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NEW YORK (Reuters) - The U.S. Environmental Protection Agency wants to revoke Genscape's ability to verify biofuels compliance credits after regulators say it failed to detect a massive fraud perpetrated by companies it was monitoring.
The announcement, made Wednesday, will likely bolster calls to reform the U.S. biofuels programs from critics such as investor Carl Icahn, who was recently named as a special adviser to President-elect Donald Trump.
Icahn owns a large stake in CVR Energy Inc, which runs two U.S. refineries.
In August he called on the EPA to change the market for renewable fuel credits to favor smaller refiners like CVR.
Genscape has 60 days to oppose the EPA notice, and the company can continue to verify credits until the agency issues it final order.
The EPA action comes after regulators discovered Kentucky-based Genscape verified millions of renewable fuel compliance credits that were fraudulently generated in 2013 and 2014 by two companies, Gen-X Energy Group Inc and Southern Resources and Commodities LLC.
Several people have been sentenced to prison and fined for the fraud. No one from Genscape has been charged.
Genscape is a well-known company in the energy industry that, among other things, tracks crude oil movements via pipeline and supply disruptions at refineries. It also verifies the authenticity of credits under the U.S. renewable fuel program.
The company did not immediately respond to requests for comment.
The EPA requires U.S. refiners to either blend biofuels such as ethanol into gasoline or buy credits - known as Renewable Identification Numbers (RINs) - from biofuel producers or blenders that are generated for every gallon of renewable produced.
Independent U.S. refiners have called the plan overly burdensome and misguided, while supporters say it has achieved its goal of boosting volumes of renewable fuel in the United States.
Reporting by Jarrett Renshaw and Chris Prentice; Editing by Lisa Shumaker