drevna, his big 

boys and girls. They will be taken care of, they’ll handle it, they 

can absorb those losses. But I don’t know if you are at liberty to 

tell us, how did that affect your balance sheet, Ms. Case? What 

personally has been put at risk in your world from this? 

Ms. CASE. It’s been difficult, I can tell you that. Like I said, we 

had a good year last year, and this year has not been so good. 

Mr. BURGESS. Well, can you give a range; do you feel like on a 

personal level you lost $1,000 or $10,000 or 100,000? 

Ms. CASE. I can’t speak to the exact dollar amounts, I don’t have 

that with me. I can say that if you look at the RIN values right 

now as to where they were last year, and then you take a pretty 

significant percentage off of that, you’ll see about what I’m getting 

for a RIN right now, whereas last year at this time we were all on 

a level playing field, my RIN was worth the same as a large-producer RIN. 

Mr. BURGESS. So you’re the one having to provide the discount 

in order to salvage the program. 

Ms. CASE. Absolutely. 

Mr. BURGESS. Mr. Paquin, can you give us an idea of the range 

of the losses that your company—you’re kind of midlevel in this 

range. There are very small guys and very big guys. 

Mr. PAQUIN. Yes, sir. After going through an extensive due diligence process, and without the opportunities and an affirmative defense to show our innocence. We are looking at a range of a 6- to 

$10 million loss of which we don’t have. Our 40 employees will 

probably go away if that occurs. However, I think we can come up 

with solutions in order to move forward. 

Mr. BURGESS. So if you have solutions, you can save 40 jobs in 

your company. 

Mr. PAQUIN. I think the industry can save tens of thousands of 

jobs if we have an immediate solution and EPA actually adjusts its 

interim policies to allow for an immediate due diligence. 

Mr. BURGESS. And, Mr. Drevna, just a quick follow-up. I’m not 

sure that I completely understood. And, now, has the EPA defined 

what due diligence is so going forward we all know? 

Mr. DREVNA. No, sir, that’s the problem right now. We’ve been 

trying to figure out what due diligence would be, having meetings 

with the assembled masses here going forward. But to date it’s 

been, you know, tell us what you think due diligence is, and they’ll 

look at it, and we don’t hear anything back. 

Mr. BURGESS. Well, we’ve defined the problem, and I hope we 

can apply a little pressure to get this done for you. 

Mr. DREVNA. If I may, sir, there is a program out there that 

we’ve been living with since 1995 under the RFG program. It’s a 

good template, why not look at it, the RFG survey. 

Mr. BURGESS. OK, we’ll look at that. Thank you. 

96 

Mr. SULLIVAN [presiding]. Ms. Castor, you’re recognized for 5 

minutes. 

Ms. CASTOR. Thanks very much. 

Well, thank you all very much for being here today. I think your 

testimony on the renewable fuels standard and the young biodiesel 

market has been very illuminating, and I really feel for what has 

happened with these crooks and bad actors that have entered into 

the market and caused so much damage to your companies. 

I wanted to focus on some of the big picture, though, on—it’s 

very interesting that almost everyone here said, Congress, continue 

on with renewable fuel standards; that the overarching goal there 

of creating jobs, of addressing—reducing greenhouse gas emissions, 

thereby addressing these extreme weather events, is important; 

and really reduce—decreasing our country’s reliance on foreign 

sources of energy. 

Except Mr. Drevna. Yes, you’re right, I read your testimony 

where it says the renewable fuel standard is a broken policy in 

need of dramatic reform. I think you’re in the minority, from the 

research I’ve been doing and the testimony here today. 

Ms. Case, notwithstanding these crooks that entered into the 

market, would your company be profitable without the renewable 

fuel standard? 

Ms. CASE. No. 

Ms. CASTOR. And, Mr. Fjeld-Hansen, how has the Musket Corporation—I wasn’t familiar that you had such a—what is it, 300 locations all across the country. We’re doing transportation fuels. 

How has the Musket Corporation benefited from the renewable fuel 

standard? 

Mr. FJELD-HANSEN. Well, as a retailer we are there to provide 

the fuel that our customer wants, so I think our customers have 

benefited. 

Ms. CASTOR. You need to bring your microphone a little closer 

and turn it on. 

Mr. FJELD-HANSEN. And also turn it on. 

No, as a retailer the benefit of this is really coming to the customer more than anything where a lot of the value created from 

the renewable fuel and also whatever emissions benefits they have 

will be transferred to the customers. So we are kind of in the middle of the chain where it’s additional fuel that we can offer to our 

customer. 

Ms. CASTOR. Well, I know you’re not saying the RFS is perfect, 

because these fraud cases have raised very significant concerns 

about the market impact of this fraud, and we need to learn the 

lessons now in order to prevent this fraud from occurring again. 

And I’m very pleased that the National Biodiesel Board and the petroleum refiners have been working to set up a third-party certification system that will help buyers verify the validity of the RINs 

before they purchase them. 

Mr. Jobe, can you describe the auditing process that biofuels producers have to undergo to qualify as a certified producer under this 

program? 

Mr. JOBE. Yes, thank you. 

Prior to working in this job, I was actually a fraud investigator, 

I did training at the Federal Law Enforcement Training Center in 

97 

Glencoe, Georgia, where some of the Secret Service agents also 

train. 

So we started working on this program back in October of last 

year in anticipation of EPA enforcement actions, and one of the 

conclusions that we came to fairly quickly was that we were going 

to need to address this problem in a very reasonable timeframe, in 

a very tight timeframe, because it was going to jeopardize, financially jeopardize, a whole lot of people, including my members, including Mr. Drevna’s members, and everyone at this table. 

And so we decided that a legislative fix was not—would not work 

in the proper reasonable timeframe; that even a regulatory fix was 

not what was needed, because regulations move at glacial speed. 

We needed the private sector to step forward with a private-sector 

fix. That’s why we got with Mr. Drevna’s organization. We formed 

a task force that was cochaired by an obligated party and a biodiesel producer and had a cross-section of all of the stakeholders, 

and advised and encouraged the development of the program. 

They even developed the audit plan for the initial audit. So it’s 

a two-phase program. First is an initial audit where actual audit 

teams go on site and audit the RINs that have been existing. And 

then the second phase is installation of special software with special data-collection algorithms and monitoring equipment, tank 

monitors, flow meter monitors, infrared camera devices, all of these 

sending realtime data to the software reconciling the data, and all 

that data then made available to obligated parties to use that information to do their due diligence. 

We’re confident that—and our members have taken—they’re 

spending tens of thousands of dollars to do this and to put equipment on site. 

Ms. CASTOR. Then are you confident that the producers will continue legitimate and high-quality operations after they receive that 

certification because of that investment? 

Mr. JOBE. Absolutely. 

Ms. CASTOR. And you also testified along with others that the 

EPA, businesses and key stakeholders are in serious discussions 

about how third-party verification systems like this one would work 

and how it would fit into EPA’s enforcement approach. Have you— 

how would you characterize EPA’s response to stakeholder concerns, and have they been a willing participant in the discussion? 

Mr. JOBE. The EPA participated as guests on all of our—on many 

of our task force meetings. They reached out. They were very responsive to us when we reached out to them. They reached out to 

us separately, and they’ve been very responsive. 

I will also just share, as far as the enforcement action, having 

done fraud cases, of course everyone would have liked things to 

have happened faster, but having prosecuted fraud cases, you have 

to get all of your facts very, very straight before you allege something about someone because you can ruin their reputation. So we 

think that this first prosecution case has gone on a relatively reasonable timeframe. 

Ms. CASTOR. Thank you very much. 

Mr. SULLIVAN. Thank you. 

We recognize Mr. Bilbray for 5 minutes. 

Mr. BILBRAY. Thank you, Mr. Chairman. 

98 

First of all, I think—I was just sitting here realizing I think the 

ranking member and I were the only ones around back in the ’90s 

when we fought to get biodiesel equity and able to get a blender’s 

credit back in those old days. I remember the battle over that, and 

I—— 

Ms. DEGETTE. We were in our teens then. 

Mr. BILBRAY. Yes, yes. 

So we have come a long way on a lot of issues. I am just concerned that we don’t recognize that what our intentions were with 

the renewable fuel standard may not have grown or evolved the 

way we wanted to. And I really wanted to say I do agree that there 

are changes need to be made, and reform is not a bad word in a 

lot of episodes. But I think here we need to learn from our successes and our failures. 

One of the places I think has been successful is the biofuel industry overall has provided a usable material with the BTUs, the energy that is needed, at the same time of avoiding environmental 

problems that some other aspects of the renewable mandate have 

applied. I mean, California, you actually have renewable fuels 

being outlawed for environmental reasons, and you’ve got renewables that are actually going to have to be imported because our 

domestic-produced renewables are not compatible with their greenhouse mandates. And so but I think there are the opportunity to 

learn from some of this. 

The question I have for those of you that—especially the little 

guys that have to work with us. Those of us in government, the big 

guys always can accommodate one way or the other. It is the little 

guy who gets squeezed out by mistakes by big government. So how 

can we help the little guy? 

Mr. Jobe, the issue of tracking who is a true credit—and this is 

really kind of near and dear to me, because when we were talking 

about so-called cap and trade, didn’t have any cap, we were talking 

about international offsets. And I saw shysters going down to Latin 

America actually cutting deals with teak growers for stuff that 

wasn’t going to reflect reality, but was going to make people money 

because they get shipped over. 

How do we do something like what we’re trying to do with our 

drug tracking of a pedigree so that a consumer can know that they 

have—that what they are buying is actually going to be credited 

under the Federal program? Do you have any ideas or have been 

thinking about that? 

Mr. JOBE. Yes. And I appreciated your suggestion earlier about 

E–Verify and the analogies there, because I really think that the 

private-sector solution that we’ve developed in conjunction with the 

obligated parties, the blenders, the marketers, the retailers, and 

large, small and medium-sized biofuel producers, I think it is very 

similar and will work like that because it is going to initially audit 

the RINs that have been generated, and then it will be monitoring 

in real time so that an obligated party or other stakeholder can, 

through a subscription service—and the obligated parties on our 

task force actually believe that it’s going to save the obligated parties money to pay for this subscription because they have auditors 

in—they have multiple—all of them have multiple auditors on the 

same site right now—but if they could just buy a subscription and 

99 

look at data that’s being monitored in real time, it would be very, 

very powerful. So I really think that’s a form of an electronic 

realtime verification that you can look at a particular RIN and see 

that it’s been monitored. 

Mr. BILBRAY. From the consumer’s point of view, the purchaser, 

right now when it comes to illegal employment, we put the burden 

on the employer to check with an old I–9 system that has been so 

fraudulent that everybody knows it’s just a scam for basically people who want to break the employment laws. But with E–Verify we 

are trying provide, as the President has expanded it, a vehicle for 

a consumer, the employer, to be able to check to make sure they 

are legally performing an activity. 

Do you see an opportunity by using some kind of information 

that works to give the consumer the ability to know what they are 

actually buying and what they are getting for the dollar? 

Mr. DREVNA. That’s a great point, Congressman Bilbray. And to 

Mr. Jobe’s thought, you know, the concept sounds really good, and 

always the devil’s in those details, and we are working very closely. 

One of the concerns we have, it can’t be just one company. There 

has to be an EPA-approved, registered—any number of people. Let 

the free market decide who you want to go to to make sure that 

you can check your boxes and get it done. And the more entities 

that are involved in that, the better because, again, you can’t just 

have one company saying, we’re doing all this. 

Mr. BILBRAY. No, I think Ms. Case would be the first one to say 

if you pick one company, you’re going to be the—you’re going to be 

left out, and some big guy is going to be in line for all the business. 

So I guess the two things you can agree on from both ends of the 

aisle, I got a constituent down at the end, but I think that we don’t 

want to have that government pick one player, because that player 

tends to be the big guy who’s got the lobbyist in Washington or is 

able to play. And the essential part of this program is the little 

guys being able to participate because they’re closest to the community. 

Ms. CASE. The point I would make with the work that we’ve been 

doing on the task force is that if all of our RINs are looked at on 

an even playing field, and the obligated party can look at the subscription service and see that I’m actually producing fuel at my facility, they would be more likely to buy my RINs, and that’s why 

it’s important for that system to be put in place. 

Mr. BILBRAY. Thank you. And thank you for taking that 10-hour 

flight round-trip to come out to testify. 

I yield back. 

Mr. SULLIVAN. Mr. Markey, you are recognized for 5 minutes. 

Mr. MARKEY. Thank you, Mr. Chairman, very much. 

Yesterday I asked Jack Gerard, the president of the American 

Petroleum Institute, whether he supported the policy we’ve had in 

place in the United States over the last 37 years to prohibit exports 

of American crude oil. He apparently doesn’t support that policy 

anymore. Even as American soldiers are fighting and dying to protect oil supplies in the Middle East, he thinks that it’s the American Petroleum Institute—or we should really now just call it the 

World Petroleum Institute because that’s really who he is repVerDate Aug 31 2005 10:33 Jul 29, 2013 Jkt 037690 PO 00000 Frm 00103 Fmt 6633 Sfmt 6633 F:\112-16~2\112-16~1 WAYNE
100 

resenting—thinks that we should seriously consider exporting 

American crude oil. 

Last week the Carlisle Group purchased the Philadelphia refinery that was for sale, the oldest and largest oil refinery on the east 

coast. The previous owner, Sunoco, had planned to close the facility 

next month, leaving 850 workers unemployed. Instead the refinery 

will now be upgraded, and an additional 200 jobs will be created. 

Now, why has that occurred? Well, in the past the Philadelphia 

refinery used high-priced imported Brent crude, which is more than 

$14 more expensive on the world market than domestic oil produced here in the United States. So the new strategy is to develop 

the infrastructure to bring in lower-priced, domestically produced 

oil from North Dakota and elsewhere to make 50 percent of its refined product. 

Mr. Drevna, if we allowed unrestricted exports of crude oil, 

wouldn’t that decrease the incentive to invest in domestic refineries 

here in the United States because it would be more dependent 

upon imported, higher-priced Brent crude at $14 a barrel higher? 

Mr. DREVNA. Mr. Markey, I wasn’t here yesterday to hear Mr. 

Gerard’s testimony, but I can say that if we allow the access to all 

of our crude oil, and natural gas and natural gas liquids, if we open 

up—have the President open up the Keystone XL pipeline, not tomorrow or next week, within a few short years, we could have a 

serious discussion about what are we going to do with the excess 

crude oil that we have and the excess natural gas. 

Mr. MARKEY. Thank you, Mr. Drevna. 

The problem is that we already had that conversation here, and 

the head of the pipeline, the Canadian pipeline, the Keystone pipeline sat here, and I asked him just 3 months ago would he agree 

that the oil coming through the Keystone pipeline from Canada 

would stay in the United States. 

Mr. DREVNA. Oh, and it will. 

Mr. MARKEY. No, he said he would not agree to that. The head 

of the Canadian pipeline said he would not agree to it. So my concern is that it will come through the pipeline, get refined, and then 

just sent off to China. So why would we have—— 

Mr. DREVNA. First, Mr. Markey, I thought this hearing was 

about invalid RINs, but if we are going to have this discussion, 

we’re more than willing to talk to you and your staff going forward. 

Mr. MARKEY. I understand. Well, it is all part of kind of the same 

subject that, you know, is being opened up here in terms of the way 

in which we fuel our country. 

So what we have here for this hearing is essentially a sort of ethanol eBay or biodiesel bazaar. Buyers can register, sellers can register, but no one ever said the sellers were all going to be scrupulous, and clearly they weren’t. 

When your companies buy real estate, whether it is refineries or 

factories or office space, do they make sure the seller actually owns 

the property and that there are no liens or other problems with it 

before closing in on the transactions? Meaning what about the companies—what about when companies buy actual biodiesel? Isn’t it 

true that most companies have audit programs in place before fuels 

are purchased to ensure that the fuels being bought or sold meet 

101 

environmental and other specifications? Whoever wants to take 

that question. Mr. Paquin. 

Mr. PAQUIN. Sir, when someone receives a wet gallon of biodiesel, 

they can actually look at the diesel and take a sample of it. In the 

current EPA system, moderated system, there is no way to look at 

that to see if it is valid or not, if it is a physical product. So if I 

were to buy a product from one of the producers to my right and 

blend that product, I would actually be able to see it. So I think 

that’s a distinct difference between the two facts. 

Mr. MARKEY. Well, I have documents from several companies 

that indicate that they do have checklists to catalogue the type of 

fuel, the type of technology, the purity of the final product, and all 

sorts of other information that should be used to validate a purchase. And so I’m just wondering what the thoroughness is of the 

industry just in ensuring that frauds are not being perpetrated in 

the same way in real estate or anything else that those checks are 

in place. 

Mr. Paquin. 

Mr. PAQUIN. Yes, sir. And I would say that there’s probably not 

another company in the entire industry that has a more thorough 

due diligence process currently than ours. We have recognized the 

majority of the fraud that has occurred in this industry. 

I will say, however, that it is extremely difficult to catch and find 

out who is trying to defraud you. They can make up fake documents. They can lie to you on the phone. You can show up to a facility that looks like it’s operating. There are several ways in which 

one can be defrauded. I think that’s why it is extremely important—— 

Mr. MARKEY. Let me just ask this very quickly. Yes or no, do you 

all agree that EPA should have the funds it needs to crack down 

on any company that violates regulations or defrauds other companies? 

Ms. Case, do you think the EPA should have those revenues to 

crack down on fraud, yes or no? 

Ms. CASE. I don’t feel like I have enough information to answer 

that. 

Mr. MARKEY. Mr. Sprague, yes or no, should the EPA have those 

policemen on the beat? 

Mr. SPRAGUE. The private sector will monitor itself, in my opinion. No. The answer is no. 

Mr. MARKEY. OK. 

Mr. SULLIVAN. Mr. Griffith, you’re recognized for 5 minutes. 

Mr. GRIFFITH. Thank you, Mr. Chairman. 

Mr. Drevna, biofuels eBay is the way that this was described, but 

in reality wouldn’t your companies have been better off if they had 

been purchasing over eBay because eBay, once it discovers an actual fraud, takes the sale off the market; is that not true? 

Mr. DREVNA. I have never purchased anything on eBay, sir, but 

I understand that is correct. 

Mr. GRIFFITH. And so in reality, if I understand it correctly, the 

EPA actually knew for over a year that the Clean Green was just 

a shack with barrel with tubes coming out of it. Is that—I’m listening to testimony. 

102 

Mr. DREVNA. That is correct. That is my understanding again. 

They saw nothing and reported nothing to us. 

Mr. GRIFFITH. And so they didn’t put up any kind of a warning 

this company is suspicious, or under investigation, or being looked 

at? 

Mr. DREVNA. No, Mr. Griffith. The first time we heard about it 

is when we got issued an NOV and a potential fine. 

Mr. GRIFFITH. And, Mr. Paquin, you indicated that there was a 

prosecution in 2009, and it was a felony that was reduced down to 

an amount of $100,000 to make it easier for local prosecutor, and 

your company at the time, the company you were with, notified 

both the EPA and the local prosecutor. The local prosecutor took 

action. Did the EPA take any action? 

Mr. PAQUIN. Sir, the EPA—the only action that I recall is to say 

that we were unable to use those RINs, and the rest of the facts 

I think are correct. 

Mr. GRIFFITH. And did the EPA notify anybody else in the industry that this was a company that was under investigation before 

the conviction? 

Mr. PAQUIN. Sir, I don’t recall any Notice of Violation for that 

case, nor do I think the EPA issued one for that case. That was 

handled by the local prosecutor. 

Mr. GRIFFITH. And do you know was there any kind of an EPA 

notification postconviction of the fraudulent perpetrator? 

Mr. PAQUIN. I think the word got out through the industry itself, 

although apparently limited, because the other people who testified 

here claim Clean Green in 2010 was the first case. However, those 

of us that were close to that and lost money at that time were 

aware of it. 

Mr. GRIFFITH. And what jurisdiction prosecuted, if you recall? 

Mr. PAQUIN. It was in Alabama, sir. And I want to clarify one 

other thing as well. It was in conjunction with other officers of that 

company that had reported the fraud to the local prosecutor. I don’t 

want to show that we made that actual call itself, although we did 

have a lawyer who may have made a call as well, but it was a 

group of people working the case at the time. 

Mr. GRIFFITH. Mr. Fjeld-Hansen, without—and I know you didn’t 

say you were against it, but without an affirmative defense would 

you instruct your buyers to buy Ms. Case’s RINs, or would you instruct them to not purchase from somebody that didn’t have the 

necessary financial wherewithal to reimburse you should they later 

be disqualified by the EPA? 

Mr. FJELD-HANSEN. I think, again, philosophically if you believe 

in market forces and that things will find some kind of equilibrium, 

I think we are going down the right path now with prosecuting 

people. I think the next guy who is going to make a RIN out of his 

garage is going to think about it much more than Rodney Hailey 

did. 

Also, I think on the enforcement side—— 

Mr. GRIFFITH. You think that the right step is to prosecute the 

wrongdoers and not reinvent the system? 

Mr. FJELD-HANSEN. Yes. I think we want to—the resolution first 

is to keep the system intact as it is, but put more—and I didn’t get 

to respond to the gentleman from Massachusetts, but put more 

103 

money into enforcement and investigation. And I think those monies will be recouped easily in formal fines. 

Mr. GRIFFITH. And I would be happy to ship money out of the 

anticoal programs into enforcement on this one. 

That being said, Mr. Drevna, back to you, is anybody looking at 

what happens if there is not enough renewables in order for American domestic supply to be used, because with the corn crop failing 

this year as a result of the weather conditions, is there a possibility 

or is anybody looking at the possibility that we may not have 

enough biofuels out there to meet the requirements, and thus some 

of the American production will actually have to be exported because it couldn’t be sold in the United States? 

Mr. DREVNA. A couple—if I may address a couple of things for 

that, Mr. Griffith. First of all, the panel here is focusing, rightfully 

so, on their particular business, their particular little one-fourth of 

the renewable fuel standard. The refining industry has obligated 

parties for four different we call them buckets, OK? This is one. 

This is a year or 2 old. Everything is going fine, but we’ve got 6, 

7, 8 percent of the RINs fraud, but everything is OK. 

On the ethanol side you got an E–10 blend wall we’re going to 

hit. The auto manufacturers, the engine manufactures, whether it’s 

a handheld power equipment or chainsaw, or mower, are saying, 

we’re not going to warranty anything over E–10. EPA said, OK, it’s 

OK to use E–15. On the cellulosic side, where there is a whole 

story in itself, where we’re supposed to buy fuel that doesn’t exist, 

and we can’t—so we can’t buy it, and we’re fined for it. 

So when I say—and, you know, I guess it was Ms. Castor or 

somebody said unanimous agreement minus one on the renewable 

fuel standard, and in my testimony when I said this thing has 

some serious problems, this program has serious problems. We’re 

sitting here intertwining a free-market atmosphere with a mandate. They don’t jive. 

Mr. GRIFFITH. I have to yield back my time. Thank you, Mr. 

Chairman. 

Mr. TERRY [presiding]. You don’t have time. 

The chair recognizes the gentlelady from Tennessee for 5 minutes. 

Mrs. BLACKBURN. Thank you, Mr. Chairman, and I’m going to 

try to sum up quickly and not take 5 minutes. 

Mr. Drevna, I think that we would agree with you many times 

free markets and mandates don’t mix. What becomes particularly 

problematic is when the Federal Government tries to have a controlled situation where they are going to emulate free-market components, and then they slap these mandates on it, and it quickly 

becomes a mess. You all have certainly seen that in the RIN program, and we’re here today reviewing it because we need to find 

some answer to this and figure out what did or didn’t work. 

Mr. Drevna and Mr. Jobe, I know you all have been negotiating 

with the EPA on trying to work this out. How are those going? 

Mr. DREVNA. They need to go faster. Where as I said earlier, 

we’re looking at EPA is supposed to come out with a regulation— 

it was supposed to be out the end of June, still isn’t out—volumes 

for 2013. 

104 

Mrs. BLACKBURN. Are you going to have something in place that 

will help with the January 2013 season? 

Mr. DREVNA. If EPA can bless it, we will try, but we have to 

have EPA blessing. 

Mrs. BLACKBURN. Do you feel like you are on track to hit that 

or not? 

Mr. DREVNA. It’s a slow track. 

Mrs. BLACKBURN. Mr. Jobe, do you want to add anything to that? 

Mr. JOBE. I agree. It’s a slow track. We have been engaged. 

We’re committed to trying to find common ground and solutions. 

We have some differences in position that we’re trying to work 

through. 

Mrs. BLACKBURN. OK. Can you quantify those differences? Are 

they things where you’re poles apart? 

Mr. JOBE. So we have—we were approached by the groups. We 

have discussed the groups. They’ve said, we would like a regulatory 

solution to transition from a strict-liability structure to an affirmative defense, meaning we can use our due diligence to defend ourselves to show that we—— 

Mrs. BLACKBURN. OK. Let me talk about due diligence then for 

a moment, because, Mr. Paquin, you talked about that a little bit. 

I want you to list for me what would be the best practices in due 

diligence that you wanted to say this is the list of boxes that have 

to be checked with an affirmative answer in order for this transaction to proceed. Do you have that? Can you say, ‘‘This is our 

list’’? 

Mr. PAQUIN. Ma’am, I can submit a list in our opinion. 

[The information follows:] 

105 


81890.064
106 


81890.065
107 


81890.066
108 

Mr. PAQUIN. I would also like to add, though, to that that even 

if you do go through that list, there still has to be the affirmative 

defense on the back side to show that in good faith you have moved 

forward in an attempt to do the right thing. 

Mrs. BLACKBURN. Right. And we understand that. 

Mr. Jobe, if you had such a list that was well-defined and industry best practice standards, would that help? 

Mr. JOBE. Yes. And our task force developed that list, and we’re 

sharing that with the EPA, and they’re working on that. 

Mrs. BLACKBURN. Would you share it with us? 

Mr. JOBE. Absolutely. And they’re working on what’s called the 

quality assurance plan. We’re working all together to develop what 

that would be. 

So if I may, you asked about the differences. We said we agree 

that an affirmative defense, to be able to show your due diligence 

to defend yourself, that’s a fair and reasonable request, and we 

want to be fair and reasonable and operating in good faith, so we 

agree with that. 

But we have some differences when we get into the details, because the petroleum folks are saying, well, we want the EPA to certify and preapprove third-party validation programs and multiple 

third-party validation programs, and anything that participates 

under that will be deemed valid even if it’s invalid. So we have concerns about that. 

Mrs. BLACKBURN. OK. Anyone want to add any other comment? 

We have 52 seconds left. 

Mr. Paquin, go ahead. 

Mr. PAQUIN. Yes, ma’am, thank you. 

I think the National Biodiesel Board and the AFPM have done 

some great work for some of the due diligence process, and the 

process is moving forward. We can see the timing, however, has 

taken so long that we’re not at a solution yet. That’s why I think 

it’s even more important and imperative that the EPA has an interim policy, or they modify their current interim policy, in order 

to solve issues today so we can save tens of thousands of jobs. If 

we don’t do that now, and we wait for these two to talk and discuss 

and talk more and then discuss and talk more, we are going to 

have all of our small producers out of business, and the industry 

is going to crumble. 

Mrs. BLACKBURN. OK. Is the EPA a help or a hindrance in this 

process? 

Mr. DREVNA. In my opinion, Mrs. Blackburn, they have been a 

referee. They haven’t come back at us on anything. They’ve been 

working with us, but it’s always thrown back at us. 

Mrs. BLACKBURN. The slow walk. OK. 

Mr. PAQUIN. Ma’am, we view the EPA as a partner. We think 

that the EPA has the ability to solve this immediately. We just 

need to use those regulatory measures that they have available. 

Mrs. BLACKBURN. Thank you. I yield back. 

Mr. TERRY [presiding]. Thank you. 

First of all, the gentlelady from Colorado has a request. 

Ms. DEGETTE. I move to strike the last word. 

Mr. TERRY. The gentlelady is recognized. 

109 

Ms. DEGETTE. I just wanted the record to be clear. I thought this 

was an excellent panel and excellent testimony, kind of clarifying 

the issues, and I just want my position to be clear, which is I’m 

not opposed to an affirmative defense. I actually think it’s a good 

idea, so long as we come up with clear requirements on the due 

diligence. And I think that’s what Mr. Paquin and others on this 

committee are saying. 

So I want to thank everybody for their testimony, Mr. Chairman, 

and I thought it was a really excellent panel. 

Mr. TERRY. Thank you. 

Does the gentleman from Texas have a request? 

Mr. BURGESS. Yes. I have an a unanimous consent request to ask 

one additional follow-up question of Mr. Jobe. 

Mr. TERRY. Is there any objection? Hearing none—— 

Mr. BURGESS. Mr. Jobe, is this something that could be done administratively at the EPA, or would this require legislative action 

on the part of the House and Senate and President, which takes 

a long time? 

Mr. JOBE. To answer your question, not a legislative fix, but a 

combination of what we’ve come up with in a private-sector solution, and then looking at ways that we can—on a regulatory basis 

that we can make the program better. 

Mr. BURGESS. So the EPA needs to quit slow walking, and you 

don’t need legislative action. 

Ms. DEGETTE. I’m going to object to further questions. 

Mr. TERRY. OK. Nice try, though. 

The gentleman from California, do you have—— 

Mr. BILBRAY. To strike the last word. One question. 

Mr. TERRY. Without objection. 

Mr. BILBRAY. Mr. Markey really sparked a concern I have, and 

I would ask, I guess, Mr. Jobe and the representative of the industry, if the corn crop fails, as some are worried now, and there is 

not enough ethanol to fulfill the renewable fuel mandate 10 percent, what happens to that domestically produced oil that may not 

be able to be sold in the United States? 

Mr. DREVNA. Congressman, right now we’re about at E10. I think 

there’s enough capacity in the ethanol industry to keep it at E10. 

The question is how expensive is it going to be. 

Mr. BILBRAY. OK. So you think we do have a—— 

Mr. DREVNA. Plus we get imports. 

Mr. TERRY. I’m sorry, we’re going to keep this to your promised 

one question. 

Mr. Jobe, the gentlelady from Tennessee, you answered that 

there are some documents regarding your standards, and she asked 

to you produce those. You have 30 days. We would appreciate that. 

That would be very helpful. 

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Mr. TERRY. But that concludes the testimony from our first 

panel. I would agree with the gentlelady from Colorado, I thought 

each of you were excellent and provided us great insight. A very 

successful first panel. You leave with our gratitude and thanks for 

being here today. Thank you. 

We’ll take a few seconds to let our first panel leave and gather 

their papers, and then we’ll go to our second panel, which includes 

the main testifier, Mr. Byron Bunker, Acting Director of Compliance Division, Office of Transportation and Air Quality, Office of 

Air Radiation. He is accompanied by Mr. Phillip Brooks, Director, 

Air Enforcement Division, Office of Enforcement and Compliance 

Assurance, U.S. Environmental Protection Agency. 

As I understand, Mr. Bunker will be the primary person to testify, and Mr. Brooks will be there to assist if there’s a dropped ball 

or something. 

But as you two understand how O&I works, you know that the 

testimony that you’re about to give is subject to Title XVIII, section 

1001 of the U.S. Code, so when holding an investigative hearing, 

this committee has the practice of taking testimony under oath. 

Do you have any objections—and since one will be providing assistance to the other, we need both of you to answer the question. 

Do you have any objections? 

Mr. BUNKER. No objection. 

Mr. BROOKS. No objection. 

Mr. TERRY. All right. Then the chair advises you, if you will 

stand, that you are under House rules and the rules of the committee. You are entitled to be advised by counsel. Do you desire to 

be advised by counsel during your testimony here today? 

Mr. BUNKER. No. 

Mr. BROOKS. No. 

Mr. TERRY. No. Both saying no. 

In that case, will you please raise your right hand and swear, 

and I will swear you in. 

[Witnesses sworn.] 

Mr. TERRY. Both having affirmed. 

Chairman, you may sit down, Mr. Bunker. You can go ahead 

with your 5-minute testimony. 

STATEMENTS OF BYRON BUNKER, ACTING DIRECTOR, COMPLIANCE DIVISION, OFFICE OF TRANSPORTATION AND AIR 

QUALITY, OFFICE OF AIR RADIATION, ENVIRONMENTAL 

PROTECTION AGENCY, ACCOMPANIED BY PHILLIP BROOKS, 

DIRECTOR, AIR ENFORCEMENT DIVISION, OFFICE OF ENFORCEMENT AND COMPLIANCE ASSURANCE, ENVIRONMENTAL PROTECTION AGENCY 

STATEMENT OF BYRON BUNKER 

Mr. BUNKER. Committee members, Ranking Member 

DeGette—— 

Mr. TERRY. Is your microphone on? 

Mr. BUNKER. Thank you. 

Members of the subcommittee, we appreciate the opportunity to 

appear before you today. I am Byron Bunker from EPA’s Office of 

Transportation and Air Quality, and I will deliver the statement on 

116 

behalf of EPA, and both I and Phil Brooks, my colleague from 

EPA’s Office of Enforcement and Compliance Assurance, will be 

happy to answer your questions. 

Biofuels play an important role in reducing our dependence on 

foreign oil, decreasing greenhouse gas emissions, and improving 

rural economies. In July 2010, in compliance with the Energy Independence and Security Act, EPA began implementing revisions to 

the Renewable Fuel Standard Program, commonly called the RFS. 

The Energy Independence and Security Act established new annual volume standards for renewable fuel, reaching a total of 36 

billion gallons in 2022, including volume standards for new categories of renewable fuel. If EISA’s mandate is fully implemented, 

the RFS program would displace about 7 percent of projected annual gasoline and diesel fuel consumption in 2022. This would decease oil imports by $41.5 billion and provide additional energy security benefits of $2.6 billion. The program is also expected to reduce transportation greenhouse gas emissions equivalent to the 

emissions from 27 million vehicles per year. 

EPA developed the implementing regulations for the RFS program through extensive collaboration with renewable-fuel producers, fuel distributors, petroleum refiners and other parties to 

ensure that the program would be compatible with the existing 

fuels market and business practices in that market. 

The RFS regulations allow petroleum producers and importers 

subject to the program known as obligated parties to demonstrate 

compliance with renewable fuel volume requirements in one of two 

ways. They can do so either by acquiring the required volumes of 

renewable fuels together with the renewable fuel credits known as 

Renewable Identification Numbers, or RINs, or by acquiring the 

RINs without fuel. EPA instituted these options in response to requests from refiners for flexibility and to implement the statutory 

provisions for a credit program. 

As the committee is aware, EPA is pursuing criminal investigations and civil enforcement proceedings against companies suspected of fraud and of violating the Clean Air Act in connection 

with the RIN market. 

While the focus of EPA’s enforcement has been on fraudulent 

RIN generators, the RFS regulations do not allow invalid RINs to 

be used for compliance with the renewable volume obligations mandated by the program. Obligated parties are the parties ultimately 

responsible for ensuring the program’s volume requirements are 

met, even if they comply solely by acquiring RINs. If an obligated 

party acquires invalid RINs, those RINs cannot be used to demonstrate compliance with the program as this would undermine the 

requirements established by Congress. 

EPA has also instituted an interim enforcement policy to provide 

a clear message that obligated parties who unknowingly use invalid RINs to meet their compliance obligations, and who timely remove those invalid RINs from their compliance reports, will be offered an opportunity to resolve violations at a very modest and 

capped amount. 

Since the enforcement actions became public, the regulated community has begun to improve its due diligence and acquisition of 

RINs. In addition, a number of private companies, as you heard in 

117 

the first panel, are now offering services designed to verify the validity of RINs for potential purchasers. 

EPA has also reached out to the oil industry and biofuel producers to discuss ways to improve the RFS program and RIN validity in particular. All parties in our discussion share a common goal 

to improve the RFS program in a way that’s fair to all parties, and 

that meets the renewable fuel volume targets envisioned by Congress. EPA believes the discussions so far have resulted in a number of promising options for consideration, including a proposal to 

establish a third-party verification system to help ensure that RINs 

are valid. 

In closing, EPA understands the seriousness and urgency of the 

fraudulent RIN issue and has been diligently working with industry to alleviate uncertainties in the renewable fuels market for obligated parties and producers alike. EPA’s goal now is the same as 

it has always been: successful implementation of the RFS established by Congress. We are working closely with affected and interested stakeholders to explore potential options for improving the 

RFS. We are committed to taking action to make necessary adjustments to the program in a timely manner. 

We appreciate the opportunity to testify today. Thank you. 

Mr. TERRY. Thank you. We appreciate your testimony here today. 

[The prepared statement of Mr. Bunker follows:] 

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Mr. TERRY. And at this time the chair recognizes the gentleman 

from Texas, Mr. Burgess, for 5 minutes. 

Mr. BURGESS. I thank the chair for the recognition and thank 

Mr. Bunker for being here. 

You heard the testimony of the first panel, and we really appreciate you sitting in and hearing that, because I think this is an important part of today’s activities. I heard you use the words ‘‘serious’’ and ‘‘urgent’’ in your summation, and I will take you at your 

word that you meant the two words that you spoke. 

I guess really the question now that remains after hearing the 

testimony, and hearing your testimony and the questions and answers from the previous panel, what is it going to take to get the 

EPA to do what’s necessary to make sure this program has integrity, to bless the program, and give an affirmative defense to those 

people we had at the table today? 

Mr. BUNKER. So as I said in the testimony, and as you heard 

from the panelists in the first panel, we are actively working with 

all the parties. I think you heard both there is considerable agreement among the parties that and some issues remain to be seen, 

I think. 

Mr. BURGESS. With all due respect, because I know time is limited, their phrase ‘‘referee’’ was used in conjunction with the EPA’s 

activity. Someone else used the term ‘‘slow walk.’’ You know, honestly, serious and urgent mean serious and urgent. You got people 

who are hurting here. The poor lady from San Diego at the end of 

the table, I mean, she’s basically in possession of a nonperforming 

asset right now. As a small businessman I know what that means. 

It means you are going broke, and you put your own money on the 

line, and now you can’t sell the product. So that’s like having a seethrough office building. It is a bad deal, and your cash flow is in 

serious jeopardy, and you are probably not going to survive for long 

if that’s not fixed. 

So serious and urgent, we got to get past the slow walking part. 

I can’t emphasize enough, you got to help these guys now, and it 

is serious, and it is urgent. 

This isn’t the biggest program administered by the EPA, it’s not 

the biggest program in the Federal Government, but it’s important. 

And we got real people out there. Mr. Paquin testified that there 

are 10,000 jobs on the line. I mean, look, wouldn’t the President 

have liked to have another 10,000 jobs a week ago Friday? That’s 

a yes or no question. I’ll answer for you: Yes, he would. 

How do we get to the point—well, you’re right now what? You’re 

operating under what, an interim rule, an interim policy? 

Mr. BUNKER. I think we’re mixing two pieces. The interim policy 

is an enforcement policy, but what everyone is talking about is 

changing the regulations that we put in place in 2007 and 2010. 

So this would be a new regulatory program. We would make 

amendments to that proposal. 

Mr. BURGESS. How quickly can that be done? 

Mr. BUNKER. The goal the industry has is to be ready for the 

start in January 2013, and I think that’s a reasonable goal. But 

how we accomplish that, all the pieces that have to be done between now and then are great. As you heard from the panel, 

126 

there’s a lot of work to be done, and I think that’s a goal we should 

work towards. 

Mr. BURGESS. Well, with all due respect to the Agency, and I do 

want you to—I mean, I take that serious and urgent, and I take 

seriously the fact that you say that this is going to happen. But 

would the committee be out of line for asking you to—I don’t want 

to take the pedal off the metal on this one. We got to work on this 

for these guys. So I’m going to suggest you report back to the committee within 90 days on the progress that you’re making concerning resolving the problems in the industry. 

Mr. BUNKER. I understand the request. Yes. 

Mr. BURGESS. Could we have the Office of the Director and the 

Administrator confirm this action within 14 days’ time to the committee? 

Mr. BUNKER. I will follow back and ask, yes. 

Mr. BURGESS. Will you transmit that request? 

Mr. BUNKER. Yes, I will. 

Mr. BURGESS. All right. 

Mr. Chairman, thank you for your indulgence. I am going to 

yield back my time. 

Mr. TERRY. The gentleman yields back his time. 

The gentlewoman from Colorado, Ranking Member DeGette, is 

recognized for 5 minutes. 

Ms. DEGETTE. Thank you, Mr. Chairman. 

Mr. Bunker, I think you heard from Mr. Burgess that we’re all 

concerned about these small producers, and I guess in the way that 

the program has been—the RIN program has been structured, can 

the EPA require people to buy RINs from the small producers? 

Mr. BUNKER. No. There is no mechanism—— 

Ms. DEGETTE. And that’s because it’s a market-based system; is 

that correct? 

Mr. BUNKER. That’s exactly the case. 

Ms. DEGETTE. And so I think what people are saying to us is we 

need some certainty that these RINs are going to be valid, correct? 

Mr. BUNKER. I think it’s basically they want to have the same 

standing as all the producers. 

Ms. DEGETTE. Right. But having the same standing as all the 

producers would mean there’s some certain level of certainty that 

the RINs are OK, right? 

Mr. BUNKER. That’s exactly correct. 

Ms. DEGETTE. And the EPA’s credit-trading program has been a 

buyer beware program from the beginning. Everybody that participated knew that that was the construction of it, correct? 

Mr. BUNKER. It was clear from the start, yes. 

Ms. DEGETTE. Now, has the EPA ever certified and validated the 

credits bought and sold in the RIN market? 

Mr. BUNKER. The Agency has not. 

Ms. DEGETTE. The program’s not set up that way; is that right? 

Mr. BUNKER. That is correct. 

Ms. DEGETTE. So if we wanted to set it up so that the EPA was 

certifying certain RIN providers, that would require a whole 

’nother program to be established within the EPA; is that correct? 

Mr. BUNKER. And different oversight and a number of other aspects would be different. 

127 

Ms. DEGETTE. Different oversight. And it would really be going 

away from the market-based solution that we’re trying to achieve; 

is that right? 

Mr. BUNKER. We would be picking the winners and losers, I 

think. 

Ms. DEGETTE. You’d be picking which people did it, and it would 

be a whole new program. And it would give certainty, but it would 

be taking that more into a government program and away from a 

market-based program; is that right? 

Mr. BUNKER. I think that’s an accurate characterization. 

Ms. DEGETTE. OK. Now, I want to know if the EPA has ever represented to people that they intended to certify or validate any 

credits that were bought and sold in the RIN market? 

Mr. BUNKER. Not to my knowledge. 

Ms. DEGETTE. OK. Now, here’s a really valid question that I 

thought was raised, though, in the last panel, which is even though 

it’s a buyer beware system, people are upset that after this fraud 

was discovered, the EPA waited a year to let people know. Why did 

the EPA wait a year to let people know? 

Mr. BUNKER. Maybe I should have explained before. The reason 

we have the two panelists is Mr. Brooks is from our enforcement 

office. 

Ms. DEGETTE. Oh, good. Maybe Mr. Brooks can tell us why the 

EPA waited a year. 

Mr. BROOKS. Yes, Congresswoman. 

The time lapse from the initial discovery, we got a tip, we sent 

inspectors out, we had to follow up on some information. And what 

we did was we brought in the criminal prosecutors, because it was 

obvious to us that we weren’t dealing with the run-of-the-mill kind 

of civil enforcement issue that my shop handles. 

So we brought in the criminal specialists. They brought in the 

Department of Justice. And at that point Criminal takes the lead 

when there are concerns about flight risk, destruction of evidence 

and seizure of assets. So in this case all of those things were at 

play, and the Criminal Division took the lead. 

Ms. DEGETTE. So there was a criminal investigation going on, 

and it’s your testimony that it took a year to secure the evidence 

they needed so that they could then do their prosecution; is that 

correct? 

Mr. BROOKS. Well, what I understand from this is, of course, 

what the Criminal Division tells us, and they asked us to hold off. 

And we acted as soon as they said—— 

Ms. DEGETTE. So you held off because the Criminal Division told 

you to hold off; is that correct? 

Mr. BROOKS. Yes. 

Ms. DEGETTE. OK. So I’m trying to ask simple questions here, 

because I think it’s a valid concern that people have. 

Mr. BROOKS. Yes. 

Ms. DEGETTE. Now, there’s been a lot of discussion about this affirmative defense, and my first question is, Mr. Bunker, what do 

you think of the idea if there was a—if you and the industry agreed 

on a due diligence process, if they checked all those boxes, would 

your Agency object to an affirmative defense then? 

128 

Mr. BUNKER. I don’t want to prejudge any outcome, but it’s plainly one of the pieces that’s fully in front of everyone and being 

robustly discussed. So I don’t want to imply I know the outcome 

from that, but it seems clear—— 

Ms. DEGETTE. But it’s on the table, it’s one of the things on the 

table? 

Mr. BUNKER. Very much so, yes. 

Ms. DEGETTE. And that’s my next question is does the Agency 

have the legal authority through rulemaking to establish an affirmative defense, or do you need congressional legislative action to do 

that? 

Mr. BUNKER. No. We think the existing authority we have under 

the act allows us to do so. 

Ms. DEGETTE. That’s good to hear. Thank you very much. 

Mr. TERRY. Thank you. Good questions. 

We’ll go to—next on the list would be the gentleman from California Mr. Bilbray. 

Mr. BILBRAY. Mr. Bunker, I think you and everybody else that’s 

required to enforce either a law or regulation understands that 

when the Legislature passes a law, there’s always the assumption 

of discretionary enforcement. There’s always the assumption that 

an intelligent way of applying the regulation or law will be the 

mode used. Maybe that’s a big mistake we make. But my concern 

here is talking about one of the victims in the process, and that is 

the person who has purchased with good faith a bogus product. 

My concern is that, and let’s be very frank about that, the Agency has a burden to bear here because of recent history. I’d like to 

think that you’re not going—you’re not addressing the concerns of 

the people who were purchasing bogus products and actually victimizing them again with an attitude of we can’t let anybody slip 

through because somebody might take advantage of the system. 

To be blunt with you, I’m concerned that there might be a 

mindset of let’s crucify one guy on the front gate, and anybody who 

would try to buy these bogus things purposely will be scared to 

death. 

My question really is how can you not reflect to these victims 

that we knew a year ago that you were probably purchasing bogus, 

but because our prosecution system needed to work through 12 

months, we see you as somebody that should not have enforcement 

or should not be denied what you legally with good intention purchased? 

Do you follow what I am saying is that you knew these certain 

consumers probably were doing this in good faith. You’ve got an investigation, and that’s totally understandable that you’ve got to 

hold off a year until everything wraps. But doesn’t that give you 

an obligation to go back and cut some slack for the people that you 

knew were purchasing at the time you were doing the investigation? 

Mr. BROOKS. Should I answer that question? 

Mr. BILBRAY. Yes. 

Mr. BROOKS. I think you’re absolutely right, and that’s what we 

did. When we sent out the Notice of Violation, we sent it out and 

said, you—— 

Mr. TERRY. Can you pull your mike closer to you? 

129 

Mr. BROOKS. When we sent out the Notice of Violation, what we 

told folks was you need to correct your accounts, you need to remove the invalid RINs because they’re invalid, you can’t use them 

for compliance. We didn’t make a penalty demand. Instead what 

we did was we met with everybody. We met with every single one 

of these guys, and we talked about the circumstances. And what 

we learned was is that the vast majority had not done any due diligence. 

Now, I’m not pointing fingers at them, but they didn’t. They had 

a different business plan, they thought that was good enough, but 

they didn’t do what was required. 

Mr. BILBRAY. Mr. Brooks, let me just say this. If you’re investigating a counterfeiter, and you know he’s producing it for a year, 

but because for the good of the general public you allow the $100 

bills to continue to go out, and people in good faith invest their life 

savings in money that’s not worth a cent, don’t you think there’s 

a little bit of obligation of the general public that is getting the 

general good of that year delay to go back and say, ‘‘We’ll hold you 

harmless for this because we knew about it, and this was a sacrifice all of us should bear, not just you’’? 

Do you follow what I am saying is that you’re actually sitting 

there telling somebody that you’re just a victim of not only the 

bogus operation, but you’re a victim of our process, and we’re not 

going to make you whole or not even going to mitigate it. 

Mr. BROOKS. Congressman, I think that what you’re saying 

makes sense. I think it’s what we did. The feedback that we got 

from the obligated parties was that they thought that we were 

being reasonable. We came up with a penalty structure that instead of $37,500 per day per violation was 10 cents a RIN. So we 

had some guys that paid 440 bucks. 

Mr. BILBRAY. But that is like saying that the people that are a 

victim of counterfeit isn’t going to be prosecuted as counterfeiters 

when the fact is they’re losing value down the line. So I appreciate 

the fact that you’ve gone there, but I am worried. And let’s be really frank about it. The Agency has a responsibility that you do not 

have the mentality of crucifying people that may not be too guilty, 

but you’ve got to make your point. And I think you have a greater 

obligation than a lot of other agencies right now to show you’re trying to be cooperative and understanding. 

And for the record, I hope my wife was watching this hearing, 

because it’s the one time she’ll ever hear somebody say that I had 

a good point. So thank you very much. 

I yield back. 

Mr. TERRY. That’s probably a true statement. 

The gentleman from Texas Mr. Green is recognized for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman, and I don’t know how to 

follow my friend from San Diego. But I appreciate you being here. 

Mr. Bunker, it is my understanding a series of meetings has 

been taking place with representatives of the biodiesel producers, 

refinery sector, blenders, advanced biofuel producers and potential 

RIN validators. I’ve also heard these negotiations yielded to an 

agreement on several points: One, a solution to the RIN fraud issue 

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130 

tification and validation program for biodiesel RIN producers is 

called for; and, three, a participation in such a program that would 

allow the EPA to shift from a strict liability to an affirmative defense that could be asserted by an obligated party. 

I’m glad to hear EPA is working with the stakeholders to expeditiously fix the problem, and I’ve been monitoring the issue. You 

know, Congress can pass a law. It would be much better if everybody sat down and worked on it, because I don’t know if we can 

do something by the end of December of this year. 

I just want to update—get an update on where the process is. Do 

you think the negotiations can be finished by the end of this year 

and something in place from the EPA? 

Mr. BUNKER. So I think you’re very well informed on where we 

are and kind of the context of those. I think that’s a fair and accurate condition that we’re in. And we certainly are working towards 

that goal of having something that can work for the 2013 year. 

Whether it’s totally finished by then or we have a process that accommodates that, I don’t know how we accomplish that goal, but 

I think that’s a reasonable goal that we can work toward. 

Mr. GREEN. OK. Can EPA actually decide now to provide an affirmative defense for a purchaser? Do you have the authority to do 

that? 

Mr. BUNKER. Sir, we have the authority. I think it will take a 

rulemaking process to change our regulations. I don’t think we can 

do that with another administrative process, but I think we can do 

it through rulemaking. 

Mr. GREEN. OK. Believe me, if Congress tells EPA to do it, it 

would be much quicker if you did it on your own instead of us passing legislation. 

Conceptually the EPA would commit to providing a legal defense 

that companies that unknowingly purchased RINs and submit compliance, fraudulent RINs. I recognize you feel that depends on due 

diligence. Would the EPA commit to approving some form of criteria that would constitute due diligence for obligated parties? 

Mr. BUNKER. That’s very, very much on the table, and I think 

it’s in front of everyone to figure out what role each party plays in 

this process. I think the first panel really did a good job of characterizing the breadth of interests here, and I think we have to find 

a way for each party to play their role in that. And that’s what 

we’re working through. 

Mr. GREEN. And again, we know we have a timeline, the end of 

this year, before we get into 2013. EPA considered increasing 

verification requirements for biofuels RIN generators to ensure the 

integrity of the marketplace. Have you done that? 

Mr. BUNKER. I think largely that’s been done through third parties that are into the market now and providing that service to 

make a more frequent process than the EPA process. 

Mr. GREEN. OK. Does that include a physical independent audit 

to verify that RIN generators produced the biofuels they claim? 

Mr. BUNKER. Most of them are doing it by some kind of monitoring or by visiting facilities and an audit function, as you described. 

Mr. GREEN. I know my colleagues already talked about the Clean 

Green Fuels, visiting Clean Green Fuels in July of 2010, and it 

131 

took a good amount of time. And I appreciate your response on why 

the investigation and action didn’t go forward because of the criminal prosecution. But weren’t the companies that purchased those 

false RINs fined and also told they had to go buy more, you know, 

RINs? 

Mr. BROOKS. Yes, Congressman. Do you want me to answer that? 

Mr. GREEN. Yes. 

Mr. BROOKS. Yes. Thank you. 

There are two aspects to that. Did they have to replace the 

RINs? Yes, because they were invalid, so they couldn’t use them, 

and that’s what the regs say. 

And the second aspect is did they pay a penalty. And, yes, the 

regulations placed an affirmative obligation. Unlike, say, counterfeit currency where you’re just out the value of the money, this system has an affirmative obligation on the obligated parties so that 

we can meet the congressional mandate. It’s basically the ‘‘skin in 

the game’’ kind of aspect that says they’re going to be careful with 

what they do and use only valid RINs. 

But in light of all the circumstances, as have been pointed out 

here, we talked to them, and we came up with what we thought 

was a fair penalty, and obviously they thought so, too, because we 

resolved the issue. 

Mr. GREEN. Well, I would encourage you to work on getting those 

negotiations and the rulemaking started before we get into the fall, 

knowing the problems we’ll have, because it’s really important. 

Some of us would not have voted for this legislation if it hadn’t 

have been for the first time in 30 years we could vote to increase 

CAFE standards. And it seemed like some of those compromises we 

have to make here may be coming back and biting us, particularly 

in this situation. 

Mr. Chairman, thank you. 

Mr. TERRY. Thank you, Mr. Green. 

The gentlelady from Tennessee is recognized for 5 minutes. 

Mrs. BLACKBURN. Thank you, Mr. Chairman, and thank you for 

staying with us for the hearing. 

Mr. Brooks, I got to tell you, when I hear you talk about the penalty, I think about these individuals that were on that first panel. 

You know, when they hear you say this, basically what they’re 

hearing is you can tell people what you’re going to do to them; it’s 

just you can’t tell them what they need to do. And I think you’ve 

got things backwards. And you focused on the penalty, but getting 

the due diligence piece right and letting them know exactly what 

to do, what compliance looks like, is where you guys are dropping 

the ball. 

Now, from the first panel we heard Mr. Jobe and Mr. Drevna 

and Mr. Paquin talk about they can define due diligence. They’ve 

got a list of what would be industry best practice standards and review. They’re waiting on you to sign off on this, to take an action. 

They defined your participation basically as being a referee. You’ve 

heard frustrations with slow walking. 

So, how long is it going to take you to sign off on an accepted 

industry standard of best practices; how long is it going to take you 

to do that to provide some guidance? 

132 

Mr. BUNKER. Thank you. If you don’t mind, I’ll answer that. 

That’s sort of my responsibility for delivering that piece. There’s a 

couple of pieces I would like to speak to. 

I think there is a broad understanding in industry for how the 

due diligence could be done. As you said, several parties have 

brought forward ideas. I think they’ve shared them with this committee. They’ve certainly shared them with the Agency. 

The part that we are in, I am not going to say it is inaccurate 

to say we are a referee at this point. Many of the parties have different views of how each of them fit into that due diligence work. 

They agree what work needs to be done, but what role each party 

in the chain plays in that is an important question for all of those 

parties, and, of course, for the Agency. So we’re working to understand the pros and cons, the trade-offs that come from—— 

Mrs. BLACKBURN. Mr. Bunker, please. You know, how long? I 

mean, they’ve talked about your slow walking. We’re talking about 

a deadline coming up. How long is it going to take? Do you need 

2 weeks? Do you need 30 days? How long is this going to take to 

make a decision? Somebody’s got to bring some leadership to bear 

at some point. 

Mr. BUNKER. That’s a very fair question, and I appreciate that. 

This group, the stakeholders, basically the parties that you heard 

from, they came to the Agency and proposed some kind of concept 

to start this work in June ’12. That was the first time they came 

in with this kind of proposal. So in less than a month, it’s mushroomed into a very productive, very useful dialogue to move this 

forward. So I don’t think it’s accurate to call it slow walking. 

I do think the goal of having something for the 2013 year is a 

good goal and one we can work towards. 

Mrs. BLACKBURN. Are you going to meet the deadline? 

Mr. BUNKER. I think there’s too many variables for me to give 

it a firm deadline. 

Mrs. BLACKBURN. Let me ask you this. I am going to run out of 

time, and I’m trying to be sensitive to that. The interim enforcement policy that you have, why don’t you adjust that so that the 

actions of the bad actors are not going to negatively impact your 

small businesses and smaller participants in the marketplace? As 

you’re focused on the long term, and Dr. Burgess talked with you 

about that, why don’t you go in here and make an adjustment to 

your interim enforcement policy? 

Mr. BROOKS. Thank you. 

We’re engaged in a conversation right now that I think informs 

how we think about enforcement, but there are—some of the requests are not as transparent as they might seem. A lot of the requests are for forgiveness of what the law required, say, for 2010, 

2011 RINs that were invalid. 

The concern that we’re trying to focus on right now is what can 

we do to help the system so that the folks who are actually producing the fuel out there have an opportunity to sell this stuff? 

And it apparently depends on confidence. And that’s why I’ve spent 

a lot of time talking with the National Biodiesel Board and producers and a lot of these other folks about what is it that can be 

done so that there is enough comfort out there. It’s really the comfort of the obligated parties that’s the focus of this. 

133 

Now, they know that if they went through these kind of processes, they don’t have to worry about whether they get hit for penalties, because they know that—you know, they talk to their best 

lawyers in the country, right, and the best lawyers in the country 

will tell them, look, if you’ve gone through a system like this, EPA 

is not going to bother with you about whether you have done due 

diligence. You clearly have. So they can solve that problem. 

But really, I think, the focus is on the future here, on how it is 

that we can make sure that we’ve got a level playing field so that 

the small producers have the same opportunity to sell as the big 

guys. 

Mrs. BLACKBURN. Well, what you’re going to see happen is that 

your small guys are out of business, and you only have a few producers. Maybe that’s what your goal is, I don’t know. 

I yield back. 

Mr. TERRY. All right. Thank you. 

At this point the gentleman from West Virginia. 

Mr. GRIFFITH. Western Virginia. 

Mr. TERRY. Southern Virginia—western Virginia. 

Mr. GRIFFITH. Thank you, sir. Thank you, Mr. Chairman. 

There may be different shades to what you’re hearing here today, 

but I think both Democrats and Republicans want to get this problem solved. I’m a little frustrated, and I will always be frustrated 

with Washington, at least I hope I will be, because having come out 

of the Virginia Legislature, we could deal with all kinds of problems in 60 days and go home. Dr. Burgess asked you all to deal 

with this problem, see if you could deal with it in 90 days and go 

home. 

This first panel indicated by and large they need an answer. 

They’re willing to work with you, you know. And you may be missing it a little bit when you say that, you know, they seemed to be 

happy. One, you’re dealing with the end product users and not the 

people who are trying to sell the RINs. Two, you know, if you have 

the right to cut off both their right and their left hand, and you 

only cut off their right hand, they may be happy you didn’t take 

the left hand, or vice versa, but they’re still not real happy about 

it. 

You know, you all need to come up with a fix for this. There’s 

a problem. Nobody wants to scrap this program. I haven’t heard 

that from at least any of the folks up here. That’s not the issue. 

The issue is how do we make it fair for everybody. And, unfortunately, based on what I’ve heard from the testimony today and yesterday, I’m not sure some of these companies will make it to January of next year. 

And I got to tell you, you know, things like what is due diligence 

and that kind of stuff, you know, come by the office this afternoon, 

and we’ll figure that out. I mean, we ought to be able to put that 

definition down in a few hours. I don’t understand why it takes the 

Federal Government so long to come up with simple things when 

you have a couple hundred years of case law out there. And I understand the EPA is different and doesn’t have that length of history, but, you know, you can borrow from other people. 

So I ask you to do that, and I ask you to get back to Dr. Burgess 

and let him know within 14 days or let this committee know within 

134 

14 days if you can do that in 90 days, because I just don’t know 

that these folks can make it. 

It’s interesting, and I’ve only been doing this—I’m one of the 

freshmen, and I’ve only been doing this a little while compared to 

some of the other folks, but when you see people from the panel 

before stay and the panel from yesterday show up to hear what’s 

going on, this is a big issue to them. And some of these companies 

won’t survive if you all don’t fix it. 

You have the power to fix it. If you need our help, I think I speak 

for everybody on this committee, we’re happy to help you. If you 

think you need a change in the code, bring it to us, we’ll make that 

change. And we can get it done, I hope—I don’t know about the 

Senate, but we can get it done in a relatively reasonable period of 

time. 

So I ask you to do that, because I think you are just glossing over 

when the companies that bought the end product are happy, clearly 

the companies that are making it aren’t, when they are doing the 

legitimate thing, and it really does strike against the American 

sense of fairness when you know that there’s a bad actor out there, 

and you let people go get harmed and let their businesses be put 

in jeopardy. 

So I don’t really have any questions. I do appreciate you all being 

here. And I do appreciate, very much so, that you all came to hear 

the first panel. But they seemed like reasonable people to me that 

you all ought to be able to get this thing worked out on. And I 

think everybody would agree that if you make a little mistake to 

correct the big problems that we’ve had, we can fix that easier if 

we have to do that next year. 

Sometimes you just have to act. You can’t always be 100 percent 

certain that that act is going to be perfect. But if you fix 95 percent 

of the problem, I think these folks would be happy. 

Mr. Chairman, if anybody wants the rest of my time? 

Ms. DEGETTE. I do. 

Mr. TERRY. Yes, the gentlelady from Colorado. 

Mr. GRIFFITH. I yield to the gentlelady from Colorado. 

Ms. DEGETTE. Thank you so much, Mr. Griffith. 

I just have a quick question for you, Mr. Brooks, because the law 

says that it’s a strict liability standard if there’s fraudulent RINs, 

correct? 

Mr. BROOKS. Yes, Congresswoman. 

Ms. DEGETTE. But yet I think I heard you say the EPA has enforcement discretion—if someone is using these invalid or fraudulent RINs unknowingly, or knowingly, they have discretion about 

what the enforcement is; is that right? 

Mr. BROOKS. We have inherent discretion. 

Ms. DEGETTE. You have discretion, so you can throw the book at 

them, or you cannot take an action at all; is that right? 

Mr. BROOKS. I think there are parameters. Obviously there are 

congressional goals that we have to adhere to. There are some hard 

edges on the regulations. But essentially you’re right. 

Ms. DEGETTE. All right. So you had said that the Agency decided 

with the people who were using the invalid RINs that to go ahead 

with a penalty, but not as strict a penalty as you could have, right? 

Mr. BROOKS. That is correct. 

135 

Ms. DEGETTE. And something piqued my interest. You said that 

was because they hadn’t done due diligence. 

Mr. BROOKS. That’s correct. 

Ms. DEGETTE. Can you explain what you found in terms of the 

due diligence by the companies? 

Mr. BROOKS. I could sum it up this way: The vast majority of the 

players had simply relied on their contract of purchase, and so they 

had an indemnity agreement, right? And so rather than ask, ‘‘Are 

these good RINs?,’’ they were satisfied with the purchase document 

that said, ‘‘If they’re not good RINs, I’m coming back to you.’’ 

Ms. DEGETTE. And they’re not doing that anymore, are they? 

Mr. BROOKS. They are not to my knowledge. 

Ms. DEGETTE. Thank you. 

Mr. TERRY. Thank you. 

The gentleman’s time from western Virginia has ceased, and I 

recognize myself for 5 minutes. 

So in that regard, carrying on Diana’s questions, what is the current definition of due diligence, and is that part of what is going 

to be worked on in the next few months? 

Mr. Bunker? 

Mr. BUNKER. Yes. I think broadly it’s understood it’s a process 

to both look at the facility and look at both the feedstock that goes 

into a facility and the production that goes out, and if you do effectively a mass balance, an energy balance, a waste products balance, 

that you can have high confidence those volumes exist. 

And I think actually to the question that was asked before, I 

think getting that resolved among the parties, what are good parameters, that’s actually the easy part. It’s each party’s role then 

in fulfilling those that where there is differences of opinion among 

the industry partners. 

Mr. TERRY. And that will be part of the process that you engage 

in in the next few months to make sure that that is more clearly 

set out in the language, and they know their obligations. 

Mr. BUNKER. Exactly. That’s the most important piece. 

Mr. TERRY. In that respect I think it was Mr. Jobe from the biodiesel board or biofuels board—biodiesel board—that mentioned 

that they have already drafted their industry standards in this respect. Have you seen those yet? 

Mr. BUNKER. Yes. We both participated in this RIN Integrity 

Task Force that was described, and they’ve shared both their phase 

1 and phase 2 programs. We think those are good programs, and 

there are several others in the industry that are similarly structured, different approaches in some cases. All seem very good, 

frankly. 

Mr. TERRY. Well, will those type of industry standards then be 

adopted at the completion of your efforts, or at least the negotiated 

language changes? 

Mr. BUNKER. Yes, I think that’s the big question. I think it’s generally assumed that we should leverage those third-party systems; 

don’t create a new government system that is one size fits all, but 

let the market choose the participants that—basically mitigate risk 

in a way that satisfies people that are at risk. That seems to be 

everyone’s goal. 

136 

So you heard there were some people that think that should be 

fully in the private sector and not be part of the government at all, 

and some people that frankly think it needs to be basically leveraged in the regulations. And that’s what we’re working through 

quickly is to figure out the how. 

Mr. TERRY. Well, we appreciate you working quickly. I think one 

of the messages that you’ve heard from this panel here today or the 

Members sitting up here is that this is a time-sensitive matter. 

And we go do agree with the January 1st, 2013, goal. 

So in that regard could you walk us through what procedures, 

what work really has to be done between now and January 1st so 

that we’ve got that document of here’s the rules or whatever technical language you want to use? 

Mr. BUNKER. Yes. So we will have to go through a notice and a 

proposal process, a public comment, and then a final action. I think 

what’s still open—— 

Mr. TERRY. What’s the timeline in between each one of those. 

Don’t those have 30- and 60-day requirements? 

Mr. BUNKER. So the minimum requirement, I think, after it’s in 

the Federal Register is at least 30 days. I can check the numbers. 

And we usually have to give a 30-day period for comments. And 

when you add all those pieces up, it may not be possible to have 

a final action in advance of January 1. I don’t know if that can 

happen. But it may well be that we can have the system in place. 

One thing we should think about is the actual compliance for 

2013 will be February of 2014. So the Agency has a very clear message of what you need to do, what the process is. And everyone 

starts doing that process maybe January 1, maybe in December, 

and then we have a final action that decides what’s the outcome 

of having done that process. They will have already fulfilled the 

elements of the work that is done up front. 

So it’s my belief we could have a process that both follows our 

regulatory process in the fullness of a notice and comment, but also 

gives some path to people to implement early by being transparent 

about where it’s going. 

Mr. TERRY. And I think you’ve stated it, but I want it more clearly as your final comment here, and we close, but you understand, 

the Division understands, that inaction right now is hurting the 

small producers. Would you agree with that? 

Mr. BUNKER. We absolutely do. We said that’s a big issue for us, 

absolutely. 

Mr. TERRY. Very good. Then not a question, but a comment. Mr. 

Burgess, Dr. Burgess, mentioned 90 days to have something ready 

for us, kind of, I would assume, just at least the skeleton. But 

Diana, the ranking member, and our side are discussing having a 

second hearing about that 90-day period, because we want to make 

sure this stays on track. So it is important to us. 

Mr. BUNKER. I understand. 

Mr. TERRY. She said 120 days. We’ll figure that out. That’s part 

of our negotiations. 

So at this time I ask unanimous consent to enter into the record 

our subcommittee binder. 

[The information appears at the conclusion of the hearing.] 

137 

Mr. TERRY. In conclusion, I would like to thank our two witnesses here today. Both of you were very helpful. I remind Members that they have 10 business days to submit questions for the 

record, and I ask that the witnesses agree to respond promptly to 

those questions, if submitted. 

All right. Thank you. The subcommittee is now adjourned. 

[Whereupon, at 12:51 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

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