Aug 21 – The Trump administration is expected to address a growing backlog of requests from small oil refiners seeking relief from U.S. biofuel laws, with a decision anticipated as early as Friday. However, a ruling on whether larger refiners should compensate for exempted biofuel blending by increasing their own contributions will be postponed. 

The U.S. Environmental Protection Agency (EPA) is set to announce decisions on some of the 195 pending small refinery exemption requests that have been accumulating since 2016. While the rulings are not expected to fully favor small refiners, they will include partial denials for some waiver requests, according to sources familiar with the matter. 

The administration is also planning to release a supplemental rule next week, inviting public comments on whether larger refiners should be required to make up for the gallons of biofuel they would have blended if small refiners were not granted exemptions. This process, known as reallocation, has become a contentious issue with far-reaching implications. 

How the administration handles these exemption requests and reallocation concerns will have significant consequences for both the oil and agricultural industries, as well as for the price of commodities like gasoline, renewable diesel, soybeans, and corn. Without reallocation, widespread exemptions can depress renewable blending credit prices, negatively affecting biofuel prices, especially corn-based ethanol and soybean-based biofuels. 

The EPA has faced years of political indecision and legal challenges, contributing to the mounting backlog. Under the U.S. Renewable Fuel Standard, refiners are required to blend biofuels, such as ethanol, into their fuel or purchase tradable credits from other refiners who meet blending requirements. Small refiners can petition the EPA for exemptions if they demonstrate financial hardship. 

Both the agriculture and oil sectors are eager for resolution on this issue. Farm and biofuel advocacy groups have urged the EPA to limit the number of exemptions granted and to require larger refiners to make up for the exempted biofuel gallons. 

On the other hand, the oil industry has strongly opposed reallocation, arguing that it creates an uneven competitive environment and imposes unnecessary regulatory costs. 

Earlier this year, the EPA indicated it would require larger refiners to compensate for future exempted gallons, but the agency has remained silent on how it will address the backlog of requests from prior years. The upcoming supplemental rule will present several options to test market responses, sources noted. 

Source:  

https://www.reuters.com/legal/litigation/us-rule-biofuel-waivers-big-oil-refiners-may-need-wait-sources-say-2025-08-21/