Federal agencies sue Iowa biofuels producer while providing millions in aid

An Iowa biofuels producer that stands to collect $3.9 million in federal assistance is also being sued by the federal government over alleged violations of the Clean Air Act.

In June, the U.S. Department of Agriculture announced $70.8 million in grants to help provide financial support for 10 Iowa biofuel producers that sustained unexpected market losses due to the COVID-19 pandemic.

The funds were made available through the USDA’s Biofuel Producer Program, which was created as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). One of the 10 recipients of the federal grants is Ida County’s Quad County Corn Processors Cooperative, which stands to collect $3,991,563.

Last week, another arm of the federal government, the Environmental Protection Agency, sued Quad County for up to $21.7 million in civil penalties, alleging violations of the federal Clean Air Act.

However, the EPA has already settled the lawsuit. The settlement requires the company to pay $320,000 in civil penalties, and also surrender or retire 438,314 fuel credits, known as Renewable Identification Numbers, over the next two years.

The federal government’s Renewable Fuel Standard program requires producers of renewable fuels to generate fuel credits, known as Renewable Identification Numbers, or RINs, in proportion to the amount of renewable fuel they produce. The program is intended to reduce the nation’s dependence on foreign oil and increase the production of renewable fuels, all while pursuing reductions in greenhouse gas emissions.

The lawsuit alleges that Quad County, at its facilities in Galva, produces non-cellulosic renewable fuel using corn as a feedstock. The company generates RINs for that production, according to the lawsuit. From May 26, 2015, through Oct. 12, 2015, Quad County allegedly produced renewable fuel using equipment that introduced starch into the production process — although that step was not described in information shared with the EPA.

The EPA also alleges Quad County failed to submit to the EPA chemical analysis and data related to the process that introduced starch into the cellulosic fermenter.

And finally, as a third cause of action, the EPA claims that the company’s actions resulted in Quad County creating invalid RINs that were of financial benefit to the company.

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

In addition, the EPA says the company is liable for any economic benefits or savings generated by each of the alleged violations. The agency’s court petition does not include an estimate of those benefits or savings.

Quad County has yet to file a response to the lawsuit, and company executives did not immediately respond to calls and emails from the Iowa Capital Dispatch on Tuesday.

The EPA is the federal agency charged with enforcing the requirements of the Renewable Fuel Standard program. In order to protect the program’s integrity and maintain a level playing field for all of the corporate players, the agency says, it has been taking enforcement action against producers accused of generating invalid RINs.

In addition to the civil lawsuit against Quad County, the EPA 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.

In a related case, the EPA announced in 2018 that it had reached a settlement with NGL Crude Logistics over invalid RINs the company allegedly generated in connection with Western Dubuque Biodiesel. NGL agreed to pay a civil penalty of $25 million.

That same year, the EPA entered into a settlement with the Chemoil Corporation that required the company to retire 65 million renewable fuel credits to resolve allegations it violated the terms of the Renewable Fuel Standard program. The market value of the credits was more than $71 million. Chemoil also agreed to pay a $27 million civil penalty.

Editor’s note: This story has been updated to reflect that EPA’s claims against Quad County Corn Processors have been settled with a consent decree that calls for the company to pay $320,000 in civil penalties and surrender or retire fuel credits that in 2022 have been valued at $1 million to $1.4 million. The company has not admitted any liability.