The move, which also included measures to discourage biofuel imports, was welcomed by the biofuels industry, which had been lobbying on the issue for months.

Why it matters: The American market for biofuel feedstocks could affect prices Canadian farmers see for oilseeds.

The U.S. Environmental Protection Agency proposed on Friday total biofuel blending volumes at 24.02 billion gallons in 2026 and 24.46 billion gallons in 2027. That compares with blending requirements of 22.33 billion gallons in 2025.

Under the Renewable Fuel Standard, refiners are required to blend large volumes of biofuels into the nation’s fuel supply or purchase credits, called RINs, from those that do.

The proposal is driven in part by an increase in biomass-based diesel requirements. EPA set a quota of 7.12 billion biomass-based diesel RINs for 2026 – a measurement of the number of tradable credits generated by blending the fuel.

It said it projected that mandate would lead to the blending of 5.61 billion gallons. The EPA expressed the biomass-based diesel requirement in billion RINs in accordance with the agency’s proposal to reduce the number of RINs that could be generated from imported biofuels.

After accounting for the reduction for imported biofuels, the EPA said it projected the number of RINs generated for biomass-based diesel would be 1.27 and 1.28 RINs per gallon in 2026 and 2027, respectively. Previously, the EPA projected the average gallon of biomass-based diesel generated 1.6 RINs.

The volume mandate for 2025 for biomass-based diesel was 3.35 billion gallons, a figure the industry had complained was too low.

The oil and biofuel industries, both major lobbying powers in Washington, have highly anticipated the release of the proposal, which, if finalized, determines the fate of billions of dollars in fuel and tradable credit transactions.

As one of the first decisions made by the current Trump administration regarding federal biofuel policy, the proposal signaled the administration’s support for the biofuels industry, which has at times been at odds with oil companies.

A coalition of oil and biofuel groups banded together in a historically unusual move earlier this year to request biomass diesel blending for 2026 at 5.25 billion gallons, compared with 3.35 billion gallons in 2025.

The coalition, led by the American Petroleum Institute, argued that the EPA’s previous mandates failed to support the growth of the advanced biofuel industry and undercut the market.

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The coalition also recommended total federal biofuel blending mandates for 2026 at 25 billion gallons, the sources said. The coalition, led by the American Petroleum Institute, a top U.S. oil trade group, presented the figures to the EPA in a meeting last week.

Why it matters: The trajectory of the U.S. biofuel market has implication for Canadian oilseed producers

While the recommendations were for one year of mandates, the EPA is expected to release a proposal that covers both 2026 and 2027, Reuters previously reported.

API declined to comment on specific numbers, while the EPA did not respond to a request for comment.

The coalition’s suggestion of 5.25 billion gallons for biomass-based diesel mandates was slightly lower than the range of 5.5 billion to 5.75 billion gallons considered ahead of the meeting and previously reported by Reuters.

Big Oil and the Farm Belt’s biofuel makers are traditional competitors in the multibillion-dollar U.S. gasoline market, but have come together to form a consensus at the request of the White House in recent months in hopes of avoiding the type of clashes that defined the first Trump administration.

The new 5.25 billion-gallon figure from the API-led coalition is in line with a number recommended to the EPA by Clean Fuels Alliance America – a U.S. biodiesel trade group – along with farm and feedstock groups.

In a mid-March letter to EPA Administrator Lee Zeldin, that coalition said EPA’s previous mandates failed to support the growth of the advanced biofuel industry and undercut the market.

The EPA set biomass-based diesel mandates for the 2025 compliance year at 3.35 billion gallons.

Under the U.S. Renewable Fuel Standard, oil refiners must blend billions of gallons of biofuels into the nation’s fuel mix, or buy tradable credits from those that do.

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The move is unusual because the oil and biofuels industries are frequently at odds with each other on issues related to the Renewable Fuel Standard (RFS) program, the around two-decade-old law that requires refiners to blend billions of gallons of biofuels into fuels like gasoline, or buy credits from those that do.

The oil industry has historically seen biofuels, like corn-based ethanol, as unwanted competition to petroleum-based fuels. Both industries’ interests, however, align in opposition to electric vehicles, which pose a threat to any form of liquid fuel.

President Donald Trump last month revoked his predecessor Joe Biden’s executive order to make half of all new vehicles sold in 2030 electric in an effort to slash greenhouse gas emissions.

“While our organizations have not always agreed on every detail, we have joined together in recognition of the critical role liquid fuels serve in the American economy, to advance liquid fuels, and ensure consumers have a choice of how they fuel their vehicles,” the groups said in a letter to Lee Zeldin, the new administrator for the Environmental Protection Agency, dated Wednesday.

“We believe strong, steady volumes for conventional biofuel targets, biomass-based diesel, and advanced fuels would more accurately reflect the availability and ongoing investments in feedstocks and production capacity,” the letter added.

One of the groups clarified to Reuters that they want an increase in volumes.

The groups that signed the letter included the American Petroleum Institute, one of the nation’s top oil trade organizations, and the Renewable Fuels Association and Growth Energy.

The American Fuel and Petrochemical Manufacturers, another oil group that typically weighs in on RFS-related issues, was absent from the letter.

The groups also urged the EPA to release multi-year standards for the RFS to provide more market certainty for both refiners and renewable fuel producers.

Renewable volume obligations, commonly known as RVOs, were proposed and finalized annually until the compliance year 2023, when standards were set through 2025. The administration soon will likely need to begin considerations for 2026 volumes.

The EPA finalized biofuel blending volumes at 20.94 billion gallons in 2023, 21.54 billion gallons in 2024 and 22.33 billion gallons in 2025.

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The inclusion would mark a hard-fought victory for the ethanol industry, which has wanted year-round E15 (fuel comprising 15 per cent ethanol) sales as a way to boost demand for its products.

Reuters reported earlier on Tuesday that the plan was expected to make it into the bill.

The plan would also provide credits to some refiners that prove compliance with the U.S. Renewable Fuel Standard (RFS), which mandates that refiners blend billions of gallons of biofuels into the nation’s fuel mix or buy credits from those that do, the sources said.

Those credits would be given to small refiners who had petitioned the U.S. Environmental Protection Agency, which administers the RFS, for an exemption from the mandates during compliance years 2016-2018 but either had been denied or had an outstanding petition as of Dec. 1, 2022, one of the sources said.

The language in the provision follows a bill sponsored by U.S. Senator Deb Fischer from Nebraska, the third biggest corn-producing state.

“My bill puts an end to years of patchwork regulations and uncertainty – year-round, nationwide E15 will now be a reality,” Fischer said in a statement after the funding bill text was released.

The biofuels industry welcomed the provision.

“We are very pleased to see that the long-awaited fix allowing year-round E15 is included in this package,” said Geoff Cooper, president of the Renewable Fuels Association. “We remain hopeful that the continuing resolution will move swiftly through Congress and to the President’s desk for signature.”

The plan also includes language that the EPA and the Commodity Futures Trading Commission would review all applicable fuel blending credits, known as RINs, and submit to Congress a report to reduce manipulation of the renewable fuel market.

Currently, sales of E15 are effectively blocked from June to September. Adding ethanol to gasoline is known to increase smog pollution in hot weather, but research has shown little difference between E15 and the more-widely available E10 blends.

The provision would likely nullify a controversial decision by the U.S. government in February to approve a request from Midwestern governors to allow year-round E15 sales only in their states, starting in 2025.

Some oil refiners had argued that allowing E15 in select states as opposed to nationwide could prompt localized fuel price spikes and supply issues.

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The government currently restricts sales of E15 gasoline, or gasoline with 15 per cent ethanol, in summer months due to environmental concerns over smog, though the biofuel industry says those concerns are unfounded.

The corn-based ethanol industry has been fighting for years for year-round sales of E15 but was frustrated by the 2025 start date, one year later than proposed.

In 2022, the governors of Illinois, Iowa, Minnesota, Missouri, Nebraska, Ohio, South Dakota, and Wisconsin made the request for year-round E15 sales, saying the move could help lower pump prices by boosting fuel volumes.

Some oil refiners have argued that allowing E15 in select states as opposed to nationwide could prompt localized fuel price spikes and supply issues.

The delay enables President Joe Biden’s administration to put off potential price spikes stemming from the decision until after the 2024 U.S. presidential election in November. Two states the decision affects, Wisconsin and Minnesota, are battleground states in this year’s contest.

Inflation and the economy are key vulnerabilities for Biden’s re-election campaign.

The Environmental Protection Agency had sent a final rule on the proposal to the White House in December with an effective date of April 28, 2024. The new timeline would push the effective date to April 28, 2025.

“By extending the implementation date, this final action reduces the risk of gasoline supply issues this summer and the price impacts that could have come with 2024 implementation,” an EPA official said on Thursday.

The EPA did not comment on whether it would issue a temporary waiver enabling E15 sales this summer.

“We cannot speculate about the 2024 summer driving season. We will continue to monitor the situation, consult closely with the Department of Energy, and be prepared to act should conditions warrant,” the agency said.

After the news, the Renewable Fuels Association, a biofuels trade group, called on the administration to take action to ensure consumers have access to E15 this summer, and said it was disappointed over the new rule’s 2025 start date.

The American Petroleum Institute, an oil industry group, meanwhile, said it supported a legislative solution that would allow year-round sales of E15 nationwide.

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But the administration will also update the methodology by March 1, which leaves some uncertainty for corn-based ethanol producers, as it could ultimately tighten requirements around SAF feedstocks.

The global aviation industry, which is expected to reap net profits of over $20 billion in 2023 and accounts for about 2 per cent of global energy-related carbon dioxide emissions, is one of the hardest sectors to decarbonize, as the equipment is not easy to electrify. Airlines argue that incentives are needed to boost the market for SAF, which can generate 50 per cent less greenhouse gas emissions over its lifecycle than petroleum fuel, but is typically two to three times more expensive than fossil-fuel-based jet fuel.

For months, the Biden administration has been divided over whether to recognize the Department of Energy’s Greenhouse Gases, Regulated Emissions and Energy Use in Technologies (GREET) model. That model enables ethanol-based SAF to qualify for tax credits under the Inflation Reduction Act, President Joe Biden’s signature climate law.

Ethanol producers and corn farmers in rural states such as Iowa and Illinois have been awaiting updates, as the industry sees SAF as one of the only routes to grow ethanol demand amid rising sales of electric vehicles.

Biden, a Democrat, is seeking re-election and will depend on votes from closely contested Midwestern states that are the heaviest corn producers.

The guidance was first reported by Reuters on Thursday.

While the guidance aims to reduce the price gap between SAF and traditional jet fuel, administration officials could not provide data to show the extent that the incentives would reduce price discrepancies between the fuels.

Ethanol seeks role in SAF

Ethanol groups have lobbied the Biden administration fiercely to recognize the GREET model for IRA credits, battling environmentalists who want standards that elevate feedstocks like used cooking oil and animal fat instead.

Farmers, ranchers and producers have the capacity to provide feedstocks to help airlines and the transportation industry meet a potentially 36-billion-gallon market, said Agriculture Secretary Tom Vilsack on a call with reporters.

“Key to this was the Treasury recognizing and appreciating the importance of the GREET platform for providing a pathway for corn-based ethanol and [other] biobased fuels to qualify for significant tax credits that were included in the IRA,” Vilsack said.

Still, the GREET model now will be updated to incorporate new data and modeling on emissions sources like land use change and livestock activity, as well as strategies producers can use to lower emissions like CCS, renewable natural gas, and climate-friendly farming practices, the Internal Revenue Service said on Friday.

The IRA currently requires SAF producers to assess emissions with a model backed by the International Civil Aviation Organization (ICAO) or a “similar methodology.”

“The real question is, come March, will the GREET model be set up in a way that will effectuate the ICAO standards,” said Mark Brownstein, senior vice president of energy transition at the Environmental Defense Fund.

Under the new changes, fuel produced in 2023 that meets the new GREET standards will be eligible for the credit, administration said on background during a call with reporters.

The Environmental Protection Agency and the Departments of Agriculture, Energy, and Transportation are working together on the scientific updates, an administration official told reporters on a Thursday press call.

Ethanol trade groups including the Renewable Fuels Association and Growth Energy cheered the news on Friday but said more information around the updated guidance was needed.

“New investments in SAF are highly dependent on the pending GREET modeling updates,” said Growth Energy chief executive Emily Skor. “The industry needs more clarity around the proposed changes before we have certainty around market access.

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The Environmental Protection Agency (EPA), which has the authority to issue the exemptions, denied 26 petitions from 15 small refineries who applied for waivers for the 2016-2018 and 2021-2023 compliance years, the agency said on Friday. There are still two pending petitions.

The agency also disclosed which oil refiners submitted petitions in July 2022 or later, as well as which oil refiners are participating in an alternative compliance schedule that allows them flexibility in complying with biofuel blending laws.

Under the Renewable Fuel Standard (RFS), oil refiners must blend billions of gallons of biofuels into the nation’s fuel mix, or buy tradable credits from those that do. The EPA can, however, award exemptions to some small refiners if they prove that the obligations cause them undue harm.

Biden has been trying to set the United States on track to reduce carbon emissions in the fight against climate change, with a goal of net-zero emissions by 2050.

The administration has not yet extended a waiver to any refinery, reversing the policy of former President Donald Trump, whose administration granted 34 exemptions to oil refiners for the 2017 compliance year alone.

The EPA consulted with the Department of Energy on Friday’s waiver decisions and found that none of the petitioning small refineries demonstrated they face disproportionate economic hardship caused by their RFS compliance, the agency said.

New transparency

The EPA publicized on Friday the names of refiners that submitted small-refinery exemption petitions from July 2022 or later. The agency added this information to its website to reflect its commitment to transparency around RFS decisions, it said.

Refiners that submitted petitions included Calumet Montana Refining and Ergon Refining. Their petitions were denied.

The agency also publicized the names of refiners that are using an alternative schedule to prove RFS compliance. Among those listed were Sinclair Wyoming Refining Company and Kern Oil and Refining Company.

Data from the EPA showed 17 small refineries have opted into the alternative compliance schedule for the 2020 compliance year, the only compliance year shown in the data. The group had retired 360 million credits to show compliance, and had 510 million credits outstanding, EPA’s website showed.

— Stephanie Kelly is a Reuters correspondent covering the U.S. oil industry from New York City.

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The U.S. Environmental Protection Agency has finalized biofuel blending volumes at 20.94 billion gallons in 2023, 21.54 billion gallons in 2024 and 22.33 billion gallons in 2025. That compares with the initial proposal announced in December of 20.82 billion in 2023, 21.87 billion in 2024, and 22.68 billion in 2025.

But the finalized volumes include just 15 billion gallons of conventional biofuels like corn-based ethanol in all three years, plus a 250 million-gallon supplemental amount for 2023. That represents a decline from the initial proposal, which included 15 billion gallons of conventional biofuels in 2023 and 15.25 billion gallons in both 2024 and 2025.

The plan also has modest increases to biomass-based diesel volumes compared with the proposal, despite a major lobbying push from groups that produce biodiesel, renewable diesel and sustainable aviation fuel to boost volumes higher.

The announcement drew strong rebukes from ethanol and biodiesel advocates.

“The industry responded to signals from the Biden administration and Congress aiming to rapidly decarbonize U.S. fuel markets, particularly aviation, marine, and heavy-duty transport, and make clean fuels available to more consumers,” said Kurt Kovarik, vice-president of federal affairs with Clean Fuels, a biodiesel group. “The volumes EPA finalized today are not high enough to support those goals.”

Iowa Secretary of Agriculture Mike Naig said the finalized mandates fail to fully support benefits that biofuels can provide to farmers and consumers.

The Renewable Fuels Association called the reductions in ethanol mandates “inexplicable” and “unwarranted.”

The final rule marks a new phase in the U.S. Renewable Fuel Standard program, which is more than a decade old and frequently pits the powerful oil and biofuel industries against each other. Under the RFS, oil refiners must blend billions of gallons of biofuels into the nation’s fuel mix, or buy tradable credits from those that do.

Ethanol producers and corn farmers like the mandates because they provide a market for their products, while the oil industry finds the requirements too pricey.

While Congress set out specific goals for the program through 2022, the law expands the EPA’s authority for 2023 and beyond to change the way the RFS is administered.

The EPA said the finalized rule would reduce reliance on foreign sources of oil by between 130,000 to 140,000 barrels per day over 2023-2025.

U.S. renewable fuel credit prices dropped eight per cent following the news, trading at $1.34 each from as much as $1.46 each the day prior, traders said (all figures US$). Biomass-based credits dropped to $1.38 each from $1.48 each the previous day.

The futures market fell sharply Wednesday in reaction to the lower-than-expected biofuel mandates, with most Chicago Board of Trade soyoil contracts locked down their daily four cent/lb. trading limit. The soyoil market had rallied to its highest in nearly 3-1/2 months last week.

Other provisions

The EPA also set out a series of regulatory changes in the final rule, in an effort to strengthen the agency’s implementation of the RFS program.

The agency will modify provisions for biogas-derived renewable fuels to ensure that biogas is produced from renewable biomass and used as a transportation fuel, as well as to allow for the use of biogas as a biointermediate.

Absent from the rule, however, was a much-anticipated pathway for electric vehicle manufacturers to generate lucrative credits under the RFS, though it was included in the original proposal in December. Reuters previously reported that the administration was planning to abandon the scheme over worries about lawsuits.

The plan would have given EV automakers, such as Tesla, credits for charging vehicles using power generated from renewable natural gas, or methane collected from sources such as cattle or landfills.

The EPA said on Wednesday it will continue to assess stakeholder comments it received on the EV scheme, and it will work on potential paths forward for it.

The American Fuel and Petrochemical Manufacturers said it was pleased to see the EPA abandon the EV program, saying the RFS is a liquid fuels program that should not include electric vehicles.

— Reporting for Reuters by Stephanie Kelly and Jarrett Renshaw; additional reporting by Mark Weinraub.

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Biden wants to fight climate change by reducing fossil fuel use in America’s transport sector, currently the source of around a quarter of the country’s greenhouse gases.

Under the plan, announced by the Environmental Protection Agency, oil refiners will be required to add 20.82 billion gallons of biofuels to their fuel in 2023, 21.87 billion gallons in 2024, and 22.68 billion gallons in 2025.

Those volumes will include more than 15 billion gallons per year of conventional biofuels like corn-based ethanol, with the rest made up by advanced fuels like those made from switchgrass, animal fats, or methane from dairy farms and landfills.

The U.S. government estimates that the lifecycle greenhouse gas emissions from biofuels can be more than 40 per cent lower than straight gasoline, meaning adding them to the fuel mix can help fight climate change.

The proposal marks the latest chapter for the more-than-decade-old Renewable Fuel Standard (RFS), under which oil refiners are required to blend billions of gallons of biofuels into the nation’s fuel mix or buy tradable credits from those that do.

While Congress set out specific goals for the program through 2022, the law expands the EPA’s authority for 2023 and beyond to change the way the RFS is administered.

Electric vehicles

In addition to boosting mandated volumes, the EPA hopes to use the reset to introduce a pathway for electric vehicle makers to generate credits. That would recognize the possibility that electric vehicles could be charged using power from the grid generated by biofuels like landfill or agricultural methane.

The EPA proposal foresees electric vehicle manufacturers such as Tesla generating as many as 600 million credits called e-RINs in 2024, and 1.2 billion of them by 2025. Under the scheme, one e-RIN would be generated for every 6.5 biofuel-powered kilowatt hours in an EV battery.

The idea got mixed reviews.

“We’re encouraged that the Biden administration continues to recognize the powerful role that the RFS can play in decarbonizing transportation,” said Brooke Coleman, executive director of the Advanced Biofuels Business Council.

He said the proposal could help “unleash years of pent-up innovation in advanced and cellulosic biofuels.”

The Renewable Fuels Association, a biofuels trade group, also welcomed the proposal, saying it “solidifies a role for the Renewable Fuel Standard in future efforts to reduce carbon emissions and enhance our nation’s energy security.”

Geoff Moody, an executive at the refinery trade group American Fuel and Petrochemical Manufacturers, said the EPA’s proposal was flawed.

“For the final rule, EPA must go back and set conventional volumes that are aligned with consumer demand and infrastructure realities,” he said. “It must also hold true to the legacy of RFS as a liquid fuels program — not an electric vehicle program — by rejecting yet another massive regulatory subsidy for electric vehicle manufacturers.”

Meanwhile, a spokesperson for the Alliance for Automotive Innovation said the group supports an e-RIN program, and pointed to a previous comment that the group made that said an e-RIN program will help accelerate the U.S. electric vehicle market.

A Tesla representative was not immediately available.

The EPA’s biofuel mandate for the current year is 20.88 billion gallons, which includes the annual volume requirement of 20.63 billion plus a supplement of 250 million gallons for volumes that were not blended in previous years.

The biofuel industry got a boost this year from passage of the Inflation Reduction Act, which provides significant subsidies to the biodiesel and sustainable jet fuel industries in the form of tax credits.

Refiners such as Marathon Petroleum and PBF Energy Inc have converted units at their oil refineries to produce renewable diesel to take advantage of growing demand and government subsidies.

Lawmakers are also pushing a bill that would expand sales of higher volume ethanol blends of gasoline called E15, something advocates say could help reduce pump prices while supporting farmers.

Reuters previously reported the details of the EPA proposal on Wednesday, citing sources.

Renewable fuel credits traded on Thursday between $1.65 and $1.70 each, down from as high as $1.84 the previous session, traders said.

— Reporting for Reuters by Stephanie Kelly and Jarrett Renshaw.

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The EPA set biofuel blending mandates for 2022 at 20.63 billion gallons and retroactive volume mandates for 2021 at 18.84 billion gallons and for 2020 at 17.13 billion gallons. Though it denied the oil refiners’ exemption petitions, the agency said it would allow extra time for small refiners to meet their 2020 blending obligations.

The EPA in December proposed to set volumes for 2022 at 20.77 billion gallons, for 2021 at 18.52 billion gallons and for 2020 at 17.13 billion gallons.

The volume mandates, typically set ahead of time each year, were delayed due to the fallout of the coronavirus pandemic, which severely reduced U.S. energy demand.

“Together, these actions reflect the Biden administration’s commitment to reset and strengthen the RFS (U.S. Renewable Fuel Standard), bolster our nation’s energy security and support homegrown biofuel alternatives to oil for transportation fuel,” EPA spokesperson Tim Carroll said.

The decision on the mandates has involved White House staff members, who have had to weigh how the policy could affect record-high gasoline prices, surging food costs and inflation, and Farm Belt constituents. Higher mandates can raise demand for corn and impose costs on fuel producers.

Under the Renewable Fuel Standard, oil refiners must blend billions of gallons of biofuels into the nation’s fuel pool or buy credits from those that do. The credits, known as RINs, are used by oil refiners and importers to show compliance with mandates.

Small refiners can receive an exemption from the requirements if they can prove financial harm from the mandates.

The law has been a hotbed of controversy, typically pitting the powerful oil and corn lobbies against each other.

Friday’s announcement was welcomed by biofuel advocates, as the EPA set volumes for conventional biofuels, which includes ethanol, at 15 billion gallons for 2022.

“While the previous administration sold out to Big Oil, President (Joe) Biden is taking unprecedented steps to bolster markets for family farmers and drive economic growth in rural America,” said Democratic U.S. congresswoman Cheri Bustos of Illinois.

The oil refining industry said the decision to set 2022 volumes that high threatens the viability of small refineries. Refiners have long said that the obligations are too pricey.

“It’s clear that the biofuel thresholds are now unattainably high,” said Mike Smith, with the United Steelworkers union, which represents workers employed by the refining industry.

Reuters first reported the 2020-2022 biofuel volumes earlier on Friday.

— Reporting for Reuters by Jarrett Renshaw and Stephanie Kelly.

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