Citing a limited ability to pay fines, biofuels producer settles with the EPA

The federal government has agreed to settle a multimillion-dollar lawsuit against an Iowa biofuels producer for significantly less than what it originally sought in penalties.

A consent decree between the Environmental Protection Agency and Quad County Corn Processors Cooperative of Ida County reflects a settlement between the parties that was reached even before the EPA’s lawsuit against the company was filed in federal court last week.

That settlement calls for the company to pay $320,000 in civil penalties, and also surrender or retire 438,314 fuel credits, known as Renewable Identification Numbers, or RINs, over the next two years.

Those credits fluctuate in value, but in 2022 they have been valued at $2.50 each to $3.34 each. Assuming that same range of value, the credits that Quad County surrenders or retires would be valued at $1 million to $1.4 million.

Company CEO Delayne D. Johnson said the proper measure of the value of the credits is the difference in value between two categories of RINs, which has recently hovered around 77 cents. That would equate to a total value of $337,502, he said.

In its court petition, the EPA argued that the company was liable for up to $21.7 million in civil penalties.

The consent decree stipulates that Quad County does not have the ability to pay any penalty greater than the amount spelled out in the settlement, and that the federal government’s own financial expert has examined company records and determined Quad County “has a limited ability to pay a penalty.”

The decree also stipulates the company does not admit any liability to the federal government.

The lawsuit was based on alleged violations of the federal government’s Renewable Fuel Standard program, which requires producers of renewable fuels to generate fuel credits, known as Renewable Identification Numbers, in proportion to the amount of renewable fuel they produce.

The lawsuit alleged that Quad County, at its facilities in Galva, generates RINS tied to its production of a non-cellulosic renewable fuel using corn as a feedstock. The EPA alleged that due to the way Quad County produced fuel from May 26, 2015, through Oct. 12, 2015, it created invalid RINs that were of financial benefit to the company.

For each of three alleged violations, the EPA claimed Quad County was liable for penalties of up to $51,796 for each of the 140 days the company was said to be in violation of federal standards. That liability totaled $21,754,320.

In addition, the EPA said the company was liable for any economic benefits or savings generated by each of the alleged violations.

The EPA is the federal agency charged with enforcing the requirements of the Renewable Fuel Standard program. In recent years it has pursued cases against other companies accused of creating invalid RINs.

In 2016, for example, the EPA settled a case against Iowa’s Western Dubuque Biodiesel, which was accused of generating more than 36 million invalid RINs. The company agreed to pay a civil penalty of $6 million.