Trump Plans Biofuel Quota Boost, Seeks to Crimp Imports

(Bloomberg) -- The Trump administration is proposing oil refiners blend more biofuels into gasoline and diesel next year while seeking to discourage the use of imported supplies.

The plan unveiled by the Environmental Protection Agency on Friday would require refiners to mix a record 24.02 billion gallons of biofuels into conventional diesel and gasoline. That would be almost 8% higher than 2025, but short of what some oil companies and biofuel producers were seeking.

The effort marks a bid by President Donald Trump to revamp aspects of the Renewable Fuel Standard program created by Congress two decades ago to raise domestic demand and support rural communities. Beyond merely laying out annual quotas, the agency’s proposal advances changes meant to boost US biofuel production and deter imports.

“We are creating a new system that benefits American farmers,” EPA Administrator Lee Zeldin said in a release. “We can no longer afford to continue with the same system where Americans pay for foreign competitors.”

It’s the first major milestone for renewable fuel policy under Trump this year, helping shed light on how the president will approach an issue that proved especially controversial during his first term in office, when he struggled to balance demands from then oft-warring oil refiners and ethanol producers. 

The proposed quotas boosted ethanol and soybean interests. Green Plains Inc., one of the biggest US makers of corn-based ethanol, jumped as much as 13% to $5.27 in New York trading, reaching the highest level in four weeks.

Big soybean handlers also rose. Archer-Daniels-Midland Co. gained as much as 5.5% to $52.41, the highest level since early December, and Bunge Global SA climbed as much as 7.1% to $82.48, the biggest jump since mid-April. Rendering company Darling Ingredients Inc. jumped 10% to $36.37. 

Soybean oil futures in Chicago climbed as much as 6.2%, the biggest increase since Jan. 10.

The administration is so far dodging one of the thorniest issues — whether to grant some small refineries’ bids to be exempted from past years’ quotas. The EPA proposal does not address the topic — nor how the agency might account for any waived volumes — according to officials who asked for anonymity because the measure is not yet public.

The plan would set a 2026 mandate for biomass-based diesel typically made from soybeans and used cooking oil that the EPA said would amount to 5.61 billion gallons, representing a 67% jump from the 3.35 billion gallons required this year. That’s in line with what a coalition of some oil companies and biofuel producers had sought, though changes in how compliance credits are awarded could affect the 2026 target.

Those interests had also pushed for a higher overall biofuel-blending quota of 25 billion gallons next year. Yet the proposed target would remain under that level the next two years, with the EPA proposing a 2027 quota of 24.46 billion gallons.

The numbers are likely to cause unease among some oil refiners that lack sufficient blending capacity to independently generate the compliance credits they use to show quotas have been fulfilled, known as renewable identification numbers, or RINs. Some oil interests had warned the agency against similarly bullish targets, arguing that could outpace production, especially if foreign supplies are limited.

Discounted Credits

The EPA is proposing to slash the value of RINS by 50% for biofuels that are imported or made in the US using foreign feedstocks. Roughly 45% of biomass-based diesel and its ingredients came from other countries last year. 

The administration cast the proposed shift as promoting domestic biofuel production and aiding American farmers, already on the front lines of Trump’s effort to rebalance trade flows with widespread tariffs. But it will come at the expense of renewable fuel producers with international footprints, potentially lowering the value of the materials they make outside the US.

Ethanol and biodiesel producers broadly cheered the plan, with the head of the Renewable Fuels Association Geoff Cooper saying the quotas would “provide crucial growth opportunities” for farmers and industry.

Renewable fuel producers would also be compelled to keep additional records on their purchases or transfers in a bid to thwart the use of fraudulent cooking oil and foreign supplies wrongly labeled as domestic.

The EPA is moving to set biomass-based diesel quotas as RINs, not on a per-gallon basis, and it is seeking to close an opening for electricity to count as a renewable fuel under the program. That would foreclose generating credits from power made from sources such as woody biomass to charge electric vehicles.

(Updates with share moves from sixth paragraph)

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