The Biofuels Report: RFS Reset - US Biofuel Mandates Evolve

The EPA’s March 27 final rule reshapes the Renewable Fuel Standard by lifting 2026‑2027 diesel mandates well above industry expectations. Higher biomass‑based diesel targets signal a push to boost domestic biofuel production, especially renewable diesel, at a time when Middle‑East conflict is inflating fuel prices worldwide. By anchoring the mandates to stronger volumes, the rule aims to stabilize demand for key feedstocks such as soybean oil, used cooking oil, and beef tallow, while also reinforcing U.S. energy security and farmer support.

A critical technical shift involves the RIN equivalence values. Renewable diesel’s credit allocation drops from 1.7 to a baseline 1.5 RINs per gallon, aligning it with biodiesel and reducing the premium that previously drove higher margins. The EPA also delayed the import‑feedstock rent credit until 2028, effectively encouraging plants to source domestic soy‑derived oil rather than foreign used cooking oil or Brazilian tallow. These adjustments are already nudging feedstock prices upward, with soybean oil futures reacting to the anticipated tighter supply.

On the legal front, the rule introduces a novel reallocation of small refinery exemptions, adding more than two billion RINs to offset past waivers. This move, coupled with partial hardship waivers, is expected to trigger extensive litigation from refiners concerned about higher compliance costs and potential gasoline price spikes. The uncertainty surrounding pending SRE petitions and the upcoming 2028 import‑credit proposal adds further complexity. Meanwhile, RIN markets have rebounded sharply, with D4 credits trading above $1.70 per gallon, reflecting the tighter credit environment and heightened demand for renewable diesel. Stakeholders should monitor court rulings and congressional actions on E15 authorization, as these will shape the long‑term trajectory of U.S. biofuel policy.