Revised Final Determination and Settlement Agreement in Genscape, Inc. v. EPA 19-3705 (6th Cir.)
On May 18, 2022, EPA issued its revised Final Determination in Genscape, Inc. v. EPA, No. 19-3705 (6th Cir.). On June 2, 2022, Genscape filed its motion to dismiss with prejudice with the court and the court acted the same day to dismiss the case Genscape Order of Dismissal (pdf) . The Final Determination, memorializes key terms of a Final Settlement Agreement (pdf) , requiring Genscape to purchase and retire 24 million RINs over a 4-year period.
EPA took 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).
On January 4, 2017, the EPA issued a notice of intent to revoke the ability of Genscape to verify RINs as a third-party auditor under the RFS Quality Assurance Program. In May 2019, EPA: (1) revoked Genscape’s registration and ability to audit renewable credits; (2) revoked the plan Genscape used to audit renewable credits; and (3) required Genscape to replace the remaining invalid credits it had verified that were used for compliance purposes.
Genscape challenged EPA’s action to require the auditor to replace the invalid RINs in the United States Court of Appeals for the Sixth Circuit. The settlement resolves that claim. Genscape has since exited the renewable fuel auditing business, and no longer audits renewable fuel facilities.
Background on the Quality Assurance Plan Program
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 8% of the total volume of RINs generated under the RFS program are audited by a third party under a QAP.