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Notice of Intent to Revoke the Ability of Genscape to Verify RINs as a Third Party Auditor

On January 4, 2017, the EPA issued a notice of intent to revoke the ability of Genscape to verify Renewable Identification Numbers (RINs) as a third-party auditor under the Renewable Fuel Standard (RFS) Quality Assurance Program. Under RFS, obligated parties and exporters must obtain and retire RINs to meet their compliance obligations and demonstrate the RFS program’s renewable fuel mandates are met. EPA is taking this action to hold Genscape accountable for failing to meet all elements of its approved Quality Assurance Plan, and for verifying millions of RINs that were fraudulently generated by two companies, Gen-X Energy Group, Inc. (Gen-X), and Southern Resources and Commodities, LLC (SRC). EPA is aggressively pursuing bad actors in the RFS program to maintain a level playing field for firms that play by the rules. The EPA will review and consider these comments before taking final action concerning the proposed revocation of Genscape’s ability to verify RINs under the RFS. EPA is also requiring Genscape to retire valid RINs to replace the approximately 68 million invalid A-RINs they verified, which were then used for compliance.

EPA granted Genscape an extension until April 18, 2017 to respond to EPA’s January 4, 2017 Notice Letter. EPA will evaluate Genscape’s submission and make its decision regarding actions to potentially revoke Genscape’s auditor registration and QAP-A, and the applicability of 40 C.F.R. § 80.1470(d), no sooner than May 18, 2017. EPA is working separately with Genscape to address its compliance with 40 C.F.R. § 80.1470(c).

Background
In response to requests from obligated parties including refiners, EPA created a voluntary program that allows third parties to audit RINs according to EPA approved Quality Assurance Plans (QAPs) to help verify that they are valid. This program provides a supplement to the “buyer beware” liability for obligated parties under the RFS program, and also provides clarity regarding which party is obligated to replace invalid RINs. Roughly 12% of the total volume of RINs generated under the RFS program are audited by a third party under a QAP.

More information on the QAP program.

Questions and Answers related to this Notice of Intent To Revoke the Ability of Genscape to Verify RINs as a Third Party Auditor

  1. During the time that EPA issues its Notice of Intent to Revoke and its Final Decision regarding Genscape, can Genscape still verify RINs under its QAP Q?

    Yes. Genscape is able to function normally as a QAP provider unless the EPA issues a final decision to revoke Genscape’s registration.

  2. Are all the RINs that Genscape verified under an approved QAP for other producers (other than Gen-X/SRC during the time period at issue) invalid?

    The EPA has only identified RINs generated by Gen-X and SRC as invalid at this time. At this time, the EPA has not issued a Notice of Violation identifying other Genscape verified RINs as invalid. However, the EPA reminds the regulated industry that RINs identified as invalid by industry must follow the requirements under 40 CFR 80.1431.

    More information about the civil enforcement actions related to Gen-X and SRC.

  3. If I previously submitted an Affirmative Defense for using A-RINs from Gen-X/SRC, is there anything else I need to do?

    No. If you previously submitted an Affirmative Defense to EPA for transferring or using invalid A-RINs generated by Gen-X/SRC and verified by Genscape, there is nothing more required of you at this time. If you plan to use invalid A-RINs generated by Gen-X/SRC and verified by Genscape and you have not previously submitted an Affirmative Defense, you may submit an Affirmative Defense following the requirements of 40 CFR 80.1473(c).

  4. I am a renewable fuel producer that is generating Q-RINs with Genscape as my QAP provider, what happens to my ability to generate Q-RINs if Genscape’s registration is revoked?

    If the EPA revokes Genscape’s registration, renewable fuel producers that have Genscape as their QAP provider will no longer be able to generate Q-RINs unless they switch to a different QAP provider.

    For more detailed information contact the Technical Support Line for EPA Fuel Programs.

  5. When does the EPA expect to take final action concerning the proposed revocation of Genscape’s ability to verify RINs under the RFS?

    EPA granted Genscape an extension until April 18, 2017 to respond to EPA’s January 4, 2017 Notice Letter. EPA will evaluate Genscape’s submission and make its decision regarding actions to potentially revoke Genscape’s auditor registration and QAP-A, and the applicability of 40 C.F.R. § 80.1470(d), no sooner than May 18, 2017. EPA is working separately with Genscape to address its compliance with 40 C.F.R. § 80.1470(c).

  6. What happens to the invalid RINs that Genscape approved? Is Genscape responsible for replacing them?

    The invalid RINs in this case are A-RINs, which were verified under EPA’s interim QAP program.* Obligated parties do not have to replace invalid A-RINs if they meet the affirmative defense requirements at § 80.1473(c). An obligated party holding invalid A-RINs can still transfer the RIN or retire it for compliance purposes as if they meet the affirmative defense criteria.

    To replace the invalid RINs in the market, Genscape must obtain 68 million valid RINs and retire them. Genscape is obligated to do this because both Gen-X and SRC failed to replace the invalid RINs.
    * The current QAP program which provides Q-RINs has a different set of rules that would apply.

  7. As an obligated party, how do I know if I am holding invalid Gen-X or SRC A-RINs and if I must submit an affirmative defense to EPA?

    The EPA notified companies that own, used, or transferred Gen-X or SRC potentially invalid RINs that they may assert an affirmative defense pursuant to 40 CFR 80.1473.

    More information about the civil enforcement actions related to Gen-X and SRC.