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> that is actually quite hard to figure out why what they did was illegal How so? They produced fraudulent RINs and sold them, knowing they were not attached t

> that is actually quite hard to figure out why what they did was illegal How so? They produced fraudulent RINs and sold them, knowing they were not attached to actual biofuels. It's only a couple of steps removed from printing fake currency. Did I miss something in how Green Diesel justified their actions?

jacquesm 10y ago
Well, given that the buyers bought just the numbers and not did not go to the authorities immediately it would seem that everybody in the deal was happy except for the EPA. If you make it so that a number is assigned to something liquid that is as fungible as can be then you really can't claim surprise if someone then decides to short-circuit the whole thing and bypass the manufacturing step. Think of it as an optimization. After all it seems the numbers where the valuable bit, the fuel was worthless in comparison.
- kelson 10y ago
  > "In return for the hollow credits, ConocoPhillips paid Green Diesel $18 million, according to court documents. Shell got stung for $14.4 million, BP for $13.6 million, Marathon Oil for $12.4 million, Exxon $1.2 million. All these companies also were forced to buy new RINs to replace Rivkin’s phony ones." > Federal agents were watching, as was Houston attorney David Fettner. He’d been appointed by a court to find and seize Rivkin’s property on behalf of commodities trader VicNRG, which had sued Green Diesel and other Rivkin companies for selling it $3.8 million in bogus RINs. “Rivkin left a trail of unhappy people behind him,” he says. Doesn't seem like everyone else was happy > Well, given that the buyers bought just the numbers and not did not go to the authorities immediately it would seem that everybody in the deal was happy except for the EPA. You'd be happy buying $1000 from someone for only $100, until you discovered the money was essentially worthless (counterfeit)
  - jacquesm 10y ago
    They should have bought FUEL, not RINs.
    - cgriswald 10y ago
      That's a bit like saying a ripped-off investor should have bought stock, not mutual funds. These companies needed the RINs, not the fuel. If they had bought the fuel with the RINs they could have been assured the RINs were legitimate, sure. But that has all kinds of associated costs (quality control, finding buyers, the cost of the fuel itself, etc.). A legitimate biodiesel producer is probably better positioned to deal with those costs, so it makes sense for him to keep the fuel and sell the RINs to companies that need them.
      - jacquesm 10y ago
        And that's precisely the problem. As soon as you start selling something totally abstract in lieu of something that was presumably produced all control mechanisms fail. Which is why I'm not a fan of these constructs. Even a legitimate biofuel producer will see better margins on the RINs than on the fuel...
        blaisio 10y ago
        I think you just don't understand how a cap and trade system works. You should try doing a google search to read up on it. It's confusing at first, but there's nothing inherently uncontrollable about it. The only reason these scams are allowed to happen is the EPA doesn't have enough manpower to constantly watch over every facility to make sure fuel is actually being produced.
        jacquesm 10y ago
        I think I understand it just fine, thank you. > The only reason these scams are allowed to happen is the EPA doesn't have enough manpower to constantly watch over every facility to make sure fuel is actually being produced. So, if you don't have that manpower don't set up a scheme like that. Trust but verify, remember?
- arjie 10y ago
  The numbers were valuable only so long as the fuel existed. As soon as it didn't, they're no longer valuable. Each references fuel. If the fuel it references doesn't exist, then the RIN is fraudulent. It's not an optimization. It's just plain fraud. And having people buy actual fuel doesn't solve anything. The fuel could be standard diesel bought at the pump that people are claiming is biodiesel.
  - tamana 10y ago
    That's Jacquesm's point. Fraud is optimizing for metrics without regard for what the metrics correlate to.
    - arjie 10y ago
      But that's true for anything. Counterfeiting is optimizing for obtaining paper instead of the actual units of currency. The verification process has to be completed and has equivalent cost either way.
- Dylan16807 10y ago
  RIDs and giant tanks of fuel are roughly equal in fungibility. You can even make RIDs into a liquid if you inscribe them on ping pong balls. Let's imagine a slightly different scenario. Oil companies are forced to directly buy biodiesel, and biodiesel is so bad that they don't even bother adding it to their fuel. Someone could sell them empty tanks and then they wouldn't have to figure out how to dispose of unwanted biodiesel. Think of it as an optimization. So in that scenario, there are no credits, there is no broken 1-1 link between numbers and gallons. There's just fake-production fraud. The problem there is fake-production fraud, and the problem in real life is fake-production fraud. Not the RIDs.

jacquesm 10y ago

Well, given that the buyers bought just the numbers and not did not go to the authorities immediately it would seem that everybody in the deal was happy except for the EPA. If you make it so that a number is assigned to something liquid that is as fungible as can be then you really can't claim surprise if someone then decides to short-circuit the whole thing and bypass the manufacturing step. Think of it as an optimization. After all it seems the numbers where the valuable bit, the fuel was worthless in comparison.

kelson 10y ago
> "In return for the hollow credits, ConocoPhillips paid Green Diesel $18 million, according to court documents. Shell got stung for $14.4 million, BP for $13.6 million, Marathon Oil for $12.4 million, Exxon $1.2 million. All these companies also were forced to buy new RINs to replace Rivkin’s phony ones." > Federal agents were watching, as was Houston attorney David Fettner. He’d been appointed by a court to find and seize Rivkin’s property on behalf of commodities trader VicNRG, which had sued Green Diesel and other Rivkin companies for selling it $3.8 million in bogus RINs. “Rivkin left a trail of unhappy people behind him,” he says. Doesn't seem like everyone else was happy > Well, given that the buyers bought just the numbers and not did not go to the authorities immediately it would seem that everybody in the deal was happy except for the EPA. You'd be happy buying $1000 from someone for only $100, until you discovered the money was essentially worthless (counterfeit)
- jacquesm 10y ago
  They should have bought FUEL, not RINs.
  - cgriswald 10y ago
    That's a bit like saying a ripped-off investor should have bought stock, not mutual funds. These companies needed the RINs, not the fuel. If they had bought the fuel with the RINs they could have been assured the RINs were legitimate, sure. But that has all kinds of associated costs (quality control, finding buyers, the cost of the fuel itself, etc.). A legitimate biodiesel producer is probably better positioned to deal with those costs, so it makes sense for him to keep the fuel and sell the RINs to companies that need them.
    - jacquesm 10y ago
      And that's precisely the problem. As soon as you start selling something totally abstract in lieu of something that was presumably produced all control mechanisms fail. Which is why I'm not a fan of these constructs. Even a legitimate biofuel producer will see better margins on the RINs than on the fuel...
      - blaisio 10y ago
        I think you just don't understand how a cap and trade system works. You should try doing a google search to read up on it. It's confusing at first, but there's nothing inherently uncontrollable about it. The only reason these scams are allowed to happen is the EPA doesn't have enough manpower to constantly watch over every facility to make sure fuel is actually being produced.
        jacquesm 10y ago
        I think I understand it just fine, thank you. > The only reason these scams are allowed to happen is the EPA doesn't have enough manpower to constantly watch over every facility to make sure fuel is actually being produced. So, if you don't have that manpower don't set up a scheme like that. Trust but verify, remember?
arjie 10y ago
The numbers were valuable only so long as the fuel existed. As soon as it didn't, they're no longer valuable. Each references fuel. If the fuel it references doesn't exist, then the RIN is fraudulent. It's not an optimization. It's just plain fraud. And having people buy actual fuel doesn't solve anything. The fuel could be standard diesel bought at the pump that people are claiming is biodiesel.
- tamana 10y ago
  That's Jacquesm's point. Fraud is optimizing for metrics without regard for what the metrics correlate to.
  - arjie 10y ago
    But that's true for anything. Counterfeiting is optimizing for obtaining paper instead of the actual units of currency. The verification process has to be completed and has equivalent cost either way.
Dylan16807 10y ago
RIDs and giant tanks of fuel are roughly equal in fungibility. You can even make RIDs into a liquid if you inscribe them on ping pong balls. Let's imagine a slightly different scenario. Oil companies are forced to directly buy biodiesel, and biodiesel is so bad that they don't even bother adding it to their fuel. Someone could sell them empty tanks and then they wouldn't have to figure out how to dispose of unwanted biodiesel. Think of it as an optimization. So in that scenario, there are no credits, there is no broken 1-1 link between numbers and gallons. There's just fake-production fraud. The problem there is fake-production fraud, and the problem in real life is fake-production fraud. Not the RIDs.