EPA Audits Potential Fraud in U.S. Biofuels Supply Chain

The U.S. Environmental Protection Agency (EPA) is carrying out audits at least two biofuel producers over the used cooking oil in their supply chains amid concerns about fraudulent use of such oils to claim government subsidies and tax reliefs, EPA spokesperson Jeffrey Landis told Reuters on Wednesday.

U.S. biofuel producers can benefit from a range of state and federal subsidies, including tradable credits under the Renewable Fuel Standard (RFS) and other new subsidies in programs under the Inflation Reduction Act (IRA).

The EPA launched audits in the summer of 2023 amid growing concerns that some used cooking oil supplies are just re-labeled supplies of virgin palm oil.

Concerns have also grown that U.S. imports of virgin vegetable oils from Asia, China in particular, are fraudulently labeled as used cooking oil and exported to the United States with the purpose of exploiting tax incentives and other renewable biofuels incentives.

The EPA has been auditing supply chains over the past year, EPA’s spokesperson Landis told Reuters, but declined to name the companies involved.

U.S. Senators from mostly farm states have recently called on the EPA and the Treasury Department to increase scrutiny and specify guidance for used cooking oil amid concerns about soaring imports from China that may have been mislabeled for obtaining tax credits.

In June, Senator Roger Marshall of Kansas and five other Senators from Ohio, Nebraska, and Iowa sent a letter to the Environmental Protection Agency (EPA), the United States Department of Agriculture (USDA), U.S. Customs and Border Protection (CBP), and the United States Trade Representative (USTR).

“You have a clear responsibility to advise the Administration on these matters and help maintain the integrity of the entire clean fuels programs by ensuring American tax dollars are not subsidizing the import of counterfeit feedstocks,” the Senators wrote in the letter.

In July, a group of other Senators joined a bipartisan, bicameral group of lawmakers in urging the Department of the Treasury to issue timely guidance on the 45Z Clean Fuel Production Credit under the IRA, which will offer tax credits from January 1, 2025, for the production and sale of low-emission transportation fuels, including sustainable aviation fuel (SAF).

By Charles Kennedy for Oilprice.com

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