

Why did a Train Carrying Biofuel Cross the Border 24 Times and Never Unload? - pebb
http://oilprice.com/Latest-Energy-News/World-News/Why-did-a-Train-Carrying-Biofuel-Cross-the-Border-24-Times-and-Never-Unload.html

======
icambron
Lot of assumptions on this thread. The company involved here is claiming that
hasn't committed a crime, which isn't a very interesting claim. The agency
that's launched and investigation hasn't gotten a chance to, you know, conduct
that investigation yet. There's also a possibility that this was all a mistake
that just needs sorted out. So before we all jump on the incentives-gone-wrong
and government-is-inefficient trains, maybe give the government a chance?

But if we are going to speculate--and let's face it, we are--let's at least
have a gander at the relevant regulations. IANAL, etc, but from my reading
Title 40 Part 80 Subpart M [1] it seems _really unlikely_ that assigning the
same volume of fuel different RINs is legal. There's a bunch there about
assigning specific numbers to specific volumes of fuel, but there's also the
super specific:

> (5) Importers shall not generate RINs for renewable fuel that has already
> been assigned RINs by a registered foreign producer.[2]

Sounds pretty clear.

[1] [http://www.ecfr.gov/cgi-bin/text-
idx?c=ecfr&SID=27e92597...](http://www.ecfr.gov/cgi-bin/text-
idx?c=ecfr&SID=27e92597791f3c5cb9d729f136e9782d&rgn=div6&view=text&node=40:17.0.1.1.9.13)

[2] [http://www.ecfr.gov/cgi-bin/text-
idx?c=ecfr&SID=27e92597...](http://www.ecfr.gov/cgi-bin/text-
idx?c=ecfr&SID=27e92597791f3c5cb9d729f136e9782d&rgn=div6&view=text&node=40:17.0.1.1.9.13&idno=40#40:17.0.1.1.9.13.93.16)

------
EwanToo
To me this reads like pretty standard fraud, along the lines of carousel
fraud[1] which was very common a few years ago.

If nobody is arrested or punished for it, then that's more like weak
enforcement than clever use of the system.

[http://en.wikipedia.org/wiki/Missing_trader_fraud#Carousel_f...](http://en.wikipedia.org/wiki/Missing_trader_fraud#Carousel_fraud)

~~~
bdunbar
> To me this reads like pretty standard fraud

I assume the companies ran this by legal before going forward with the plan.
Loopholes aren't illegal, they're just exploits.

~~~
calinet6
However, by all accounts, this one appears to be illegal.

From post below (soon hopefully to be 'above'):

"> (5) Importers shall not generate RINs for renewable fuel that has already
been assigned RINs by a registered foreign producer.[2]"

------
coopdog
As much as I dislike the idea of new government departments, it sounds like
they do need some kind of 'evil' department who's only job is to think up ways
to abuse proposed new laws and regulations before they go into effect.

Similar to how generals have the intelligence section of their staff put on
only the enemy hat and poke holes in their plans.

~~~
rndmize
I don't think you need a new department for that. Take the tax code. Who knows
how to exploit the tax code the best? The accountants at the IRS. Have the IRS
give an employee a bonus each time they find an exploit and write a report on
how it works and recommendations on fixing it. It shouldn't be that different
from the way major software vendors pay rewards for reported bugs/exploits.

You could provide similar incentives for reports on efficiency improvements
(and to prevent exploitation of a system like this, you could have the bonus
provided only if the improvement/fix is actually implemented, or based on how
significant it is, or something.) Prize and crowd-sourcing systems have worked
pretty well when it comes to a lot of things, so why not apply them to
improving government bureaucracy?

As it stands, our system does the opposite - it rewards people for finding and
abusing exploits in the system instead of fixing them (see - every corporate
scandal and stock market crash ever.)

~~~
ams6110
So "exploit" == legal way to keep MY money. Interesting.

~~~
mtgx
Sure, you can see it that way, but that also means that you consider _all_
taxes to be _taking your money_ \- i.e. taxes are illegitimate. Otherwise, if
you think taxes have their purpose, then everyone should play by the same
rules, and not try to "cheat the system".

~~~
simonh
That argument works for individuals who are only responsible for their own
finances and moral conduct, but companies have legal obligations to their
shareholders to maximise shareholder value. Arguably that means if they find a
legal way to reduce their tax costs they are obligated to do so. It's an
interesting and non-trivial ethical question.

~~~
GauntletWizard
I wish we'd stop that. There's the concept of a [Benefit
Corporation](<http://en.wikipedia.org/wiki/Benefit_corporation>) which is
sadly underused. It's a corporation that, while not non-profit, exists to
create something other than pure wealth/shareholder profit.

More immediately, I'd like to see several rulings at once that state that
future sustainable profits are more important than immediate ones, and that
the suing shareholders can be held liable for court fees and damages for
negative press if they sue the company/board an lose. Companies and their
executives should be allowed fairly broad strokes to make a company valuable,
including value of goodwill and paying attention to/not exploiting loopholes
in the law.

------
aresant
A fun sci-fi read would be about a futuristic government that "subsidizes" an
Industry for much-debated, but ultimately politically driven reasons.

Rather than simply making cash-handouts, however, the Government & the
Industry conspire to hide these handouts by creating new by-products for sale
to consumers.

The Industry grows and rejoices, extending its products into as far ranging
lines as sweeteners, fuels, and plastics.

To drive adoption they interrupt the free market through price manipulation
and straight forward mandate from their "Environmental" agency.

Despite overwhelming evidence that consumers are being harmed by these by-
products - record obesity, less efficient engines, and environmental damage -
the subsidies only grow.

I'd like to see how the protagonist would drive change as presently my best
solution is to rage via comment board into the echo chamber.

~~~
lostlogin
Am i missing the joke? Whats sci-fi about this? And how many industries are
like this? Meat, diary, cars, arms, power, oil, medical, prisons. And these
are just the ones that come to read from stories I have read recently.

~~~
uvdiv
He's bitter about corn subsidies in the US.

" _sweeteners, fuels, and plastics_ " -- high fructose corn syrup, corn
ethanol, corn ethanol-derived polyethylene

" _price manipulation and straight forward mandate from their "Environmental"
agency._ " -- corn ethanol subsidies, corn ethanol mandates

etc.

------
exabrial
Good lord... The companies here are dirty, but lets not forget the EPA for
creating the problem in the first place!

~~~
rayiner
Yes, let's blame the government for people abusing regulations. Except the
regulations we like, of course. We'll call it "arbitrage" when we abuse
regulations we don't like, and "fraud" when we abuse regulations we do like
(like property).

~~~
ianstallings
They made a gigantic mistake and we shouldn't blame them? I disagree
completely. They should be blamed for this asinine regulation yes. Because it
really _is_ their fault. Good intentions don't cut it when it comes to fiscal
accountability.

~~~
rayiner
I find it deeply amusing that tech people are always so forgiving of bugs in
software, but seem to go out of their way to blame the government for bugs in
regulation just because it's the government. Newsflash: everything is
imperfect, and the operation of this whole complex world we live in requires a
certain amount of good faith on the part of everyone.

I agree the regulation is asinine, but for reasons completely unrelated to the
incident. From the article: "Each time the loaded train crossed the border the
cargo earned its owner a certain amount of Renewable Identification Numbers
(RINs), which were awarded by the US EPA to “promote and track production and
importation of renewable fuels such as ethanol and biodiesel.” The RINs were
supposed to be retired each time the shipment passed the border, but due to a
glitch not all of them were."

The mechanism in question was reasonable, and it looks like there was a bug in
the implementation. While that's definitely a mistake, I don't think it rises
to the level of "asinine" and I don't think that gets the importer off the
hook any more than it gets a cracker off the hook when he exploits an OS bug
to steal credit card numbers.

~~~
rhizome
Implementation bugs are design flaws are tax loopholes are human failings that
the technocrat decries as solvable even though it's people originating all of
it.

~~~
rayiner
Lots of human failings are solvable through regulation. Have you been killed
and eaten recently? _Boom_ a common flaw of human society solved by
government.

------
z_
CBC article: [http://www.cbc.ca/news/canada/story/2012/12/19/mystery-
biodi...](http://www.cbc.ca/news/canada/story/2012/12/19/mystery-biodiesel-
train-credits.html)

------
bmuon
This is a typical case of how incentives have a tendency to go wrong. I
recommend you to listen to this Freakonomics Radio podcast which tells a
series of stories about incentive failure, for example an indian town which
started farming cobras when a ruler started giving out money for each cobra
head after an infestation.

[http://www.freakonomics.com/2012/10/11/the-cobra-effect-a-
ne...](http://www.freakonomics.com/2012/10/11/the-cobra-effect-a-new-
freakonomics-radio-podcast/)

------
Steko
[http://www.mnn.com/green-
tech/transportation/stories/solved-...](http://www.mnn.com/green-
tech/transportation/stories/solved-the-mystery-of-the-biofuel-filled-train-
that-kept-crossing\\)

 _The companies maintain that this practice was legal. Another company,
Northern Biodiesel, appears to have been put out of business by the practice.

The EPA has investigated several other cases of RIN fraud, including one
against Jeffrey David Gunselman, the CEO of Absolute Fuels who was arrested in
July, accused of selling more than $50 million in fake RIN credits._

So yeah, keep telling yourself that this is another case of the dum dum
gubmint who needs to stay out of our way and how no one ever goes bankrupt
after defrauding the gubmint because I mean, it all sounded great when Rush
said it right?

~~~
SoftwareMaven
I don't understand what you are saying (aside from trolling, which is heavily
frowned upon). It reads to me like the government is either creating perverse
incentives, failing to implement correctly or failing to monitor. If it is the
first, we'd be better off without the interference. If it is the second, what
is wrong with the government that it can't implement it's policies correctly
(perhaps too complex)? If it is the last, then why is the government not
policing the policies better?

And finally, do RIN credits provide better incentives than no credits? That is
the real question that should be asked with regard to the government being
involved. The government's track-record isn't great.

~~~
Steko
"I don't understand what you are saying "

The assumption that this is a legal loophole is mistaken.

"It reads to me like the government is either creating perverse incentives,
failing to implement correctly or failing to monitor"

Because someone committed fraud and they're now being investigated for fraud
by the government?

"If it is the first, we'd be better off without the interference"

If only we were omniscient and knew which incentives were perverse.

"If it is the second, what is wrong with the government that it can't
implement it's policies correctly (perhaps too complex)?"

If only the government could always put it's policies into effect perfectly
like the free market. Wait, what?

"If it is the last, then why is the government not policing the policies
better?"

Because justice isn't instant? Because 30+ years of one party pushing
deregulation takes it's toll? It sounds like your solution to the latter is
more deregulation.

"And finally, do RIN credits provide better incentives than no credits? That
is the real question that should be asked with regard to the government being
involved."

If only there were some way for the public to comment on future government
rules.

"The government's track-record isn't great."

The track record for successful modern societies without pesky governments is
stunningly less great.

------
johnpmayer
> The RINs were supposed to be retired each time the shipment passed the
> border, but due to a glitch not all of them were.

Inside job? Sounds like the type of "glitch" that was in Office Space.

But probably not (Hanlon)

------
SideburnsOfDoom
TL;DR: export fraud.

~~~
gvb
TL;DR: Attempting to indirectly manipulate human (corporate) behavior via tax
incentives gets hammered by the law of unintended consequences.

Again.

~~~
woof
TL;DR: fraud

------
gsibble
Hilarious. Sounds legal and I doubt they would have done it otherwise. Good
example of why most regulation is ridiculous because it's generally easy to
find and exploit loopholes.

~~~
eagsalazar2
Good god libertarians make me sick.

~~~
jrs235
I identify as a libertarian... But all these folks blaming the government in
this case without truly knowing what took place but just jumping to the
regulations are to blame conclusion, make me ill.

Yes the law of unintended consequences often occurs with regulations however
blatantly taking advantage of someone or something is wrong, legal or illegal.
This is where we need a jury of peers to determine whether we want to
encourage or discourage the behavior that this company took part in. I'd find
this company guilty in a heart beat.

It's like jury nullification in reverse.

All it takes for evil to triumph is good men to do nothing.

~~~
emiliobumachar
The law of unintended consequences may well apply to such "jury nullification
in reverse", by creating jurisprudence. This partcular case seems like very
clear-cut fraud to my layman's mind, though.

------
gojomo
If Bioversal/Verdaso employees who cooked this up ever apply to YC, they have
a good answer for the "Tell us about the time you most successfully hacked
some (non-computer) system to your advantage?" question.

~~~
dsr_
It won't be successful if the company pays more in fines than it earned in
profit.

~~~
ryguytilidie
If the US government is involved in the prosecution, we can pretty much
guarantee that we will make it worth their while. It's usually something like
"oh you made 500m profit from fraud? How about 50m fine, any bigger might make
you go out of business, like you would have without committing fraud."

~~~
ianstallings
Well, maybe. Uncle Sam tends to look the other way when it's not him being
fleeced. But when it is him, holy crap watch out. He'll break you up and sell
you for pieces.

------
eagsalazar2
Sometimes I am dazzled, again, by what total dicks some people are.

------
kunle
Seems like a classic case of the law of unintended consequences at work.

------
ck2
And no-one will serve a day in prison because it's white-collar crime.

------
wayne_h
... to get to the other side... waw-waw-waaaaah....

------
frere
Nice arbitrage!

