Updates with EPA administrator comments, latest RIN pricing.
The US Environmental Protection Agency (EPA) is close to proposing new biofuel blend quotas for future years and to finalizing long-awaited cuts to last year's cellulosic mandate.
The agency late Wednesday sent the two regulations to White House interagency review, the last major step before rules can be released publicly, meaning they could be released in the coming days. Lobbyists and corporate executives have said in recent weeks that they expected the EPA to release at least the draft rule, which is likely to include volumes for 2026 and 2027, before the end of the month and potentially by Memorial Day. The agency has said it wants to get the frequently delayed biofuel program back on its statutory timeline, which would require volumes for 2027 to be proposed soon and then finalized before November this year.
The Renewable Fuel Standard program requires oil refiners and importers to blend different types of biofuels into the conventional fuel supply or buy credits from those who do. EPA decisions around volumes are highly influential for crop feedstock demand, biofuel production margins, and for retail fuel prices.
A coalition of industry groups — including the American Petroleum Institute and farm groups — has pushed EPA to hike the program's biomass-based diesel mandate from 3.35bn USG this year to a record-high 5.25bn USG next year. Some groups have floated a volume as high as 5.75bn USG for either 2026 or 2027, since the rule is expected to set volumes for multiple years, while fuel marketers have urged more caution.
Biofuel and farm groups generally support keeping the program's implied conventional mandate for corn ethanol at least flat at 15bn USG, though one ethanol advocate has told Argus it has privately lobbied the agency for higher volumes in that category too.
Supporters of biogas, the main credit generator in the program's small cellulosic subcategory, also back aspirational volume targets, though EPA has proposed cutting its 2024 mandate retroactively from 1.09bn USG to 880mn USG because of a production shortfall. That rule, which is separate from the new draft volumes for 2026, is close to being finalized too.
As biofuel production has fallen off to start the year and as traders react to optimism among industry groups about future volumes, the price of Renewable Identification Number (RIN) credits tied to renewable fuel blending hit their highest prices in over a year earlier this month. But it is unclear if the agency will raise volumes as substantially and quickly as biofuel producers want. And other program decisions — like whether to generously hand out program exemptions for small refiners without then reallocating volumes among large producers — could curb biofuel demand even if the agency sets high topline targets.
There are more than 160 pending petitions from small refiners for exemptions from biofuel blend mandates across ten compliance years after federal courts took issue with EPA's reasoning for denying petitions en masse under former president Joe Biden's administration.
"None of these were getting approved at all in the last administration," EPA administrator Lee Zeldin said at a House subcommittee hearing Thursday. "We want to get caught up as quickly as we can."
EPA did not immediately comment on its timeline for moving ahead with the pending Renewable Fuel Standard rules or provide more clarity on expected provisions. A US database says that the rule with new volumes will also contain "several regulatory changes... intended to improve the program's implementation."
RIN markets rattled
RIN prices began falling after Wednesday's assessment window had closed and were volatile in trading Thursday, with conventional D6 RINs trading down to 98¢/RIN at one point before later rebounding to 105¢/RIN. Buyer interest waned after a sharp decline in soybean oil futures and amid speculation — without immediate evidence — that EPA could ultimately set volume mandates below industry targets.
Current-year biomass-based diesel D4 credits fell nearly 11pc on the day, and D6 RINs ultimately slipped nearly 10pc. Cellulosic biofuel D3 RINs bucked the trend, inching up slightly on the day, but the Argus Renewable Volume Obligation — which serves as a cost of compliance calculation figure driven by RIN credit price assessments — still fell by 1.40¢/USG to 14.56¢/USG by the session's end.
