(New throughout, adds market background, prices)
WASHINGTON, Sept 29 Glencore Plc's
bunker fuel unit has agreed to pay a $27-million penalty and
retire over $71 million worth of credits for compliance with the
U.S. biofuels program to resolve charges it violated the policy,
the U.S. government said on Thursday.
The U.S. Department of Justice and the Environmental
Protection Agency (EPA) alleged that Chemoil Corp exported at
least 48.5 million gallons of biodiesel from the United States
from 2011 to 2013 but failed to retire the associated renewable
identification numbers generated for the exported fuel.
In addition to paying the highest-ever civil penalty in such
a case, Chemoil will have to retire some 65 million renewable
fuel credits in the settlement, the Justice Department said. It
has already retired 7.7 million.
The credits are used by oil refiners and gasoline importers
to prove they are meeting government mandates for use of ethanol
and biodiesel in gasoline and diesel.
The removal of millions of the credits, known as Renewable
Identification Numbers (RINs), from the market will likely stoke
mounting worries over tightening inventories of the credits. Oil
refiners and others have said that prices of credits are soaring
in response to the U.S. government's plan to boost renewable
fuel mandates next year.
Prices of renewable fuel (D6) credits for 2016 compliance
traded as high as 90 cents apiece following the news, then eased
back to 88 to 89 cents each. That was little-changed from
87.75-88.75 cents on Wednesday, brokers said.
The biomass-based diesel (D4) credits for current year
traded up to $1.02 apiece, up from a range of 99.75 cents to
$1.005 each previously, they said.
A New York-based products trader said the penalty would
strengthen a rally in distillate, or diesel, prices, including
ultra-low sulfur diesel futures on the New York Mercantile
Exchange, which rose 1 percent Thursday.
The diesel prices tend to rise with RINs to compensate for
U.S. producers' cost of buying the credits.
The RIN market has been rife with fraud in previous years,
and the U.S. government has settled a number of cases of past
fraud in recent months.
(Reporting by David Alexander in Washington, Chris Prentice and
Jessica Resnick-Ault in New York; Editing by Tom Brown and David