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naphtha range from 1.4 to 1.5 with the majority approved at 1.5, and for renewable jet fuel range from 1.6 to 1.7, with the majority approved at 1.6.”
EPA now projects the average number of RINs generated for biobased diesel will be 1.27 and 1.28 RINs per gallon in 2026 and 2027, respectively, but the agency added that these numbers are not proposed standards and are presented for illustrative purposes only.
EPA’s biobased diesel volume projections for 2026 and 2027 exceeded industry expectations. The projected volume proposal for 2026 is 7% higher than the 5.25 billion gallons associations like Clean Fuels and even the American Petroleum Institute were seeking.
Trade groups lauded the pending RVOs. The American Soybean Association called the proposed biobased diesel volume increases “historic” and noted the 67% increase from 2025 to 2026. Clean Fuels referred to the proposal as “a robust step-change” in terms of RVOs and obligation percentages. The Iowa Biodiesel Board said the record-setting targets are “a major win” for domestic biodiesel producers. Missouri Soybean Association President Renee Fordyce said the increased biobased diesel volume targets provide much-needed market certainty for farmers, processors and biofuel producers, allowing for long-term planning and investment.
EPA is proposing several additional changes to the RFS program, including removing e-RIN eligibility (RINs produced from renewable electricity for electric vehicles); clarifying that RINs cannot be generated on pure biodiesel used for process heat or power generation; and several others.
The agency proposed setting the total RFS blending level at 24.02 billion gallons — a record amount — and plans to keep the corn-ethanol volume at 15 billion gallons. Comments on the proposal must be received by EPA on or before Aug. 8.
45Z Modifications Signed Into Law
President Donald Trump’s signature piece of legislation — the “big, beautiful bill”—was signed into law July 4 to implement his agenda with Republicans in control of the White House and both chambers of Congress. The tax and spending bill, which made it through slim Republican margins in the House and Senate under the budget reconciliation process, is perhaps best known for permanently extending the Trump tax cuts of 2017 as well as codifying his campaign promises of no taxes on tips and overtime. The massive bill also includes significant modifications to 45Z.
To begin with, the new law pushes back the expiration of 45Z for two years. The incentive was set to expire at the end of 2027. While earlier drafts of this legislation included four-year extensions through 2031, the final version includes a two-year extension, sunsetting the provision at the end of 2029. Importantly, the law enables taxpayers to transfer 45Z credits through 2029, providing forward-looking certainty and
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enabling small producers to fully access the value of the credit. In response to a massive influx of questionable U.S. imports of used cooking oil from China, the new law restricts 45Z eligibility to biofuels made from feedstocks originating in North America. Since 2022 when the 45Z credit first emerged, it was always limited to domestic producers, which was a major change from the blenders credit. Now, eligible biofuels must be produced in the U.S. and the feedstock must have originated
in the U.S., Canada or Mexico.
The measure also addresses penalties imposed on biofuels
made from crop oils by eliminating indirect land-use change (ILUC) in modeling greenhouse gas (GHG) emissions. Most U.S.- based agriculture and biofuel groups say these two provisions are pivotal to reviving domestic biodiesel and renewable diesel production from feedstocks like soybeans or canola. One group, however, is not pleased with the final feedstock requirements.
“We are disappointed that the final reconciliation bill restricted foreign feedstocks under 45Z,” said Michael McAdams, president of the Advanced Biofuels Association. “We will continue to advocate for both domestic and international feedstocks to ensure advanced biofuel refineries and biorefineries have the resources they need to maximize production and contribute to America’s energy dominance agenda. We turn our attention now to the EPA’s work developing its final RVOs for 2026 and 2027. The proposed rule currently calls for a 50% reduction in RIN value for fuels made with foreign feedstocks, which will only hurt American biorefineries and their workers. We urge the EPA to reconsider this current restriction and support American advanced biofuel production.”
Another major change to 45Z is the elimination of the SAF premium. As passed in the IRA, SAF was eligible for a maximum of $1.75 per gallon while on-road biofuels like biodiesel could only claim up to a maximum of $1 per gallon.
For biodiesel producers, one very important part of the new law is an extension of the small agri-biodiesel producer credit, as well as increasing its value from 10 cents to 20 cents per gallon on the first 15 million gallons. Small biodiesel facilities with production of 60 million gallons per year or less can access this credit in addition to 45Z, and the same transferability rules apply. The small agri-biodiesel producer credit is extended for the rest of 2025 through 2026. Although the modifications to 45Z outlined above are not set to go into effect until 2026, the extension of the small agri-biodiesel producer credit is immediate.
“Clean Fuels thanks Congress for working overtime to provide certainty for biodiesel and renewable diesel producers — especially small companies — so they can resume production and industry growth,” said Kurt Kovarik, Clean Fuels’ vice president of federal affairs. “Clean Fuels especially thanks Sen. Chuck Grassley, R-Iowa, for securing an enhancement to the small agri-biodiesel producer credit to help small producers as they make the transition to the 45Z clean fuel production credit. While the extension of the 45Z credit with transferability through 2029 provides some immediate stability, our industry continues to urge the treasury department to promptly propose and finalize clear, reliable rules for the credit.” R
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