In June 2010, a CN Rail cargo train crossed the US / Canada border 24 times, earning some $2.6 million in transportation revenue. This statement, in itself, is probably not newsworthy, as cargo trains transport some 1.8 trillion tons of freight each year throughout North America.
However, when you consider the cargo, which included tankers of biofuel that were never delivered, the situation becomes a little bit suspicious. Why wasn’t the fuel ever delivered?
As part of the US green energy program, the US Environmental Protection Agency [EPA] is offering incentives to import biofuels into the US. Each time biofuel cargo crosses into the US, the EPA issues a number of RINs [Renewable Identification Number], which are worth between 50¢ and $1 each.
After crossing the border, the RINs are supposed to expire, but they didn’t. So, without actually importing any biofuels, Bioversal/Verdero was able to retain about 12 million RINs worth $6-$12 million. In this case, the incentives garnered via the loophole were worth more than the cargo itself, which was simply shuffled back and forth across the border.
How did they get away with such an obvious abuse of the system? The “spirit of the law” can be ignored in favor of the “letter of the law,” which let these companies in particular get away with millions. As with many laws, there are loopholes, and there are unscrupulous characters who will find their way through them.
The EPA and the Canada Border Services Agency are claiming fraud, but the biofuel company involved, Bioversal Trading Inc. and US counterpart Verdero, are claiming they were fully within their legal rights.