Grassley, Baucus: Highway Bill Offers Needed Fuel Fraud Crackdown
WASHINGTON – The new highway bill signed into law today contains a series of needed crackdowns on fuel tax fraud, according to Sen. Chuck Grassley, Finance Committee chairman, and Sen. Max Baucus, ranking member. Grassley and Baucus worked to include anti-fuel fraud measures in the bill. Today they released an Internal Revenue Service report showing that their reforms are needed because illegal, hazardous fuel blending to avoid federal fuel taxes occurs routinely across the country.
“Whether you’re driving an 18-wheeler or a pick-up truck, you should know what you’regetting when you fill up the tank,” Grassley said. “Research shows anything but. The IRS identifieda variety of potentially harmful petrochemicals that were illegally blended into highway diesel fuelto dispose of these hazardous wastes. This is troubling from a consumer safety and environmental standpoint, but also because these filler materials help dealers skip out on federal fuel taxes. We need a much better handle on what goes into the diesel fuel that drives a big piece of our economy.” Baucus said, “Fuel fraud robs our nation of better highways and safer infrastructure. In order to skirt taxes, some will resort to mixing other substances to highway diesel fuel. Not only are they avoiding taxes, but their cost-cutting ways are creating harmful by-products, compromising thehealth of our environment. The anti-fraud measures take common-sense approaches to crackingdown on these abusive practices. More funds will be generated for improved roads and vehicles willbe safer because of the highway bill.”
President Bush signed the highway bill containing the Grassley-Baucus fuel fraudcrackdowns into law today. Grassley and Baucus released an IRS study indicating that illegal,hazardous fuel blending activity is occurring frequently across the country, with at least 6.7 percentof samples showing evidence of adulteration. The report summarizes a series of sampling andnational data-gathering exercises aimed at identifying illegal highway fuel-blending activities. Thereport identifies a wide variety of potentially harmful petrochemicals that were illegally blended intohighway diesel fuel to dispose of these hazardous wastes. Additional testing and investigations alsodisclosed a wide variety of blending schemes in which semi-refined blendstocks were systematicallyco-blended outside of a regulated refinery environment to produce untaxed, off-specification dieselmixtures. Additionally, off-specification partially refined blendstocks have been frequently used asuntaxed extenders of conventional refinery-blended diesel fuel.
The study suggests that it is costly and complex to systematically prevent ordinary fuelblending schemes – using regular but off-spec hydrocarbons -- through field chemical sampling.However, frequent random sampling in high risk areas is necessary to prevent disposal of hazardouswastes by blending with conventional fuels. It is well-known that both practices, if unchecked, canlead to serious engine and emissions systems damage, especially in the newest generation of lowemission diesel trucks and automobiles with sophisticated technology emission control systems.Human health issues resulting from exposure to the vapors from hazardous blends, and emissionsfrom partially combusted off-specification blends, constitute another societal harm that needs to beaddressed.
Grassley and Baucus worked to enact other anti-fuel fraud measures in past legislation andsaid they will continue to look for ways to improve the security of the nation’s fuel network.The IRS report they released is attached.
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