By Jarrett Renshaw and Siddharth Cavale
Aug 31 (Reuters) - The U.S. Environmental Protection Agency on Monday granted small refinery exemptions worth 1.76 billion renewable fuel credits for the 2025 compliance year and said it will propose reallocating the waived obligations to larger refiners in future years, a move that could deepen divisions within the oil industry over biofuel policy.
The decision caps a week of intense lobbying by the Farm Belt and Big Oil over pending small-refinery exemption
requests, pitting farmers who fear lost demand for biofuel crops against refiners seeking relief from costly blending mandates.
The exemptions were larger than expected. The EPA also plans to shift the waived obligations to produce biofuels such as ethanol from corn or sugarcane and biodiesel from oils and fats onto larger refiners in future years.
Those developments threatened to inflame tensions between the powerful energy and agriculture industries as the Trump administration seeks to lower fuel prices without alienating farm-state voters ahead of November's congressional elections.
The Renewable Fuel Standard, established by Congress, requires refiners and fuel importers to blend specified volumes of renewable fuels into the nation's transportation fuel supply or purchase credits known as renewable identification numbers, or RINs.
Small refineries can seek exemptions from those requirements if complying would cause them disproportionate economic hardship. When plants receive exemptions, the EPA can force other refiners to make up the production difference so that the overall quota of biofuel produced is met for the year.
The EPA, which administers the program, has faced political pressure from both the refining and agricultural industries over how broadly to grant the waivers.
On Monday, the EPA said it has granted full exemptions to 18 out of 34 refineries that had sought exemptions from their Renewable Fuel Standard obligations for the 2025 compliance year. The agency has delayed 2025 compliance until September 1 and is currently seeking another extension.
The EPA statement said it granted 50% exemptions to 11 refineries, denied three petitions and determined two petitions to be ineligible.
MARATHON, CHEVRON RECEIVE EXEMPTIONS
Refineries owned by Marathon Petroleum and Chevron were among those that received exemptions, according to the EPA. The companies did not immediately respond to requests for comment.
The exemptions totalled 1.76 billion worth of renewable fuel credits, roughly double the amount the agency estimated earlier this year.
The EPA said it will propose by the end of October requiring larger refiners to produce biofuels equal to the difference between the actual and estimated volumes exempted in the 2026 and 2027 obligation years.
This would ensure the issue of how the overall production quota is met gets addressed before the November midterm elections. But the plan would remain subject to public scrutiny and a regulatory process that does not guarantee it will take effect.
Ethanol blending credits, known as RINs, rose 16% to $2.07 each as of 3:45 p.m. ET, up from $1.78 on Thursday, according to market data.
Biofuel trade group Growth Energy said the exemptions appeared difficult to justify given refiners' recent profits, arguing that small refineries should receive relief only when they can demonstrate “disproportionate economic hardship.”
The group praised lawmakers for fighting to preserve the biofuel quotas finalized earlier this year and said it would work with EPA “to fully account for lost biofuel gallons and make producers and farmers whole.”
The American Petroleum Institute, the nation's largest oil trade group, said the larger-than-expected package of exemptions undermined regulatory certainty. API CEO Mike Sommers said granting exemptions “significantly above” EPA's projection would be “a significant step backward.”
API also opposed shifting the exempted obligations to larger refiners in future years.
“Both actions would inject uncertainty into the fuels marketplace,” Sommers wrote, adding that “new compliance surprises” would move “in the wrong direction at precisely the wrong moment.”
Farm-state lawmakers have warned that broad exemptions could depress demand for crops and undermine the biofuel industry, while refiners argue that the mandates can impose steep costs when compliance credits are expensive.
(Reporting By Jarrett Renshaw; Editing by Colleen Jenkins, Edmund Klamann, Paul Simao, David Gregorio and Cynthia Osterman)
