Chevron to Pay $1 Million Clean Air Act Penalty Over Invalid Renewable Fuel Credits

Key Takeaways

• Clean Air Act Settlement: Chevron agreed to pay just over $1 million to resolve violations of the Renewable Fuel Standard program.
• Improper Fuel Credits: The company generated more than 2.2 million renewable fuel credits on renewable diesel that had already been used to create RINs.
• Credit Retirement: Chevron retired more than 2 million valid credits worth about $3.6 million to offset the improperly generated ones.
• Program Integrity: U.S. officials emphasized that enforcement protects the reliability of the Renewable Identification Number market underpinning the Renewable Fuel Standard.

Deep Dive

Chevron has agreed to pay just over $1 million to settle allegations that it violated the Clean Air Act’s Renewable Fuel Standard program by generating and selling renewable fuel credits that should never have entered the market.

The settlement, announced Wednesday by the Justice Department’s Environment and Natural Resources Division, also required Chevron to retire more than 2 million Renewable Identification Numbers, or RINs, that it had improperly generated. The credits retired to correct the issue were valued at roughly $3.6 million.

The violations trace back to renewable diesel production between January and August 2022. According to the Justice Department, Chevron invalidly generated more than 2.2 million advanced biofuel credits tied to fuel that had already been used once to generate RINs. Those credits were then sold to third parties.

Chevron disclosed the issue to regulators in June 2023.

At the center of the case is the integrity of the RIN system, which serves as the accounting backbone of the Renewable Fuel Standard. Under the federal program, each gallon of renewable fuel produced in the United States can generate a RIN that obligated parties, typically refiners and fuel importers, must obtain and retire annually to demonstrate compliance with renewable fuel blending requirements.

To prevent double counting, each volume of renewable fuel can generate credits only once.

“Today’s action demonstrates the Administration’s commitment to the Renewable Fuel Standard program by ensuring that Renewable Identification Numbers generated and traded represent actual renewable fuel gallons produced,” said Principal Deputy Assistant Attorney General Adam Gustafson of the Justice Department’s Environment and Natural Resources Division. “The benefits that flow from the Renewable Fuel Standard program to rural American communities depend on the integrity of program credits, and this action ensures the reliability of Renewable Identification Numbers in the marketplace.”

Chevron operates in multiple roles within the RFS system. The company produces renewable diesel that can generate credits, but it is also considered an obligated party because it manufactures petroleum fuels that must meet the program’s renewable fuel requirements.

According to the Justice Department, Chevron had already retired valid RINs before the settlement was finalized in order to offset the improperly generated ones. Those replacement credits accounted for more than 2 million RINs and were valued at about $3.6 million.

Federal officials said enforcement actions like this are aimed at preserving confidence in the credit market that supports the Renewable Fuel Standard. The program requires increasing volumes of renewable fuel to replace or reduce petroleum-based fuels used in transportation, heating oil, and jet fuel across the United States.

Ensuring that each credit reflects actual renewable fuel production, regulators say, is essential to maintaining the program’s credibility and the functioning of the broader marketplace built around it.

The GRC Report is your premier destination for the latest in governance, risk, and compliance news. As your reliable source for comprehensive coverage, we ensure you stay informed and ready to navigate the dynamic landscape of GRC. Beyond being a news source, the GRC Report represents a thriving community of professionals who, like you, are dedicated to GRC excellence. Explore our insightful articles and breaking news, and actively participate in the conversation to enhance your GRC journey.