02 September 2026, Washington, D.C.: The U.S. Environmental Protection Agency granted 1.76 billion gallons worth of small refinery exemptions from 2025 biofuel blending mandates, nearly double the roughly 990 million gallons the market had expected, while simultaneously proposing to shift that entire shortfall into 2026 and 2027 blending quotas so that overall biofuel demand for corn and soybeans is not permanently reduced.
The exemptions, granted under the Renewable Fuel Standard (RFS), waive the obligation for a group of small oil refineries to blend a certain volume of ethanol, biodiesel or renewable diesel into the fuel they sell. Because that blending obligation ultimately drives demand for corn-based ethanol and soybean oil-based biodiesel, a large volume of waivers can knock down prices for both crops if left unaddressed. The volume granted this round is described by industry trackers as the highest level of refinery waivers since 2017.
EPA’s proposed fix is what is known as reallocation: rather than simply letting the exempted gallons disappear from the market, the agency intends to add 100 percent of the difference between the roughly 990 million gallons originally projected and the 1.76 billion gallons actually exempted back into the Renewable Volume Obligations for 2026 and 2027. In practice, that means the exempted gallons are rescheduled into future years rather than eliminated outright, which analysts say should leave the multi-year demand outlook for corn and soybeans largely intact even though it does nothing for this year’s headline number.
Reaction from farm groups reflected both relief and frustration. Dave Walton, vice president of the American Soybean Association and an Iowa soybean farmer, said soybean farmers appreciate the administration’s effort to protect them from the negative impact of the exemptions, a reference to the reallocation commitment. Kurt Kovarik, vice president of federal affairs at Clean Fuels Alliance America, said the country’s biodiesel, renewable diesel and sustainable aviation fuel producers have been working overtime to meet the record RFS volumes set earlier this year, arguing the exemptions undercut that investment even with reallocation promised. Jed Bower, president of the National Corn Growers Association, said corn growers are disheartened by the scale of the exemptions but welcomed EPA’s commitment to make the volumes whole through reallocation.
Government and industry estimates cited alongside the announcement suggest the stakes are large. Without reallocation, biomass-based diesel demand could have fallen by roughly 500 million gallons, translating into an estimated $1 billion hit to soybean farmer revenue, a loss the reallocation plan is intended to prevent. Iowa alone has more than 31,000 jobs tied to the biofuel sector, according to figures circulated by industry groups, illustrating why the rural Midwest pays such close attention to RFS mechanics that can otherwise seem like inside-the-Beltway plumbing.
The announcement matters well beyond U.S. borders because ethanol and biodiesel mandates are one of the largest structural sources of demand for corn and soybean oil in the world’s biggest producer of both crops. When Washington waives blending obligations, it can soften U.S. crop prices, which ripples through global benchmarks that exporters and importers everywhere, including Indian edible oil buyers and Latin American soybean producers competing for the same export markets, use as reference points. A credible reallocation commitment reduces the odds of a sudden, unaddressed drop in U.S. crop demand destabilizing global price benchmarks in the run-up to the Northern Hemisphere harvest.
EPA has not yet finalized the reallocation rule, and farm groups are expected to continue pushing for firmer, binding commitments rather than a policy pledge that could change with future administrations or court challenges. The scale of this year’s exemptions, however, has already reset expectations for how aggressively the agency will use small refinery waivers going forward.
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