Washington officials have coalesced around a plan that would assign to larger oil refineries responsibility for making up no less than 50% of the renewable fuel blending volumes that were previously waived for small refineries under the Small Refinery Exemption program, according to three sources familiar with the discussions.
The proposal addresses exemptions granted in recent years that removed blending obligations from certain small refineries after they demonstrated economic hardship. Under the Renewable Fuel Standard (RFS), refineries must either blend ethanol and other biofuels into their fuels or purchase compliance credits known as RINs from entities that do the blending.
Supporters of greater reallocation argue the change would bolster demand for biofuel blending credits and thereby support producers of ethanol and related biofuels. Opponents among larger refiners contend it unfairly shifts costs, potentially raising their compliance expenses and increasing pressure on fuel prices at the pump.
Scope and recent developments
The debate has intensified after the administration processed a backlog of waiver requests that covers more than 2 billion gallons for the years 2023 through 2025, an amount that constitutes a significant portion of total renewable fuel blending requirements. The backlog and the question of whether to reassign the exempted gallons have become central to tensions between agricultural interests and the refining sector.
EPA officials have indicated in recent weeks that the agency is leaning toward reallocating at least half of the waived volumes for those three years, and that the percentage could be greater, the sources said. Those individuals asked not to be named while discussing internal deliberations.
Last year, the EPA solicited public commentary on a broad array of potential approaches to reallocation, ranging from zero to 100% reassignment. The current inclination toward a minimum 50% reallocation represents a shift toward higher biofuels blending relative to some earlier options under consideration.
Administrative steps and timing
Separately, the EPA submitted its proposed biofuel blending volumes for 2026 and 2027 to the White House on Wednesday. An EPA administrator communicated that the agency expects to issue a final rule before the end of March, and officials had previously indicated that blending volume determinations and the reallocation approach would be released together.
The sources emphasized that no conclusive decision has been finalized and that the approach could change prior to formal publication. Any reallocation plan must receive White House approval before it can be promulgated as policy. The EPA and the White House did not provide comment in response to requests about the reallocation plan.
Implications
The pending decision will directly affect biofuel producers, agricultural feedstock growers, and refiners, with downstream potential impacts for fuel markets and consumers. Biofuel groups pressing for full reallocation view this as essential to sustaining production and supporting farm demand. Refiners caution that being required to cover waived gallons from smaller rivals imposes additional compliance burdens.
Given the administration's recent processing of more than 2 billion waived gallons for 2023-2025, the final reallocation rule will determine how much of that volume larger refiners must address, and whether blending credit markets experience upward pressure as a result.