The U.S. biomass-based diesel industry is raising concerns that a significant increase in small refinery exemptions (SREs) under the Renewable Fuel Standard could undermine the strong market signal created by recently established renewable fuel volumes, threatening domestic fuel production, agricultural markets and investments already underway across the country.
Reports indicate the administration is considering exemptions for the 2025 compliance year totaling as much as 1.8 billion Renewable Identification Number (RIN) credits—nearly double the amount EPA anticipated when establishing its current Renewable Fuel Standard requirements.
The potential increase comes as U.S. biodiesel and renewable diesel producers have been responding to stronger federal blending requirements by increasing production, bringing capacity back online, hiring workers and making investments throughout the domestic fuel and agricultural supply chains.
For biomass-based diesel producers, the concern is not simply the number of exemptions granted, but whether the corresponding renewable fuel obligations are fully reallocated. Without full reallocation, SREs effectively reduce the amount of renewable fuel required under the RFS and can weaken the demand signal the program was designed to provide.
Industry and agricultural groups have warned that exemptions at the levels reportedly under consideration could eliminate approximately 500 million gallons of biomass-based diesel demand. Such a reduction would have consequences extending well beyond fuel producers, affecting soybean farmers, oilseed processors, renderers, feedstock suppliers, fuel distributors and rural communities that have invested in the growing domestic renewable fuels industry.
The uncertainty comes at a particularly important time for American agriculture. Biomass-based diesel has become a major domestic market for soybean oil and other agricultural feedstocks, adding value to commodities produced by U.S. farmers while supporting additional investment in domestic oilseed crushing and processing.
Reducing biomass-based diesel demand could place additional pressure on agricultural markets at a time when farmers are already navigating elevated production costs, volatile export markets and global economic uncertainty.
The potential impact also extends to U.S. energy security. Biodiesel and renewable diesel diversify the nation’s transportation fuel supply using fuels produced domestically from resources including soybean oil, used cooking oil, animal fats and other renewable feedstocks. Maintaining a strong domestic biomass-based diesel industry can reduce exposure to disruptions in global petroleum markets while supporting American manufacturing and rural economic development.
The biomass-based diesel industry has welcomed strong federal renewable fuel requirements and responded to those signals with increased production and investment. Significant exemptions without corresponding reallocation, however, could send the opposite market signal—creating uncertainty for companies that made business decisions based on the volumes established under the RFS.
The industry is therefore urging the administration and EPA to ensure that any SREs granted for the 2025 compliance year are fully accounted for so they do not reduce the renewable fuel demand established through the RFS.
Maintaining the integrity of those volumes would provide greater certainty for biodiesel and renewable diesel producers, protect markets for American agricultural products and reinforce investments in domestic fuel production at a time when energy security and agricultural markets are increasingly important to the U.S. economy.
Notice: The Michigan Advanced Biofuels Coalition (MiABC) does not lobby or influence policy in any way. The policy interests of Michigan soybean farmers and biodiesel producers are supported by the Michigan Soybean Association and Clean Fuels Alliance America, respectively. This post is for educational purposes only.