Biodiesel appears to be a tough business to enter, whether you're talking lawsuits over federal mandates or crackdowns on fraud. CBC News in Canada has investigated a cross-border mystery over biodiesel that thickens the plot.

Allegedly, two years ago, biodiesel train shipments (not pictured) were sent back and forth several times between Canada and the US by CN Rail but were never unloaded. The shipping company appeared to make $2.6 million in Canadian dollars for the effort. While it seems odd that CN Rail would repeatedly transport goods but not unload them, the company claims it followed its legal obligations. "CN met its obligations as a common carrier and we have no further comment," CN spokesman Mark Hallman told CBC.

It seems that a lot was going on behind the scenes for these rail shipments that were made between June 15 and 28, 2010. According to a railway worker who spoke to CBC News anonymously due to fear of being fired, "In 25 years, I'd never done anything like it. The clerk told me it was some kind of money grab. We just did what we were told."

CBC News alleges it gained access to internal CN records that indicate fraud. Train 503 shipped biodiesel to Port Huron, MI, from Sarnia, Ont., and Train 504 brought them back. Sometimes rail cars were added and removed – between 68 and 89 cars would go at a time – and as soon as the paperwork and car shuffling were completed, the biodiesel made the return trip.

This train would usually make one trip per day to Port Huron, but maximizing the number of trips can make a lot of money for the company, said Teresa Edwards, CN's manager of transportation for Port Huron/Sarnia, in an email. Each move cleared customs to cross the border, which meant more revenue was generated for Port Huron/Sarnia. "If we can get in more flips back and forth we will attempt to do so," Edward wrote. Edwards didn't return phone calls to CBC News.

Two US biodiesel companies were listed as customers – HeroBX and Northern Biodiesel, and neither responded to calls from CBC. A Canadian company, Bioversal Trading Inc., is being investigated by the Canada Border Services Agency on allegations of false statements to avoid duties in shipping biodiesel to Romania and Italy. CN records say Bioversal arranged the train shipments investigated by CBC News.

Biodiesel producers are in a difficult situation, competing with regular diesel at fuel stations all across North America and with questionable characters hurting the industry's image. It's a tough business to be in.


I'm reporting this comment as:

Reported comments and users are reviewed by Autoblog staff 24 hours a day, seven days a week to determine whether they violate Community Guideline. Accounts are penalized for Community Guidelines violations and serious or repeated violations can lead to account termination.


    • 1 Second Ago
  • 16 Comments
      harlanx6
      • 14 Hours Ago
      Follow the money. This has to get back to politics.
      drreece
      • 14 Hours Ago
      carousel fraud was probrably invented the day after tax, but is normally associated with smaller very valuable goods as trains are usually more noticeable!! probrably reclaimed sales tax multiple times on the same load.
      • 14 Hours Ago
      I work in the RIN market. Indeed RFS1 that was replaced by RFS2 on 7/1/10 had a loophole that did not specify which RIN to retire for exporter RVO. Bioversel must have studied this and found this legal loophole, which went away on 7/1/10, and knew that RFS1 allowed this by not specifying which RIN to retire. On the other hand, RFS2 (which is currently effective) clearly states that if you exported bio you have to retire bio RINs, thus making it valueless (and thus there is no pricing arbitrage....you cannot generate expensive RIN and retire cheaper RIN). Bioversel and their legal team took a huge regulatory risk (and bad publicity risk) by exploiting this loophole. They seemed to have told the Canadian news source what they did and what they did was legal. However, I believe Bioversel took their risk-taking too far. Why? 40 CFR Section 80.1131, which was effective during Bioversel's scheme was performed, stated that a duplicate RIN is an invalid RIN. Invalid RINs are valueless and cannot be used for compliance by obligated parties. This means that the first batch of RINs that were generated on the imported cargo was legal, but once they generated the RINs on the same bio that was re-imported again, the RINs became a duplicate RIN, thus being an invalid RIN per 40 CFR Section 80.1131. This would make any duplicate RIN (original and the copy and any subsequent copies) invalid. I really hope EPA and the authorities invalidate all of the RINs generated by this scheme and require the companies involved (e.g. Bioversel) to pay up.
      Marcopolo
      • 14 Hours Ago
      The US never learns ! You would think that the lesson of the Volstead Act would be burned into the heart of every American legislator. But, no ! Legislator have not learned that gratuitous mandating, inadequately monitored subsidies, and other unpopular laws, will breed those who will seek to exploit such regulations for personal gain on a colossal scale. The bio-fuel industry is an increasingly unpopular and uneconomic industry, naturally it attracts all kinds of scams. End the mandated use of bio-fuel, and the scams will dry up !
        carney373
        • 14 Hours Ago
        @Marcopolo
        By far a bigger scam is oil, which hit $140 a barrel in 2008, up from $10 a barrel in 1999, representing a new foreign imposed "tax" of over $2,000 for every man, woman, and child in America, or $8,000 per family of 4 when average income is only $45K, only $35K after taxes. That crashed the economy and made trillions in wealth vanish, and has caused immense suffering right to this day (non college unemployment is over 25%). Meanwhile according to a Merrill Lynch study published by the (anti-ethanol) Wall Street Journal, biofuels, of which ethanol is by far the most important, prevented oil from rising even higher in 2008, saving America more than $100 billion. Far from being a "scam", biofuel is a major weapon helping to fight back against the massive, economy-crashing, planet-trashing terror-funding oil scam.
      carney373
      • 14 Hours Ago
      Maybe biodiesel makers and marketers would be less tempted to cheat if automakers designed and warranted their diesel cars to be compatible with B100 (100% biodiesel). As it is, there's a lot of FUD over whether to fill up on biodiesel. B5 and B20 are nice and better than nothing, but given the trivial cost per car of adding B100 compatibility there's no excuse.
        diesel912turbo
        • 14 Hours Ago
        @carney373
        The quality of fuel will not permit the fuel systems to last with some blend. B100 will kill current engines.
      EZEE
      • 14 Hours Ago
      Duh - to get to the other side...
      purrpullberra
      • 14 Hours Ago
      This is a perfect example of why the 'conservative' idea to give business what it wants is ruinous. Cash grabbers, not businessmen, run businesses. If it ruins the world but makes one guy cash it must be done (according to such GOP garbage.). Business, practices and accounts, should be opened wide to its detractors in order to prove they aren't ruining the world for short term profit for a select few. If you've got nothing to hide....
        sirvixisvexed
        • 14 Hours Ago
        @purrpullberra
        "Cash grabbers, not businessmen, run businesses." You should continue along the same unintelligent lines of thought and say that all black people are bad because you read an article about one or two stealing TVs, or all Mexicans are bad because you heard about a few of them driving around without car insurance. This kind of prejudice is supposed to be for the RIGHT wingers, not you, silly! What are you doing thinking like "them"? :) The first part of your comment is the type of ignorance that has been repeated since cave man days: "Look! one of something is bad! THEY'RE ALL BAD!" The second part of your comment is true, but flawed, because you only apply it to businesses. Imagine if the personal finances of all of the *individual* immoral subsidy grabbers were revealed. The people who keep "written down" income low so they continue to qualify for free handouts and not pay taxes, the people who pump out babies in order to get paid for them. One could put hidden cameras in the offices of an immoral business like this to reveal their gross practices, but one could also put hidden cameras in the homes of people who are subsidy grabbers, revealing their daily lives, just how horribly lazy and unmotivated they are to learn, work, and serve others to change their financial situations and contribute more to their own well being and society's. "This is a perfect example of why the 'conservative' idea to give business what it wants is ruinous" Laziness penetrates the business world and the personal world. Not nearly all people, or businesses, are lazy and stupid. The same idea behind paying broke mothers to have more children, is behind blindly paying trains to simply run a route. The occupy wall streeter who screams and throws rocks for a chunk of someone else's earnings, is guilty of the same shortcomings as a business that lazily and immorally takes advantage of a subsidy. Immoral "cash grabbers" come from all walks of political ideology. Greedy, lazy, cash grabbers are rampant on the left, and right. So are honest people. No government handouts to businesses, or people, solves the problem.
        BipDBo
        • 14 Hours Ago
        @purrpullberra
        I'm sure that this is somehow routed in subsidies, which is typically not a "conservative" practice.
          Rotation
          • 14 Hours Ago
          @BipDBo
          Conceptually it's not a conservative practice. But in reality the Republicans, the US de facto conservative party, loves subsidies as much as the next group does.
          BipDBo
          • 14 Hours Ago
          @BipDBo
          @ Rotation, This is true, unfortunately. Republicans have the ideal to cut spending and decrease the size and reach of the government, especially on the federal level. This ideal, though, unfortunately stands at odds for a senator or congressman who is representing his or her state. A federal subsidy that helps a local economy may be wasteful spending and bad for the country as a whole. It is a rare congressman or senator who will say no to a handout. Our republican governor, Rick Scott said "no" to rail funds despite the fact that it would create a lot of construction jobs here because he felt it was wasteful federal spending. That decision got a lot of criticism.
          Ryan
          • 14 Hours Ago
          @BipDBo
          Subsidies are good until people take advantage of them and scam the system.
        EZEE
        • 14 Hours Ago
        @purrpullberra
        Yes, purr, that is exactly it. Because if government was involved, businesses would still do unprofitable things with each other because,,,,,,. I can t even think of a sarcastic response.
      BipDBo
      • 14 Hours Ago
      I'm sure that it's something like the "splash and dash" biodiesel scam. http://www.ncpa.org/sub/dpd/index.php?Article_ID=16668
    • Load More Comments