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Someone figured out how to take churning and kick it up a few notches....

"A CBC News investigation has uncovered a cross-border mystery involving unexplained shipments of biodiesel tanker cars that were sent back and forth numerous times between Canada and the U.S. by CN Rail but were never unloaded.

According to leaked internal CN documents, the rail company stood to make $2.6 million for the effort.

“CN received shipping directions from the customer, which, under law, it has an obligation to meet,” CN Rail spokesman Mark Hallman said last week. “CN discharged its obligations with respect to those movements in strict compliance with its obligations as a common carrier, and was compensated accordingly.”

News story at CBC news

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I doubt anyone during the civil war "made millions" selling blankets to the military.

I don't see this applying here anyw... (more)

Glitch99 (Jan. 06, 2013 @ 2:03p) |

Under what administration was this program established ?

xoneinax (Jan. 06, 2013 @ 3:38p) |

No, because the sale of the RINs are not to the government, they're sold to Exxon or other private refinery owners.

xerty (Jan. 06, 2013 @ 7:27p) |

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Yup, sounds like some government incentive program is getting gamed and the railroad was happy to (get paid to) help.

“This unit train will move at least once daily to Port Huron starting on Tuesday, June 18,” said an email written by Teresa Edwards, CN’s manager of transportation for Port Huron/Sarnia.

It will “clear customs and return to Sarnia. If we can get in more flips back and forth we will attempt to do so. Each move per car across the border is revenue generated for Sarnia/Port Huron.

“It will be the same cars flipping back and forth and the product will stay on the car.”

The email ends with a reminder that the move “has the potential to make a lot of money for CN so need everyone’s assistance to maximize the number of trips that we make and ensure that it all moves smooth.”

June, huh? Right at the end of AARP 5%...hmmm...

I understand the Shipping company is generating revenue for each cross-border shipment, but I'm still confused as to why someone would pay them to ship "the package" back and forth? It's someone else's cargo, and it's worthwhile for that someone else to keep paying these shipping costs over and over, so the article must not even be scratching the surface of the truly profitable aspect of this.

Maybe the company ended up with alot of unaccounted for inventory from illigitimate sources, and needed to quickly generate receiving records to match the volume on-hand? I get the feeling from the article that some form of smuggling (all the cars didnt actually contain the same thing each trip) wasnt likely.

Glitch99 said:   I understand the Shipping company is generating revenue for each cross-border shipment, but I'm still confused as to why someone would pay them to ship "the package" back and forth? It's someone else's cargo, and it's worthwhile for that someone else to keep paying these shipping costs over and over, so the article must not even be scratching the surface of the truly profitable aspect of this.

Some sort of tax benefit or government kickback for importing/exporting biodiesel? They are paying 2 mil to ship the stuff, so the reward has to be worth that...

speedbird71 said:   Glitch99 said:   I understand the Shipping company is generating revenue for each cross-border shipment, but I'm still confused as to why someone would pay them to ship "the package" back and forth? It's someone else's cargo, and it's worthwhile for that someone else to keep paying these shipping costs over and over, so the article must not even be scratching the surface of the truly profitable aspect of this.

Some sort of tax benefit or government kickback for importing/exporting biodiesel? They are paying 2 mil to ship the stuff, so the reward has to be worth that...


Without those facts, where is the story? Shouldn't this be in "off topic"?

Glitch99 said:   Maybe the company ended up with alot of unaccounted for inventory from illigitimate sources, and needed to quickly generate receiving records to match the volume on-hand?

At first I was thinking they were exploiting a government incentive program, but I think Glitch is correct. It matches with their other issues abroad.

Whatever it is, its just more corruption. I'm sure it'll lead back to tax dollars wasted and lies generated and nobody
will have to take claim for it, because they're all protected while the little guy swims in the fecal pond

I haven't read into the detail but it seems like fraud to me. So it is for fraud and profit.

Could be in support of a ponzi. The company churns the shipments, each of which generates a manifest. Then, it doesn't need to create fake manifests to show how profitable it is, it can produce real ones.

the funny thing is that I doubt they are the innovators of this type of particular fraud. I am sure their buddies at other companies are the ones that showed them how to do it.

Stunner2xx said:   the funny thing is that I doubt they are the innovators of this type of particular fraud. I am sure their buddies at other companies are the ones that showed them how to do it.
Just curious, but who's the "they" you are referring to? Because the "they" in the article profiting $2.6-mil is merely following shipping instructions - there is no fraud involved. The other "they" involved is the one that actually owns the product and is paying for the shipping, that we get very minimal details about so it's impossible to characterize it as "this type of particular fraud" - because we have no clue as to why this was happening, let alone if there was fraud involved, let alone what particular type....

Hmm.. found this article
EU finds U.S. evasion of biodiesel tax: sources

which says:

It follows a year of investigations and seizures of biodiesel shipments suspected as originating from the United States but labeled as coming from other countries' ports.The EU imposed tariffs on U.S. Diesel blends containing at least one in four parts of biodiesel in 2009, after it found U.S. exporters benefited from illegal subsidies and sold their blends to Europe at below cost, hurting EU producers.The Commission now says it has evidence of illegal transshipments via Canada and that U.S. exporters switched to weaker biodiesel blends, hurting EU producers, according to the sources

Could be some relation to some scheme like that.

does biodiesel sell at a premium to regular Diesel? Is there any money is passing off regular Diesel as biodiesel?

No, other way around - biodiesel has lower specific energy and so is less valuable than regular Diesel.

bio Diesel does have a higher lubricity than the ULSD currently mandated. The new low lubricity ULSD is harder on injection components. New injectors can be over $3000 at the "stealership." My business is very involved in the light duty Diesel industry (pick-ups). We offer the same products or better for nearly half the cost.

The Govt should stay out of or at least severely limit the manipulation of costs of commodities (corn, milk, paying farmers not to produce, ethanol, solar, and lets talk about schooling with all the "free student loans" that make education pricing artificially higher).

Pretty clear its to generate fake records for some purpose - whether its to show their company has produced that much biodiesel , or to show that much Diesel exported to the EU originated from Canada instead of USA , or some govt incentive program or something

It will probably come to light since the op article mentions several investigations

jerosen said:   Hmm.. found this article
EU finds U.S. evasion of biodiesel tax: sources

which says:

It follows a year of investigations and seizures of biodiesel shipments suspected as originating from the United States but labeled as coming from other countries' ports.The EU imposed tariffs on U.S. Diesel blends containing at least one in four parts of biodiesel in 2009, after it found U.S. exporters benefited from illegal subsidies and sold their blends to Europe at below cost, hurting EU producers.The Commission now says it has evidence of illegal transshipments via Canada and that U.S. exporters switched to weaker biodiesel blends, hurting EU producers, according to the sources

Could be some relation to some scheme like that.


Yup, that jives with the following excerpts from OP's article:

CN records say the Canadian company that arranged the deal is Bioversel Trading Inc., which is being investigated by the Canada Border Services Agency on allegations it made false statements to avoid duties in shipping biodiesel to Romania and Italy.

Bioversel Trading Inc. is part of the Bioversel family of companies that share offices and officers with Einer Canada. The CBC interviewed Einer Canada’s Arie Mazur, who made a lengthy defence of Bioversel Trading’s fight with the European Union’s Anti-Fraud office...

Officials are now investigating claims the companies were routing American-made biodiesel through Canada and falsifying its origin to avoid paying tens of millions of dollars in European anti-dumping duties.

I'm sure I'm missing something pretty simple, but I still don't understand how this scheme was expected to show that US biodiesel wasn't being shipped to the EU via Canada.

For instance, if they were trying to exaggerate deliveries from the US to Canada, it seems this would just strengthen investigators' claims that fuel was being routed US -> Canada -> EU. On the other hand, if the goal was to show that X barrels of fuel were delivered to the US from Canada, maybe to artificially reduce the appearance of net flow in the other direction, it seems like this would just call into question whether the supposed originating company in Canada would have been able to keep up with all of the fictitious production which would be required for them to fulfill their claimed deliveries to both the EU and US.

Maybe the goal was just to obfuscate the whole situation...like this post.

capnkidd said:   bio Diesel does have a higher lubricity than the ULSD currently mandated. The new low lubricity ULSD is harder on injection components. New injectors can be over $3000 at the "stealership." My business is very involved in the light duty Diesel industry (pick-ups). We offer the same products or better for nearly half the cost.

The Govt should stay out of or at least severely limit the manipulation of costs of commodities (corn, milk, paying farmers not to produce, ethanol, solar, and lets talk about schooling with all the "free student loans" that make education pricing artificially higher).


My uncle has been making his own biodiesel for years with no ill effects in his trucks.

clearanceman said:   capnkidd said:   bio Diesel does have a higher lubricity than the ULSD currently mandated. The new low lubricity ULSD is harder on injection components. New injectors can be over $3000 at the "stealership." My business is very involved in the light duty Diesel industry (pick-ups). We offer the same products or better for nearly half the cost.

The Govt should stay out of or at least severely limit the manipulation of costs of commodities (corn, milk, paying farmers not to produce, ethanol, solar, and lets talk about schooling with all the "free student loans" that make education pricing artificially higher).


My uncle has been making his own biodiesel for years with no ill effects in his trucks.



High pressure common rail injectors often have problems with low quality Diesel or bio Diesel. At pressures over 20k psi a small amount of water or contamination will cost thousands in repair. Most trucks older than 2003 will take bio Diesel well, some will run on waste motor oil, trans fluid etc. life of components may be shortened but injectors are 1/8th the price.

As expected, the US taxpayer was funding this stupidity. It was part of a free market in renewable fuel subsidies.

http://www.businessinsider.com/the-biofuel-subsidy-scams-2012-12

Article said: Under the mandate, oil companies must blend 1 billion gallons of biodiesel a year into the fuel stream. Each refiner’s contribution is determined by its market share. If a refiner doesn’t want to comply, it can instead buy RIN credits from biodiesel producers. Hence, a $2 billion market for biodiesel RIN credits, policed by the ever so vigilant EPA.

But RIN credits can be traded independently from the batches of biofuel that generated them. And this has opened up some opportunities.

To generate RINs from importing biodiesel into the US, ownership of each trainload was transferred to Bioversel’s US partner, Verdeo, which then, rather than selling the biodiesel in the US, exported it back to Canada. But by exporting the biodiesel, Verdeo would have been required to “retire” the associated RINs, instead of being able to sell them. So Verdeo retired ethanol RINs instead, which cost only a fraction. The difference, less the cost of transportation back and forth, was profit.

xerty said:   As expected, the US taxpayer was funding this stupidity. It was part of a free market in renewable fuel subsidies.

http://www.businessinsider.com/the-biofuel-subsidy-scams-2012-12

Article said: Under the mandate, oil companies must blend 1 billion gallons of biodiesel a year into the fuel stream. Each refiner’s contribution is determined by its market share. If a refiner doesn’t want to comply, it can instead buy RIN credits from biodiesel producers. Hence, a $2 billion market for biodiesel RIN credits, policed by the ever so vigilant EPA.

But RIN credits can be traded independently from the batches of biofuel that generated them. And this has opened up some opportunities.

To generate RINs from importing biodiesel into the US, ownership of each trainload was transferred to Bioversel’s US partner, Verdeo, which then, rather than selling the biodiesel in the US, exported it back to Canada. But by exporting the biodiesel, Verdeo would have been required to “retire” the associated RINs, instead of being able to sell them. So Verdeo retired ethanol RINs instead, which cost only a fraction. The difference, less the cost of transportation back and forth, was profit.


Green for the follow up.

If you read the article, there was lots of outright fraud involving these RINs. Give the guys in OP credit for creating some railroad jobs while playing by the book.

Article said: Absolute Fuels in Texas, was sent an EPA Notice of Violation in February this year. On July 19, owner Jeffrey David Gunselman was arrested for having allegedly created on his computer more than $50 million in RIN credits that he then sold. He didn’t even have the facilities to produce biodiesel. Earlier this month, he pleaded guilty to a laundry list of charges and is contemplating a maximum sentence of $20 million in fines and 1,268 years in the hoosegow.

Another Texas company, Green Diesel, received a Notice of Violation on April 30. The issue: 60 million fake RINs. By then, CEO Philip Rivkin had apparently skedaddled to Europe, out of harm’s way.


Forget hacking credit cards. You can sell these things for over $1 a piece and the EPA is a year behind on enforcement so you can flee the country with all the cash.

xerty said:   As expected, the US taxpayer was funding this stupidity. It was part of a free market in renewable fuel subsidies.

http://www.businessinsider.com/the-biofuel-subsidy-scams-2012-12

Article said: Under the mandate, oil companies must blend 1 billion gallons of biodiesel a year into the fuel stream. Each refiner’s contribution is determined by its market share. If a refiner doesn’t want to comply, it can instead buy RIN credits from biodiesel producers. Hence, a $2 billion market for biodiesel RIN credits, policed by the ever so vigilant EPA.

But RIN credits can be traded independently from the batches of biofuel that generated them. And this has opened up some opportunities.

To generate RINs from importing biodiesel into the US, ownership of each trainload was transferred to Bioversel’s US partner, Verdeo, which then, rather than selling the biodiesel in the US, exported it back to Canada. But by exporting the biodiesel, Verdeo would have been required to “retire” the associated RINs, instead of being able to sell them. So Verdeo retired ethanol RINs instead, which cost only a fraction. The difference, less the cost of transportation back and forth, was profit.

So if they had to return/retire the credits for importing the biodiesel when they subsequently exported it, how could they just chose to retire ethanol credits instead?

Glitch99 said:   xerty said:   As expected, the US taxpayer was funding this stupidity. It was part of a free market in renewable fuel subsidies.

http://www.businessinsider.com/the-biofuel-subsidy-scams-2012-12

Article said: Under the mandate, oil companies must blend 1 billion gallons of biodiesel a year into the fuel stream. Each refiner’s contribution is determined by its market share. If a refiner doesn’t want to comply, it can instead buy RIN credits from biodiesel producers. Hence, a $2 billion market for biodiesel RIN credits, policed by the ever so vigilant EPA.

But RIN credits can be traded independently from the batches of biofuel that generated them. And this has opened up some opportunities.

To generate RINs from importing biodiesel into the US, ownership of each trainload was transferred to Bioversel’s US partner, Verdeo, which then, rather than selling the biodiesel in the US, exported it back to Canada. But by exporting the biodiesel, Verdeo would have been required to “retire” the associated RINs, instead of being able to sell them. So Verdeo retired ethanol RINs instead, which cost only a fraction. The difference, less the cost of transportation back and forth, was profit.

So if they had to return/retire the credits for importing the biodiesel when they subsequently exported it, how could they just chose to retire ethanol credits instead?



Its called fraud.

Mickie3 said:   Glitch99 said:   So if they had to return/retire the credits for importing the biodiesel when they subsequently exported it, how could they just chose to retire ethanol credits instead?
Its called fraud.

No, they followed the rules although it's suggested that these rules have been changed since. If they were going to commit fraud, there were much easier ways than paying millions to ship trainloads of biodiesel around. Did you even read my article?

Article said: CBC News emphasized that it “has found no evidence Bioversel or its partners broke any laws.” Apparently, regulations at the time permitted importing biofuels to generate RIN credits, re-export the fuel, retire cheaper ethanol credits instead of biodiesel credits, and laugh all the way to the bank. A perfect example of how huge corporate welfare programs, such as fuel subsidies, throw off unexpected crumbs in surprising directions.

I suspect that the government will be able to use the False Claims Act.

"The False Claims Act, also known as the "Lincoln Law," was enacted during the Civil War to combat the fraud perpetrated by companies that sold supplies to the Union Army.

"War profiteers were shipping boxes of sawdust instead of guns, for instance, and swindling the Union Army into purchasing the same cavalry horses several times. "You can sell anything to the government at almost any price you’ve got the guts to ask," boasted one profiteer who made millions unloading moth-eaten blankets to the military." The guys reselling the same cavalry horses went to prison under the False Claims Act. In this case I think it will trump the "gap" in the regulations. Most double dippers don't think about the False Claims Act when they do their legal search for loopholes.

nsdp said:   I suspect that the government will be able to use the False Claims Act.

"The False Claims Act, also known as the "Lincoln Law," was enacted during the Civil War to combat the fraud perpetrated by companies that sold supplies to the Union Army.

"War profiteers were shipping boxes of sawdust instead of guns, for instance, and swindling the Union Army into purchasing the same cavalry horses several times. "You can sell anything to the government at almost any price you’ve got the guts to ask," boasted one profiteer who made millions unloading moth-eaten blankets to the military." The guys reselling the same cavalry horses went to prison under the False Claims Act. In this case I think it will trump the "gap" in the regulations. Most double dippers don't think about the False Claims Act when they do their legal search for loopholes.

I doubt anyone during the civil war "made millions" selling blankets to the military.

I don't see this applying here anyways - there's no comparison to selling boxes of guns that contain no guns, or new blankets that really are warn to little more than scrap rags. It'd be more applicable if they booked the import of 100 carloads while 5 cars just sat in the railyard unmoved, or even just moved empty rail cars across the boarder claiming they contained biofuel without bothering to load them. In this case, they claimed to have imported 100 carloads, and did in fact import 100 carloads (and we can assume freely acknowledged the exporting of 100 carloads as well). There's a big difference between claiming to have done something, and going through the motions of actually doing it.

xerty said:   As expected, the US taxpayer was funding this stupidity. It was part of a free market in renewable fuel subsidies
Under what administration was this program established ?

xoneinax said:   xerty said:   As expected, the US taxpayer was funding this stupidity. It was part of a free market in renewable fuel subsidies
Under what administration was this program established ?

Well, to be more clear, the US fuel consumer is paying for this via a complex set of mandated renewable fuel requirements put on refiners. This seems to have been established in 2007, and ethanol production was a big beneficiary. More background reading.

http://www.ethanoltoday.com/index.php?option=com_content&task=vi...
http://web.archive.org/web/20110206120114/http://www.epa.gov/ota...

The accounting and tracking of unverifiable RINs looks to be a compliance and accounting nightmare, and that's before you get into trying to unwind frauds. Ironically the price of gas reflects all this waste, while fraudulent RIN producers serve to keep the price of RINs down and thereby making gas more affordable at the pump.

nsdp said:   I suspect that the government will be able to use the False Claims Act.
No, because the sale of the RINs are not to the government, they're sold to Exxon or other private refinery owners.



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