25/08/26
EPA RFS waivers may wither US soybean demand
Houston, 25 August (Argus) — Granting broad exemptions from 2025 biofuel
blending obligations under the Renewable Fuel Standard (RFS), a move currently
under consideration, would significantly affect the domestic soybean industry,
the American Soybean Association (ASA) said. The US Environmental Protection
Agency (EPA) plans to rule on 34 outstanding petitions against 2025 renewable
volume obligations (RVOs) by the end of this month, the agency said last week .
EPA's granting exemptions from 2025 renewable fuel blending obligations would
help small refiners and other obligated parties because it would reduce their
compliance costs by lowering required biofuel production or renewable
identification number credits. But these small refinery exemptions (SREs) would
return Renewable Identification Number (RIN) credits to the market, potentially
easing currently required biofuel blending, lowering demand for feedstocks such
as soybean oil. "At a time when soybean farmers are already struggling to
support our farms, we cannot afford for the rug to be pulled out from under one
of our most important sources of domestic demand," ASA vice president Dave
Walton said. Market participants have been on edge for months, and some
refiners, for years, because the earliest petition was filed in 2024, as they
await EPA's decision and its impact on the RIN market. Argus assessed RIN
contracts at record highs this summer as participants anticipated a potential
shortfall of credits in the credit bank for meeting EPA's ambitious biofuel
blending targets for this year and 2027. These record-setting targets have
spurred facilities to come back on line and boosted existing biofuel production,
particularly for D4 RIN generating fuels like renewable diesel, biodiesel and
sustainable aviation fuel which can utilize soybean oil as a feedstock. The US
administration of President Donald Trump, while largely focused on "unleashing"
US fossil fuel-based energy production, has backed biofuels as a way to lower
the cost of transportation fuels, especially in focus as the US-Iran war has
pushed up the cost of oil products. Additionally, the added revenue for the
agricultural sector could offset impacts from the war and the US trade policies.
But the rise in RIN prices has increased compliance costs for facilities that
rely primarily or exclusively on purchasing RINs to meet compliance rather than
biofuel blending. The agency estimates obligated volumes at 22.1bn USG for 2025
but has not provided information on projected compliance exemptions for that
year. EPA is supposed to consult a methodology established by a 2011 small
refinery study by the US Department of Energy (DOE) when examining petitions and
economic factors. While the EPA has enforcement discretion to depart from the
DOE methodology, in recent decisions the agency has closely followed it. If the
EPA continues this approach, it could return 1.3bn RINs to the market, according
to estimates from Argus Consulting and Analytics Services. But a departure from
this pattern for as many as half of the outstanding 2025 petitions could
increase this figure to 1.87bn RINs. Any returned RINs with a 2025 vintage would
not expire until next year and could go towards covering 2026 compliance needs.
The RFS requires refiners to blend various types of biofuels each year on an
increasing scale or meet their obligations by buying credits, known as RINs, in
the secondary market. Refining facilities with a nameplate capacity of 75,000
b/d or less can petition the agency for an annual compliance exemption, but they
must demonstrate that meeting their RVO would cause disproportionate economic
hardship for the EPA to grant a small refinery exemption (SRE). The EPA can
grant full, partial or no relief. If EPA chooses to take up a less conservative
exemption approach, US soybean farmers could lose $1bn in revenue from a roughly
500mn USG drop in biomass-based diesel demand, ASA said. ASA indicated that
recent reports and estimates could put total exempted RINs from the upcoming
decision at more than 1.8bn credits. Soybean oil (SBO) futures have tumbled from
their four-year high of 79.09¢/lb, reached on 1 June, alongside the weakness
across the energy complex and are currently retesting the 67¢/lb level last
reached on 31 July as demand concerns have emerged following the EPA's latest
SRE announcement. The Iowa Renewable Fuels Association has also come out against
this potential outcome, arguing that, in addition to the negative impacts on
Iowa farmers and biodiesel producers, it would undermine the integrity of the
2026-27 RFS targets. The group urged the Trump administration on Tuesday to keep
its commitment to American farmers and order the EPA to deny these "baseless"
claims of economic harm. These 2025 SREs have weighed heavily on the RIN market
in recent weeks, with contract prices falling sharply at the end of July on
concerns over the EPA's potential decision. Market participants had expected
these rulings as part of a SRE decision scheduled for 3 August . Expectations
regarding improved clarity on 2025 SREs were dashed when the EPA only ruled on
petitions from 2023-24 obligations, denying three of the six requests. Credit
assessments rose after this decision, as market participants interpreted the
EPA's actions as more conservative than expected, which could signal a similar
approach to 2025 petitions and reinforce expectations of a tight credit market.
But RIN assessments plunged on Monday as participants weighed discussions that
the 2025 decisions could reintroduce enough credits to dampen contract prices in
the market, with D4 RINs with a current-year vintage falling 14.2pc from 21
August over the session to 188.5¢/RIN. By Denise Cathey and Thompson Corpus Send
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