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The administration of former US President Donald Trump granted some oil refineries exemptions from obligations requiring them to blend renewable fuel with gasoline and diesel, while delaying a key decision on how much of the burden other oil companies would have to absorb.
The US Environmental Protection Agency (EPA) said in a statement issued on August 22 that the decision applies to 38 small refineries that had requested exemptions from annual blending quotas.
The agency said it granted 63 full exemptions submitted by refineries seeking relief from biofuel blending requirements and issued 77 partial exemptions for periods dating back to 2016. At the same time, it denied 28 requests and classified seven applications as ineligible.
The EPA’s ruling on small refinery exemptions, the first under the new Trump administration, will affect oil companies’ costs of complying with the US biofuel blending mandate. Biofuel producers say the decision also risks reducing demand for their products, as well as for the corn and soybean crops used to produce them, at a time when farmers face export constraints linked to trade disputes.
The issue represents a major test for President Trump and for two sectors that form an important part of his political base: oil and agriculture. Although some agricultural and fossil fuel lobbying groups had found common ground on biofuel policy, that alliance was tested after the EPA’s ambitious June proposal requiring refineries to blend record volumes of biofuels with gasoline and diesel in 2026 and 2027.
However, the agency postponed the most difficult decisions related to these exemptions. It delayed a ruling on whether large refineries should be required to compensate for exemptions granted to smaller refineries for the 2023–2024 period. This is known as the reallocation plan and will determine the potential impact on biofuel demand supported by federal quotas.
The EPA said it would propose reallocating volumes for 2023 and later years, but it does not plan to reallocate volumes for the 2016–2022 period. The proposal is expected to undergo interagency review in the near future, with the aim of balancing the goals of the biofuel program with economic considerations while allowing stakeholders to comment.
The agency argued that biofuel demand would not be affected by its decision on refinery exemptions through 2022, since the credits used to demonstrate compliance with targets remain valid for two years.
Market and Refinery Implications
The results were mixed for many refiners. For example:
Legislative Background
The issue of small refinery exemptions has also challenged previous US administrations. One reason exemption requests accumulated is that former President Joe Biden had delayed decisions on the controversial file.
It remains unclear whether the August 22 decision will resolve years of legal disputes over the program. Refineries whose requests were denied are likely to challenge the decision in federal courts, while major oil companies may resist any move requiring them to take on additional biofuel blending burdens.
The United States has set biofuel blending quotas for more than a decade under a 2005 federal law known as the Renewable Fuel Standard. However, small refineries may receive exemptions if they prove they face disproportionate economic hardship.
Under the program, each gallon of ethanol or biodiesel blended with transportation fuel generates credits known as Renewable Identification Numbers (RINs), which refiners use to meet federal blending obligations. Refineries that do not generate enough credits, sometimes due to limited blending infrastructure, can buy RIN credits to meet annual targets.