LINCOLN, Neb. (DTN) -- The U.S. Environmental Protection Agency on Monday exempted 1.76 billion renewable identification number gallons from the 2025 Renewable Fuel Standard volumes in granting 18 full exemptions and 11 exemptions of 50%.

EPA also announced its intention to conduct a new rulemaking to reallocate all the gallons exempted.

"EPA will propose to reallocate 100% of the difference between projected and actual exempted volumes for 2025 SREs into the 2026 and 2027 renewable volume obligations before the end of October 2026," the agency said in a news release.

"Due to the agency's 2025 SRE decisions, EPA will also be announcing a direct final rule to extend the 2025 RVO compliance date by 30 days to Oct. 1, 2026. This will allow the market to appropriately account for the additional RINs."

In 2020, the agency created a new forecasting method for expected volumes that could be exempted in future years.

EPA said on Monday that it had to exempt more than its original estimate of 990 million gallons for 2025 because it received a higher volume of petitions.

"Before that rulemaking, SREs were not considered as part of the volumes -- in other words, all SREs had the result of reducing volumes," the agency said in a news release.

"Following EPA's methodology, the agency estimated that 990 million RINs would be exempted in 2025 in 'Set 2' and put into the volumes. However, due to more small refineries requesting exemptions and changes in financial circumstances, EPA is exempting more RINs than estimated in 'Set 2.'"

MARKET REACTION

DTN Lead Market Analyst Rhett Montgomery said any market reaction to the news may not be seen until Tuesday.

"Yes, there has been a give and take over the past week," Montgomery said. "Soybean oil futures were down hard on the initial news a week ago but recovered sharply late last week on supplemental reports that the EPA is considering compensating the past year's exemptions with higher mandates for 2027."

Soybean oil and canola were both lower for most of the session Monday, but soybean oil flipped positive during the past couple of hours, he said.

"I think maybe as traders thought the ruling wouldn't come today after all," Montgomery said.

"With the ruling now coming in after the close, it will be important to watch the open this evening and into tomorrow to see what the market makes of it."

AG REACTION

Clean Fuels Alliance America said in a statement it was "disappointed" with the latest round of SREs.

Kurt Kovarik, Clean Fuels' vice president of federal affairs, said his group would work with the administration to make sure the gallons waived would be reallocated.

"America's biodiesel, renewable diesel and SAF (sustainable aviation fuel) producers have been working overtime to meet the historic RFS volumes announced just last March," he said.

"The industry is producing at record pace today, providing a strong domestic market for America's farmers, investing billions in rural communities, contributing to America's energy security and providing American consumers a price break at the pump -- in short, delivering measurable results on the administration's goals for the RFS. We're hopeful that today's action won't reverse the progress we've made and that our industry can maintain faith in the RFS program."

National Corn Growers Association President Jed Bower said corn growers were "disheartened" by the number of SREs granted.

"We are thankful that the Trump administration is taking action to offset this development by pledging to reallocate these RINs," Bower said in a statement. "Reallocation is essential for protecting farmers, biofuel producers and consumers alike."

The American Soybean Association said on Monday that it was thankful for the plan to reallocate the gallons waived.

"We appreciate the administration's commitment to reallocating 100% of these additional exemptions and their intention to enter into supplemental rulemaking soon, but timing is critical," said Dave Walton, ASA vice president and Iowa soybean farmer.

"Any delay in reallocation risks undermining the domestic market demand that soybean farmers urgently need as we enter harvest season. EPA must move quickly to fully reallocate these RINs and ensure soybean farmers are held harmless."

Growth Energy CEO Emily Skor said the group had not changed its position that SREs should be granted only when refiners "prove disproportionate economic hardship."

"It's difficult to see how these refiners have met this threshold when they're simultaneously reporting sky-high and, in some cases, record-setting earnings," she said in a statement.

"We will work with EPA to fully account for lost biofuel gallons and make producers and farmers whole."

Geoff Cooper, president and CEO of the Renewable Fuels Association, said he believes "most of the SREs issued" were "completely unjustified."

"The proposed plan laid out by EPA today creates a pathway for ensuring no net loss in renewable fuel demand and it is crucially important that the agency moves quickly to faithfully implement this approach," he said in a statement.

"At a time when oil refiners are reporting record-high profit margins, gasoline supplies are tightening and consumers are paying record-high prices at the pump, the administration should focus on efforts to increase -- not decrease -- the domestic production and use of more affordable biofuels like ethanol."

Devin Mogler, president and CEO of the National Oilseed Processors Association, said the exemptions had created uncertainty in the market.

"President Trump's strong RFS put American agriculture on a path toward greater certainty, investment and growth, and we appreciate the president and Congress stepping in to protect that progress," Mogler said.

"We remain disappointed by the sheer volume of these refinery exemptions and the uncertainty they have injected back into the market. But restoring waived gallons to the established RFS volumes is critical to sustaining domestic growth, creating stronger markets for American farmers and reducing our reliance on China."

PETROLEUM SRE OPPOSITION

The Trump administration continued forward with the proposal even after the American Petroleum Institute warned EPA Administrator Lee Zeldin in a letter on Monday that granting a higher volume of SREs could be harmful to the market.

Granting small-refinery exemptions for 2025 "significantly above" what EPA predicted "would be a significant step backward," the API said. "Reallocation of these exempted renewable volume obligations to non-exempt refiners would compound the problem. Both actions would inject uncertainty into the fuels marketplace when policymakers are justifiably focused on reducing costs for American consumers."

The API said it had "consistently opposed" widespread SREs because they "distort" the marketplace and allow some market participants to "avoid obligations" that apply across the broader refining sector.

"When exemptions are granted on a large scale, especially after compliance decisions should have been settled," the letter said, "government policy effectively determines which companies bear compliance costs and which do not. That undermines confidence in the regulatory system and creates winners and losers based on administrative decisions rather than market performance."

EPA ON REPORTS

The agency also addressed what it said had been "inaccurate and misleading reporting" on the agency's RFS actions that had "contributed to significant market movements" despite no official statement or action from the administration.

"Most recently, misleading reports and information led to significant volatility in the RIN market," the agency said.

"These incidents raise serious concerns about the potential misuse of material nonpublic information and possible market manipulation. EPA continues to work with the Commodity Futures Trading Commission and will expand its coordination to ensure compliance with all applicable federal laws and protect the integrity of the RIN market."

Read more on DTN:

"4 State AGs Warn EPA: Granting Biofuel Exemptions to Record-Profit Refiners Violates RFS Law," https://www.dtnpf.com/…

"Biofuels, Ag Fear RFS Exemption Surge," https://www.dtnpf.com/…

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

Follow him on social platform X @DTNeeley

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