EPA Will Reallocate Small Refinery RINs

OMAHA (DTN) -- In a move aimed at protecting demand for ethanol and biodiesel, EPA Administrator Lee Zeldin used a trip to Iowa on Tuesday to announce a proposal to reallocate 770 million renewable fuel blending credits granted to small refiners by adding them to volume obligations for refiners either this year or next year.

The proposal, which dives into the weeds of the Renewable Fuels Standard, would essentially protect the equivalent of 770 million gallons of ethanol from being waived from refiners' blending requirements.

Zeldin announced proposed revisions to the Renewable Fuels Standard (RFS) to ensure 100% of the blending volumes granted by EPA through 29 small refinery exemptions in August won't reduce the overall renewable fuel blending requirements for the country's petroleum refiners.

While meant to boost markets, the proposed rule didn't lead to any immediate reactions in the corn and soybean markets on Tuesday. Corn futures were essentially flat at midday while soybean futures were down 3 to 3.5 cents.

EPA granted 18 full exemptions and 11 partial exemptions to small refineries in August, totaling 1.76 billion in exempted Renewable Identification Numbers (RINs), which serve as compliance credits under the RFS. EPA had already factored 990 million RINs into its "Set 2" rule that set the RFS blending requirements for 2026 and 2027.

Under Tuesday's proposed rule, EPA would reallocate 770 million RINs that haven't been accounted for. Those RINs go back to the 2025 RFS renewable volume obligations. Under Tuesday's announcement, EPA will reallocate 100% of those RINs to refiners under the 2026 and 2027 RFS volume requirements.

EPA is proposing two options to revise its Set 2 rule. Under one option, EPA would split the exempted RINs and add them to 2026 and 2027. Under the second option, the agency would add the entire volume to 2027 requirements.

Growth Energy and the Renewable Fuels Association (RFA), which represent the biofuels industry, both praised EPA for the proposal.

"With this proposal, EPA would deliver on the full potential of historic RVOs and fulfill its promise to make American farmers and biofuel producers whole," said Growth Energy CEO Emily Skor. "Reallocating lost gallons would strengthen the rural economy and provide relief to farmers looking for reliable new markets that won't be destroyed by costly exemptions.

Geoff Cooper, president and CEO of RFA, said his members believe the small refinery exemptions were unjustified, but the reallocation plan – if finalized – would help offset the demand loss for ethanol producers and farmers.

Cooper added that refiners are "enjoying record profit margins" while gasoline supplies are tightening and consumers are paying higher fuel prices. He credited the Trump administration for recognizing "this is no time to undermine domestic biofuels" with small refinery exemptions. Still, Cooper also said RFA continues to call for reforms to small refinery exemptions.

"These exemptions were always meant to be a temporary measure to give truly small, independent refiners a little more time to come into compliance with the RFS program," Cooper said. "Unfortunately, many so-called small refiners have viewed SREs as an entitlement program and have exploited this loophole for two decades, putting American consumers, farmers, and biofuel producers on the losing end."

The American Petroleum Institute (API) criticized EPA's announcement, arguing that the reallocation would make it harder for refiners to plan and invest in fuel supplies.

"U.S. refiners are running all out to meet demand and keep fuel flowing to American consumers," said Kristin Whitman, senior vice president of federal relations for API. "Reallocating small refinery exemptions, particularly at historically high renewable volume obligation levels, would add new uncertainty to an already strained fuels market, making it harder for refiners to plan and invest in the reliable fuel supplies consumers depend on. We are continuing to review EPA's proposed rule and remain committed to working with the administration and Congress on durable solutions that strengthen market stability and help keep fuel affordable."

Dave Walton, an Iowa farmer and president of the American Soybean Association (ASA), said the proposal would help maintain the historic renewable fuel volumes in the 2026-2027 Set 2 rule and protect domestic biofuel demand. Walton urged EPA to finalize the rule and reallocate the biofuel volumes as quickly as possible.

"Soybean farmers are navigating a tough farm economy, and the administration's strong domestic biofuel policies will continue to drive much-needed market demand in the U.S.," Walton said. "We are encouraged by today's proposal and urge EPA to get it across the finish line quickly."

EPA stated, "The Trump EPA understands the importance of providing a predictable and stable market for farmers, refiners, and American consumers to help maintain economic competitiveness and keep energy prices low. The proposal reflects the Trump administration's commitment to have a robust and growing market for their crops while also unleashing American energy."

The rule would help protect and expand markets for farmers, Zeldin said in a news release.

"As soon as we got into office, American farmers asked the Trump EPA not to give them handouts but create avenues for them to enter additional markets. As our farmers continue to harvest their crops, today's proposal is working to maintain a strong and durable market for them to sell to," Zeldin said.

Zeldin made the announcement at an event in Peosta, Iowa, as the Trump administration looks to boost support for Republicans in the state ahead of the November election. Zeldin maintained his visit was official and not a campaign event. EPA's news release included comments from Iowa's congressional delegation, including two House members in competitive re-election races and a House member running for U.S. Senate.

EPA will take public comments on its proposed rule until Dec. 4.

Also see, "EPA Waives 1.76B Gallons From 2025 RFS, Pledges Full Reallocation in 2026, 2027," https://www.dtnpf.com/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

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