The Environmental Protection Agency (EPA), for better or worse, has huge influence over the U.S. energy markets.
So President-elect Trump's nomination of Scott Pruitt as the new head of the EPA is understandably grabbing a lot of headlines.
For one, Pruitt has made no apology for his adamant opinion that the EPA - the very agency he's set to lead - should be abolished.
But amid all that, another, even more important EPA matter has been buried...
A whole market sector is at risk.
Ethanol Is in the Crosshairs
Of course, major elements in Pruitt's nomination itself will continue to make headlines. If he gets his way and the EPA is disbanded, he may be returning to Oklahoma (where he is currently attorney general) in short order.
But there is another matter concerning the EPA that is far more important.
It involves an increasingly contentious practice in reporting the biofuel component put in gasoline.
Given the acrimony over regulations almost certain to happen as the top management of the EPA changes, the issues surrounding energy intelligence company Genscape may be the tip of an iceberg. Late last year, the EPA initiated procedures to revoke the company's authority to verify biofuel credit compliance under federal regulations.
Reuters reported on Jan. 4 that Genscape will be contesting the action:
"Industry energy intelligence company Genscape said it will fight the Environmental Protection Agency's efforts to revoke the company's authority to verify biofuels compliance credits under the U.S. renewable fuels program.
The U.S. agency informed Genscape last week that it was seeking to penalize the company for failing to detect a massive fraud perpetrated by companies it was monitoring as part of its Quality Assurance Program, or QAP.
But Genscape disagreed in a written statement last week, saying it would oppose the EPA order.
"Genscape believes it acted responsibly by investigating concerns identified through the implementation of its approved QAP plan, by turning over the results of that investigation to EPA, and by assisting the DOJ (Department of Justice) in its successful pursuit of a series of criminal convictions," Genscape said.
U.S. regulators discovered that Louisville, Kentucky-based Genscape verified millions of renewable fuel compliance credits that were fraudulently generated in 2013 and 2014 by two companies, Gen-X Energy Group Inc and Southern Resources and Commodities LLC.
Several people have been sentenced to prison and fined for the fraudulent schemes. No one from Genscape has been charged.
The EPA requires U.S. refiners to either blend biofuels such as ethanol into gasoline or buy credits - known as Renewable Identification Numbers (RINs) - from biofuel producers or blenders that are generated for every gallon of renewable produced.
Genscape, part of DMG Information, a division of Daily Mail and General Trust plc, tracks crude oil movements via pipeline and supply disruptions at refineries. It also verifies the authenticity of credits under the U.S. renewable fuel program."
The real issue here, however, may well be the …
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.