It hinges on getting biodiesel credits every time biodiesel is imported; but, when biodiesel was exported, they had the choice of 'retiring' either biodiesel credits, or the cheaper ethanol credits. So they retired ethanol credits - again and again.
The company that organized the train shipment was Bioversel Trading Inc. of Toronto. Its principal, Arie Mazur, gave CBC a detailed explanation this week explaining that the trip was all about RINs — renewable identification numbers — the credits set up by the EPA to promote and track production and importation of renewable fuels such as ethanol and biodiesel.
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Bioversel Trading hired CN Rail to import tanker loads of biodiesel to the U.S. to generate RINs, which are valuable in the U.S. because of a "greening" policy regulating the petroleum industry. The EPA's "Renewable Fuel Standard" mandate that oil companies bring a certain amount of renewable fuel to market, quotas they can achieve through blending biofuel with fossil fuel or by purchasing RINs as offsets.
Because RINs can be generated through import, the 12 trainloads that crossed into Michigan would have contained enough biodiesel to create close to 12 million RINs. In the summer of 2010, biodiesel RINs were selling for 50 cents each, but the price soon fluctuated to more than $1 per credit.
Once "imported" to a company capable of generating RINs, ownership of the biodiesel was transferred to Bioversel's American partner company, Verdeo, and then exported back to Canada. RINs must be "retired" once the fuel is exported from the U.S., but Bioversel says Verdeo retired ethanol RINs, worth pennies, instead of the more valuable biodiesel RINs. Bioversel claims this was all perfectly legal.
http://www.cbc.ca/news/canada/story/2012/12/19/mystery-biodiesel-train-credits.html
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