Fuel distributor Center Oil Co., one of the region's largest private companies, unwittingly bought more than 1.3 million bogus renewable fuels credits in 2010, according to two lawsuits the company filed last month in St. Louis County Circuit Court.

The credits, worth hundreds of thousands of dollars, are tied to a much larger credit counterfeiting scandal wreaking havoc for biodiesel producers and petroleum companies across the country. The dustup has given new ammunition to critics of the six-year-old federal renewable fuel mandate.

Over the last four months, the federal government has identified two companies that allegedly sold millions of dollars worth of bogus credits. And the owner of one of the companies, Clean Green Fuels LLC of Baltimore, has been charged with selling $9 million of worthless fuel credits and spending the money on exotic sports cars, homes and jewelry.

The fallout from the scandal hasn't been fully realized. But already it has meant increased scrutiny for biodiesel producers and an expensive headache for more than two dozen companies facing possible fines for buying the worthless credits, even if they did so unknowingly.

The federal Renewable Fuel Standard was approved by Congress in 2005 and expanded two years later to require even larger volumes of biodiesel and ethanol as a way to reduce dependence on foreign oil, cut greenhouse gas emissions and create jobs in rural America.

For 2012, the law requires the use of 15.2 billion gallons of renewable fuel, an amount that will steadily increase to 36 billion gallons by 2022.

Oil refiners and fuel importers can meet obligations either by blending biodiesel and ethanol with petroleum-based or purchasing the credits from producers of the renewable fuels.

The fuel credits, known as renewable identification numbers, or RINs, are 38-digit serial numbers that represent biodiesel and ethanol made in or imported to the United States. For biodiesel, each RIN represents 1.5 gallons.

Center Oil didn't say in the lawsuits what consequences it might face for purchasing and re-selling the worthless biodiesel credits. The lawsuit doesn't specify the amount of damages it's seeking.

Company officials didn't return a call seeking comment.

Center Oil filed the lawsuits on Jan. 20 and Jan. 24, accusing separate companies of breach of contract and breach of warranty for selling bogus RINs.

The suits claim Center Oil bought 943,000 phony RINs from Miami-based International Exchange Services LLC in April 2010 and 441,000 bogus RINs from OceanConnect LLC, based in White Plains, NY, six months later.

Both of the companies being sued were identified by federal prosecutors as having bought RINs from Clean Green Fuels.

It's unknown how many companies and brokers unknowingly bought or sold some of the 80 million phony fuel credits so far identified by the EPA. Often, RINs are re-sold multiple times before they're retired.

But the EPA has already issued notices to two dozen companies, including some of the country's largest oil companies, warning them that they may have violated federal regulations for submitting worthless biodiesel credits.

Center Oil was not among those companies, and according to its lawsuit, it subsequently re-sold the credits.

Those who work in the biodiesel industry believe RIN fraud is rare. But the issue has nonetheless made oil companies and brokers more careful about whom they buy from.

And that has had the unfortunate effect of making it difficult for lesser-known small producers to sell their credits into a jittery market, said Wayne Lee, a biofuels consultant in Little Rock.

"It's having a severely negative effect on the smaller producers," he said. "The vast majority of biodiesel producers are straight up, honest small plants doing what they're supposed to be doing. These guys are trying to eke a living out of the ground."

The National Biodiesel Board, an industry group based in Jefferson City, said it has long been aware for the potential for RIN fraud - a reason it long ago included a link on its home page to anonymously pass on tips about suspect RIN transactions to the EPA.

And at the group's annual conference last week, it announced plans to form a task force made up of parties from the petroleum industry, biodiesel producers and the EPA to look at ways to strengthen the RIN program.

"There is significant disruption in our market right now because of these cases," said Ben Evans, a spokesman for the biodiesel group. "We are happy to see the EPA cracking down on any potential fraud because we think it's going to send a strong signal to the market that if people can't get away with this type of thing."

Not everyone is as pleased with how EPA is handling the matter.

Not only is the agency is pursuing companies allegedly selling bogus fuel credits, it also issued notices of violation to two dozen companies last fall, including several of the nation's largest oil refiners, for using some of the invalid RINs to satisfy the biofuels mandate.

Under the market-based RIN system, EPA is maintaining a "buyer beware" policy for companies that claim they unknowingly purchased worthless fuel credits. That's true even though both companies accused of generating bogus RINs had been required to register with the agency.

"I think it's a tragedy that EPA has hid in the shadows on this one," said Charles Drevna, president of the Washington, D.C.-based American Petrochemical Manufacturers Association, which has long opposed the renewable fuel mandate for a variety of reasons. "They allow con artists to register with them and then they say buyer beware."

The outcry from oil companies has also captured the attention of some in Congress, including longtime critics of the EPA and the renewable fuels law.

Within the past two months, Republican lawmakers have sent letters to the EPA asking the agency to defend its position. Just this week, Sen. James Inhofe called for a Senate Environment and Public Works Committee hearing on RIN fraud.

The EPA has defended its enforcement actions, saying it long ago worked with producers, refiners and other parties to develop the market-based system for renewable fuel credits. The agency said that system includes are protections built into existing regulations to help prevent fraud, including a requirement for independent verification that fuel producers have appropriate equipment and fuel production capacity.

However, EPA said, buyers must do "due diligence" before buying RINs.

"EPA does not have the capacity to validate or certify the actual production of renewable fuel and associated RINs before RINs are generated," the agency said in an email response to questions.

Meanwhile, the biofuels industry is trying to focus attention on the fact, in its view, the renewable fuel standard is working. Biodiesel production surpassed 1 billion gallons last year for the first time, helping create more jobs and diversify the nation's fuel system, said Evans, the biodiesel industry spokesman.

"We don't want to downplay (problems in the RIN market)," he said. "It's creating significant disruption in our industry. But let's not throw the baby out with the bathwater."