EPA grants 1.76 billion biofuel waivers, plans to shift burden to larger refiners

The U.S. Environmental Protection Agency (EPA) has approved small-refinery exemptions from renewable fuel obligations totaling 1.76 billion credits for the 2025 compliance year, a figure roughly double its earlier estimate. The agency also announced plans to propose reallocating the waived blending obligations to larger refiners for the 2026 and 2027 compliance years.

The decision follows intense lobbying from both the agricultural and oil industries. Farm groups had warned that broad exemptions could reduce demand for biofuel crops, while refiners argued that the blending mandates impose significant costs. The EPA's move is expected to heighten tensions between these sectors as the administration balances fuel price concerns with farm-state political interests.

Under the Renewable Fuel Standard, refiners must either blend specified volumes of biofuels into the fuel supply or purchase credits, known as RINs. Small refineries can seek waivers if compliance would cause them disproportionate economic hardship. When exemptions are granted, the EPA can require other refiners to make up the shortfall to meet the overall annual quota.

For the 2025 compliance year, the EPA granted full exemptions to 18 of the 34 refineries that applied. Eleven refineries received 50% exemptions, three petitions were denied, and two were deemed ineligible. Refineries owned by Marathon Petroleum and Chevron were among those receiving exemptions.

The agency said it will propose a rule by the end of October that would require larger refiners to produce biofuels equal to the difference between actual and estimated exempted volumes for the 2026 and 2027 obligation years. This proposal would still be subject to public comment and regulatory review.

Market reaction was immediate, with ethanol blending credits rising 16% to $2.07 each. Biofuel trade group Growth Energy questioned the justification for the exemptions given recent refinery profits, while the American Petroleum Institute argued that the larger-than-expected package undermines regulatory certainty and that shifting obligations would inject further uncertainty into the fuels market.