RFS Final Rule Issued         03/27 13:34

   EPA Finalizes RFS: Reallocates 70% of Gallons Waived by Refinery Exemptions

   EPA finalized 2026-2027 Renewable Fuel Standard volumes at record highs, 
reallocating gallons lost to small-refinery exemptions and announcing foreign 
feedstock restrictions beginning in 2028.

Todd Neeley
DTN Environmental Editor

   LINCOLN, Neb. (DTN) -- The U.S. Environmental Protection Agency finalized 
2026-2027 Renewable Fuel Standard volumes on Friday, setting biofuel volumes 
higher than proposed numbers released last year.

   EPA set overall volumes to include reallocation of small-refinery exemptions 
at 26.81 billion gallons for 2026 and 27.02 billion gallons for 2027 -- 
providing a 70% reallocation. Corn-based ethanol also maintains a 
15-billion-gallon market in the final rule.

   The agency had been considering a range of SRE reallocations from zero to 
100%, with biofuels and agriculture industries pushing for full reallocation.

   "This approach will balance a number of factors that come into play when 
considering volume requirements and the impacts of SREs, including protecting 
biofuel demand while maintaining a stable and functioning credit market," the 
EPA said in a news release on Friday.

   Biomass-based diesel volumes for 2026 were set at 9.07 billion gallons and 
jump to 9.2 billion gallons in 2027. The advanced biofuels volumes were set at 
11.1 billion gallons and 11.32 billion gallons for those years.

   The new volumes represent a 60% increase over 2025 for both biodiesel and 
renewable diesel, according to EPA.

   EPA also announced, starting in 2028, foreign fuels and feedstocks will 
receive half the RFS compliance value compared to American-made products, 
"providing American biofuel producers with time to prepare for the change while 
ensuring that American farmers benefit from the RFS program and American energy 
independence," the agency said.

   DTN Lead Analyst Rhett Montgomery said the RFS announcement did provide a 
boost to the soybean oil market on Friday.

   "It really seems like a 'buy the rumor, sell the fact' type trade, but 
soybean oil has recovered to again be slightly higher currently," he said.

   "Overall, I'd say the mandated volumes combined with a 70% reallocation of 
small-refinery exemptions is in line with what traders have been expecting the 
past few months, which has contributed to the almost 20-cent per-pound rally in 
soybean oil futures through 2026 thus far."

   Montgomery said because the foreign feedstock requirement will not go into 
effect until 2028 it may "leave some traders anxious, especially considering 
the lost share of demand soybean oil has suffered compared to used cooking oil 
in recent years; but this will need to be monitored as it may at the end of the 
day be price dependent."

   As for corn, he said the corn-ethanol mandate is a neutral development for 
the corn market at this point as "the ethanol industry remains a strong and 
steady corn demand source.

   "I expect the ongoing push for year-round E15 will continue to be the demand 
story to watch in coming years as it pertains to expanding the ethanol 
industry," Montgomery said.

   The EPA earlier this week granted a waiver to allow E15 sales to continue 
throughout the summer, 
https://www.dtnpf.com/agriculture/web/ag/news/business-inputs/article/2026/03/25
/e15-approved-summer-epa-waiver-fuel.

   EPA released the final volumes at the start of an agriculture event at the 
White House on Friday during which President Donald Trump touted the RFS 
release along with a grab bag of ag issues.

   Geoff Cooper, president and CEO of the Renewable Fuels Association, said the 
final RFS numbers represent a "robust" boost for fuel consumers and farmers.

   "The final rule locks in the highest-ever renewable fuel volume obligations 
and provides clarity for farmers, ethanol producers, oil refiners, and fuel 
distributors alike," Cooper said.

   "Today's action by EPA and the White House will boost the farm economy, 
strengthen American energy security, and reduce fuel prices for hardworking 
families. We applaud the Trump administration for recognizing the important 
role renewable fuels and agriculture can play in meeting our nation's energy 
dominance objectives."

   The EPA estimated the Set 2 RFS rule would generate over $10 billion for 
rural economies and create over 100,000 new jobs in the agricultural and 
manufacturing sectors.

   Brian Jennings, CEO of the American Coalition for Ethanol, said EPA's 
decision to set RFS volumes at their highest level ever helps "fulfill" 
Congress's original intent of the law.

   "We've consistently advocated for strong final blending obligations for 2026 
and 2027 reflecting the full potential of the RFS and ensuring small-refinery 
exemptions do not erode demand for renewable fuels," Jennings said in a 
statement.

   "It is critical that EPA set blending requirements at levels that fully 
account for any SREs granted. Failing to do so risks undermining the intent of 
the RFS by allowing obligated parties to rely on surplus renewable 
identification numbers rather than driving actual blending and use of renewable 
fuels. The integrity of the RFS depends on ensuring volume obligations 
translate into real-world demand. Any gap between required volumes and actual 
blending undermines the program and creates uncertainty for ethanol producers, 
farmers and rural communities."

   Kurt Kovarik, Clean Fuels' vice president of federal affairs, said the 
biodiesel and renewable diesel industries are anxious to get to work.

   "The entire U.S. clean fuel industry -- from farmers and feedstock providers 
to fuel customers -- is grateful to see this rule finalized," he said in a 
statement.

   "U.S. biodiesel, renewable diesel, and SAF (sustainable aviation fuel) 
producers are eager to get to work and bring the 7 billion gallons of existing 
production capacity up to speed to meet 10% or more of America's demand for 
diesel fuel."

   In 2025, biodiesel and renewable diesel facilities were forced to shut down 
or run far below prior-year production levels because of market uncertainty. As 
a result, U.S. biodiesel production declined by one-third in 2025 compared to 
2024.

   EPA ACTIONS ON DEF

   EPA also announced Friday that it is removing the diesel exhaust fluid, or 
DEF, sensor requirement for all diesel equipment.

   In August 2025, the Trump administration announced new guidance that allows 
farmers and truckers to revise software to prevent sudden speed and power 
losses caused by DEF.

   Starting with model year 2027, that guidance requires all new diesel on-road 
trucks to be engineered to avoid sudden and severe power loss after running out 
of DEF.

   In February, EPA announced it is requesting information from the top 14 
manufacturers that account for 80% of all products that use DEF systems, on 
data on warranty claims, failure rates and repair information for model years 
2016, 2019 and 2023 emission control products.

   On Friday, EPA announced it had received the data it requested from 11 of 
the manufacturers.

   "The preliminary review of the warranty data suggests that DEF sensor 
failures are a significant source of warranty claims and DEF-related 
inducement," EPA said in a news release.

   "Farmers and truck drivers should not have their vehicles stop working 
because a sensor isn't working properly. EPA is taking immediate action on this 
new information. The agency's new guidance makes clear that under existing 
regulations, manufacturers can stop inaccurate DEF system failures by removing 
traditional emission sensors, known as urea quality sensors, and switching to 
nitrous oxide sensors."

   The agency said Nox sensors can be installed without being treated as 
illegal tampering under the Clean Air Act.

   Read more on DTN:

   "DEF System Failures Under EPA Scrutiny," 
https://www.dtnpf.com/agriculture/web/ag/equipment/article/2026/02/03/epa-invest
igates-def-failures-diesel

   Todd Neeley can be reached at todd.neeley@dtn.com

   Follow him on social platform X @DTNeeley




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