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United States District Court for the District of Kansas
June 26, 2012, Decided
Case No. 12-2090-JTM
MEMORANDUM AND ORDER
Plaintiff Lansing Trade Group filed this action claiming breach of contract and breach of warranties against defendant OceanConnect. The matter is now before the court on OceanConnect's Motion to Dismiss or to Stay the Proceedings.
The dispute involves a contract for the sale of "RINs," or Renewable Identification Numbers. RINs are numbers associated with renewable fuels under Environmental Protection Agency (EPA) regulations.1 They are used to measure and track renewable fuel production.2 EPA rules require "obligated parties" — fuel refiners, importers and blenders — to annually show they are responsible for introducing a certain volume of renewable fuels into gasoline sold in the United States. They do this by showing EPA they have acquired and are "retiring" a sufficient number of RINs.3
Under EPA regulations, fuel producers generate RINs as they make renewable fuel, with at least one RIN created for each gallon of renewable fuel produced. When a producer transfers ownership of the renewable fuel, it transfers the associated RINs with it to the purchaser. Once an obligated party acquires the fuel or once the fuel is blended with gasoline, the RINs are "separated" [*3] from the fuel and can be kept by the obligated party when it resells the fuel. When an obligated party gets enough RINs to meet its annual quota, it can start selling its "excess" RINs to other obligated parties. The buyers then may use these RINS as credits to meet their EPA quotas.4 RINs can be bought and sold by anyone registered with EPA, and can be transferred any number of times.5 Both plaintiff and defendant buy and sell RINs as part of their business. Plaintiff claims it bought RINs from defendant and resold them, only to learn the RINs were fraudulent and invalid. Defendant contends it likewise bought and sold the RINs without knowing of their fraudulent origin.
The EPA regulations declare a RIN to be invalid for a number of reasons, including if the RIN has expired (RINs have a limited life span), if it does not represent renewable fuel, or if it was otherwise improperly generated.6 Upon a determination by any party that the RINs it owns are invalid, EPA [*4] rules require the party to adjust its records and to retire the invalid RINs.7 Invalid RINs cannot be used to satisfy a party's annual fuel obligation, even if the party acquired the RIN with a good faith belief that it was valid.8 EPA regulations make it a violation for any person to create or transfer an invalid RIN.9 Any person who commits a violation can be liable for a civil penalty.10
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
2012 U.S. Dist. LEXIS 87952 *; 2012 WL 2449514
LANSING TRADE GROUP, LLC, Plaintiff, vs. OCEANCONNECT, LLC, Defendant.
Subsequent History: Motion denied by Lansing Trade Group, LLC v. OceanConnect, LLC, 2013 U.S. Dist. LEXIS 3170 (D. Kan., Jan. 9, 2013)
fuel, invalid, allegations, parties, motion to dismiss, renewable, warranty, argues, obligated, regulations, contends, buyer, join, breach of contract, purchasers, claim for breach, rights