LINCOLN, Neb. (DTN) -- The Trump administration proposed a record 24.02 billion gallons of biofuels be blended in 2026, with biomass-based diesel seeing a more than 2-billion-gallon jump from 2025 to 5.61 billion gallons in 2026, in a Renewable Fuel Standard proposal released Friday.

Biomass-based diesel was the big story as the U.S. Environmental Protection Agency proposal also calls for another bump in 2027 to 5.86 billion gallons.

July soybeans closed Friday up 27 1/2 cents at $10.69 3/4 based on the news. November soybeans also ended the day higher by the same margin at $10.54 3/4. July soybean oil closed up the daily limit of 3 cents a pound at 50.61 cents per pound. July corn ended the day up 6 cents at $4.44 1/2.

"Definitely a welcomed event after months of uncertainty for the biofuel industry and by extension the ag industry," DTN Lead Analyst Rhett Montgomery said.

"It's felt for a while that federal guidance for biofuels was the missing demand piece, especially in the soybean oil market where exports are already very impressive and the newly announced RVOs as well as domestic protections for U.S. feedstocks just solidifies the demand for soybean oil amid fairly tight stocks. Soybean crush also continues at a record pace and is forecasted to set another record again in 2025-26, which is certainly hard to argue at this point given Friday's news."

The much-anticipated proposal would keep conventional corn-based ethanol at 15 billion gallons during the next two years.

The Trump administration's proposal is a significant step up compared to the Biden administration's multi-year rule that set biomass-based diesel volumes at 3.35 billion gallons in 2025. The industry has been calling for much higher RFS volumes to match actual production, at a time when biodiesel plants have been cutting back or closing production in light of lingering tax uncertainty.

RINS PROPOSAL

The RFS proposal also calls for a 50% reduction in the number of renewable identification numbers, or RINs, generated for imported renewable fuels and those fuels produced with foreign feedstocks.

Devin Mogler, president and CEO of the National Oilseed Processors Association, said that aspect of the proposal is important.

"We applaud the administration for recognizing the need to reduce the RIN value for biofuels made from imports of tallow and so-called 'used cooking oil' which have been displacing U.S. soybean oil -- harming farmers and biofuel producers alike for years," Mogler said in a statement.

Caleb Ragland, president of the American Soybean Association and a famer from Magnolia, Kentucky, said the proposal is a boost to rural America.

"The significant increase in proposed volumes for biomass-based diesel will support soybean farmers, soybean processors and biofuel producers in rural America, and serves as a much-needed win for our communities," he said in a statement.

Kurt Kovarik, vice president of federal affairs for Clean Fuels Alliance America, said the proposal was a "welcome and timely signal" to U.S. biodiesel, renewable diesel and sustainable aviation fuel producers as well as America's farmers and agricultural businesses.

"The industry has made major investments in domestic production capacity and feedstocks to meet America's energy needs and provide consumers affordable, cleaner fuels," he said in a statement.

"We anticipate this will have a tremendous beneficial impact for American farmers and agricultural communities and we look forward to working with President Trump and EPA Administrator Zeldin to finalize this rule and fully unleash U.S. clean fuel producers."

SMALL-REFINERY EXEMPTIONS

On small-refinery exemptions, the EPA offered an evaluation of where things stand.

EPA said the total volumes requirements remain the same regardless of SREs but the percentage obligations for non-exempt obligated parties increase when SREs are granted. So, the volume obligations would be achieved by fewer obligated parties.

"There is currently significant uncertainty regarding the number of small-refinery exemption petitions that could be granted for 2026 and 2027," the agency said in the proposal.

"We have yet to take further action on these petitions and are still determining how we will evaluate and decide those petitions, which would then inform how we would evaluate and decide any SRE petitions received for 2026 and 2027. We expect to communicate our policy regarding SRE petitions going forward before finalization of this rule."

EPA provides a range of potential gallons exempted for 2026 and 2027 from what it says are about 34 qualifying and operational small refineries that produce about 18 billion gallons of gasoline and diesel. To qualify for exemptions, the RFS requires small refineries to show disproportionate harm from having to meet their obligations.

Geoff Cooper, CEO and president of the Renewable Fuels Association, said the proposal was a good first step for biofuels producers and farmers.

"It represents an excellent starting point for the 2026 and 2027 RVO discussion," Cooper said in a statement.

"The entire supply chain is seeking certainty regarding EPA's plans on SREs and today's proposal helps to clarify the agency's approach moving forward. We agree that the agency has a legal obligation to reallocate any exempted blending volumes, consistent with the approach adopted by EPA near the end of President Trump's first administration. However, EPA's top priority for SREs should be maintaining a high standard for evaluating petitions and continuing to take a restrained and limited approach. The marketplace needs to be reassured that the RVOs published by EPA are real and will not be watered down or eroded by SREs."

American Coalition for Ethanol CEO Brian Jennings said the "stakes are high" for this next phase of the RFS.

"Ethanol producers and farmers are under tremendous economic pressure, particularly due to uncertainty caused by current efforts to reorder international trade and we need EPA to substantially increase domestic ethanol blending under the RFS in 2026 and 2027," Jennings said. "This rulemaking is a pivotal opportunity for the Trump administration to fully utilize the RFS statutory authorities by setting ambitious blending targets that reflect the critical role American ethanol plays in strengthening U.S. energy security, boosting rural economies and reducing prices at the pump."

Growth Energy CEO Emily Skor said the proposal is a boost the industry needed.

"Today's proposed RVOs secure an economic lifeline for the nation's farmers and ethanol producers," she said in a statement.

"EPA's proposal will unlock investments, create jobs and support growth in rural America, expanding renewable fuel production and creating the kind of certainty that spurs innovation and truly unleashes American energy dominance. Although EPA has yet to project future SREs, we expect that it will ensure that any lost gallons from exemptions will be reallocated to ensure that blending obligations are met."

Monte Shaw, executive director of the Iowa Renewable Fuels Association said in a statement, "Agriculture is hurting, having just endured the largest two-year drop in net farm income in history. We need forward-leaning RFS blending levels to maximize American energy dominance. Midwest farmers are ready to help power our economy."

Republican Iowa Sen. Charles Grassley said the proposed biodiesel volumes would help the industry rebound from when "under the Biden administration, five biodiesel plants in Iowa closed or idled in part because RVOs were set too low."

Read more on DTN:

"EPA Finalizes Multi-Year RFS Volumes," https://www.dtnpf.com/…

"Clean Fuels Alliance America to Sue EPA on Renewable Fuel Standard Volumes Delay," https://www.dtnpf.com/…

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

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