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Who's performing your engineering review?

As the industry grows again, and as we approach the Jan. 31 deadline for updated engineering reviews, a few questions are posed for exploration
By Ron Kotrba | January 16, 2013

With a trifecta of recent events in biodiesel—a growing biomass-based diesel mandate under RFS2, the retro reinstatement of the tax credit, measures to tighten the RIN credit program—we are seeing more activity in the space. Equipment and processor companies are working to fill orders. Existing producers are wisely reinvesting their retroactive tax credit payment into new technologies to become low-cost producers. Producers are expanding through technology development and plant acquisition, working to build business models that are no longer contingent upon federal payments; or at least the volatile short-term subsidies. Even though greenfield construction may never be (or at least for a long while) what it was in the 2005-’07 time frame, projects are moving forward. Thus, the topic of facility engineering reviews is up for discussion again. 

It is imperative to know that EPA will begin a process of registration deactivation for existing producers that haven’t submitted an updated registration and engineering review by Jan. 31. Part of the updated engineering review guidance states that:

“In addition to conducting the engineering review and written report and verification required by paragraph (b)(2) of this section, the updated independent third-party engineering review shall include a detailed review of the renewable fuel producer's calculations used to determine the volume of RINs of a representative sample of batches of each type of renewable fuel produced since the last registration.”

What is the liability, if any, of third-party engineering firms that perform reviews, or the accounting firms that conduct attestations, for biodiesel production facilities such as Clean Green Fuel, Absolute Fuels or Green Diesel, the three confirmed biodiesel RIN defrauders?

Through a Freedom of Information Act request, Biodiesel Magazine obtained information from U.S. EPA regarding the names of companies that performed engineering reviews for the biodiesel production facilities in the three known cases of RIN fraud. While Biodiesel Magazine also requested RIN attestation information for those three biodiesel processing plants, EPA said there was no information on record as to who performed, if anyone, RIN attestations for the above three facilities.  

Clean Green Fuel LLC owner Rodney Hailey was convicted on a number of counts of wire fraud, money laundering and Clean Air Act violations. He didn’t even have a production facility, so it stands to reason why EPA said there is no information on record pertaining to any engineering review.

Jeffrey Gunselman, head of Absolute Fuels out of Lubbock, Texas, pled guilty in December to all 79 counts of wire fraud, money laundering and making false statements in violation of the Clean Air Act. According to EPA records, Absolute Fuels’ engineering review was performed by Nessa Engineering Experts LLC.

Green Diesel LLC, a subsidiary of Fuel Streamers Group, was issued a Notice of Violation for generation of 60 million invalid RINs and the offices were subsequently raided. Through correspondences with former employees, I am told CEO Philip Rivkin is still on the run and has left a trail of tears behind. An independent engineer, Glenn F. Cunningham, performed the engineering review of the Green Diesel LLC facility, according to EPA records.  

Clearly EPA accepted those engineering reviews, allowing Absolute Fuels and Green Diesel to participate in the RFS2 program and generate RINs. So where does this leave us? 

 

 

2 Responses

  1. Wayne Lee

    2013-01-16

    1

    Excellent article, Ron. Where does this leave us? It tells biodiesel plants to be careful that they hire "qualified", and "independent" engineers to handle these reviews. My questions would be: 1) Is the engineer familiar with biodiesel plants? 2. Is he or she licensed in the state in which the review is to be performed? 3. Is the engineer truly independent, i.e. will they be reviewing something they did. I think the clear intent is that the engineer doing the review is not reviewing their own work.

  2. Roman Wolff

    2013-01-16

    2

    Ron; great article. I find an engineering review to be extremely valuable to the biodiesel producer and somewhat valuable for the EPA in determining the potential capability of a facility to produce biodiesel within a given framework. It appears, from a very distant perspective, that the very few cases of RIN fraud have been a result for companies misrepresenting their actual production - or lack therof. The engineering review does not help the producer or the EPA in that case and a different audit is in order.

  3.  

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