Solved: The mystery of the biofuel-filled train that kept crossing the border

A Canadian company and a partner are the latest to defraud an EPA system designed to bring more renewable fuels into the market.

By

John Platt

Fri, Dec 28 2012 at 10:32 AM

Related Topics:

Biodiesel, Biofuels, EPA, Ethanol, Train & Rail

CN Rail trains crossing at Port Huron. (Photo: Samira/Flickr)

Why did the train full of biofuels cross the border between the U.S. and Canada?

To get to the other side.

Why did the train full of biofuels cross the border 23 more times?

To defraud the government.

Canada's CBC News first mentioned the mysterious biofuel-filled tanker on Dec. 3. The train, operated by CN Rail, crossed the U.S.-Canadian border several times between June 15 and June 28, 2010, but never appeared to unload its cargo. All told, the train crossed the border 24 times, earning CN Rail C$2.6 million in shipping fees.

When asked about the odd shipping behavior, a CN Rail spokesperson told CBC News that the company "received shipping directions from the customer, which, under law, it has an obligation to meet. CN discharged its obligations with respect to those movements in strict compliance with its obligations as a common carrier, and was compensated accordingly."

An internal email acquired by CBC said the cars of the train were reconfigured between each trip but the cargo was never removed. The email said "if we can get in more flips back and forth we will attempt to do so. Each move per car across the border is revenue generated for" the port between Michigan and Ontario.

At the time, the train's cargo was linked to a Toronto-based company called Bioversel Trading Inc., which refused comment on the operation. A lawyer for the company suggested that its business competitors were seeking to organize a "witch hunt" against it. The Canada Border Services Agency and the U.S. Environmental Protection Agency (EPA) launched investigations, suggesting the possibility of fraud.

CBC News' first report generated several tips that have since helped crack the case. As reported on Dec. 19, Bioversal Trading "made several million dollars importing and exporting the fuel to exploit a loophole in a U.S. green energy program," journalists John Nicol and Dave Seglins wrote. Specifically, the company was taking advantage of renewable identification numbers (RINs), a system of credits established by the EPA to "promote and track production and importation of renewable fuels such as ethanol and biodiesel."

Each time the train crossed the border, new RINs were generated. After the two-week period, Bioversal had amassed nearly 12 million RINs, worth between 50 cents and $1 each. RINs can be purchased by oil companies to offset the EPA's requirement to bring more renewable fuels into the market.

Ownership of the biofuel was repeatedly transferred between Bioversal and its U.S. partner company, Verdeo. Each transfer generated new RINs, and the old numbers should have been retired, but it appears that only the RINs for ethanol were retired, even though those were only worth a few cents each. The companies maintain that this practice was legal. Another company, Northern Biodiesel, appears to have been put out of business by the practice.

The EPA has investigated several other cases of RIN fraud, including one against Jeffrey David Gunselman, the CEO of Absolute Fuels who was arrested in July, accused of selling more than $50 million in fake RIN credits.

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MNN tease photo: Martin Cathrae/Flickr

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Comments: 2

Mike Stone Sr Dec 29 2012 at 9:21 AM

The authoritarian EPA is out of control, the American people through their representatives in Congress should be controlling "energy policy"! Nixon sought to appease the "left" by SIGNING INTO EXISTENCE" the EPA , the agency has went rogue under the influence of "radical environmentalists"and should be brought back under the direct control of Congress! Any regulation should be voted on by Congress , taking into consideration both environmental and economic repercussions!