Renewable racket

Gasoline and diesel refiners are spooked after a series of revelations, beginning last November, that three companies created millions of fraudulent credits for renewable fuels. The credits, worth a combined $155 million, were sold under the scheme Congress initiated in 2005 to promote the use of "green" fuels like biodiesel and ethanol from plant waste and corn. Fuel makers that cannot produce their own renewable fuel must buy it-or buy credits-from those that can. But the specter of phony credits has chilled the renewable market, causing refiners to avoid buying from smaller producers for fear of more fraud.

In June, even while one of the alleged violators went to trial in Maryland, the Environmental Protection Agency was investigating a fourth suspected case of fraud.

Biofuels such as ethanol are routinely blended with standard gasoline and sold to U.S. drivers. By law, renewables must comprise about 9 percent of all fuels consumed in the United States this year. The industry won't stop buying and selling, but smaller producers may get sidelined: A representative for Aspen Biofuel, a company making biodiesel from used cooking oil in Portland, Ore., told the Houston Chronicle his company was stuck with unsold credits because the "marketplace just basically froze and locked up for small- and medium-sized producers."

Part of the problem is that the EPA leaves it to buyers to determine whether the renewable credits they're purchasing are legitimate. If not, the buyers not only lose money on worthless credits, the EPA fines them. In two of the recent fraud cases, the agency fined 30 fuel companies that purchased fake credits. Settlements reached six figures.

This "buyer beware" approach unnerves refiners, and they're buying from fewer biofuel producers. The president of a renewable credit brokerage, Ocean Connect, said there were 150 active makers of biodiesel last year, but only 40 this year. The brokerage is suing the EPA for its handling of the situation. The House Energy and Commerce Committee launched its own investigation in May.

In the Maryland case, federal prosecutors charged 33-year-old Rodney R. Hailey with creating $8.4 million in fake biodiesel credits on his computer. Hailey allegedly sold the credits to petroleum companies and used the money to buy jewelry, real estate, and luxury cars, including a Rolls-Royce, a Lamborghini, and two Bentleys.

Rare action

The United States, Japan, and the European Union ratcheted up pressure on China in June over its export policy for molybdenum, tungsten, and 17 rare earth minerals. The three nations asked for a World Trade Organization panel to resolve a dispute that began in March, when they filed a complaint claiming China's tariffs and restrictions on rare earth exports were effectively forcing manufacturers to move into China. Rare earths are essential to technology like hybrid car batteries, smartphones, and missiles.

The new pressure came seven days after Chinese officials released a white paper blaming rare earth mining for polluting rivers and causing landslides in the country. They promised to tighten environmental controls-a move Western observers suspected could function as an excuse for continued export restrictions. China currently controls 90 percent of the world's production of rare earths. - Daniel James Devine