[Federal Register Volume 90, Number 179 (Thursday, September 18, 2025)]
[Proposed Rules]
[Pages 45007-45017]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-18111]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 80 and 1090
[EPA-HQ-OAR-2024-0505; FRL-11947-03-OAR]
RIN 2060-AW23
Renewable Fuel Standard (RFS) Program: Standards for 2026 and
2027, Partial Waiver of 2025 Cellulosic Biofuel Volume Requirement, and
Other Changes; Supplemental Notice of Proposed Rulemaking
AGENCY: Environmental Protection Agency (EPA).
ACTION: Supplemental proposed rule.
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SUMMARY: On June 17, 2025, the U.S. Environmental Protection Agency
(EPA) proposed volumes and percentage standards for four categories of
renewable fuel that would apply to obligated parties in 2026 and 2027
under the Renewable Fuel Standard (RFS) program. On August 22, 2025,
the EPA issued decisions on 175 small refinery exemption (SRE)
petitions under the RFS program. This supplemental proposal takes into
consideration the expected impacts of the SRE decisions issued. Based
on this information, the EPA is co-proposing additional volumes in 2026
and 2027 representing complete (100 percent) reallocation and 50
percent reallocation for SREs granted in full or in part for 2023 and
2024, as well as those projected to be granted for 2025, as part of the
ongoing RFS rulemaking. The EPA is also providing more information on
its projection of SREs to inform the calculation of the 2026 and 2027
percentage standards.
DATES:
Comments. Comments must be received on or before October 31, 2025.
Public hearing: The EPA will hold a virtual public hearing on
October 1, 2025. Please refer to the SUPPLEMENTARY
[[Page 45008]]
INFORMATION section for additional information on the public hearing.
ADDRESSES:
Comments. Submit your comments, identified by Docket ID No. EPA-HQ-
OAR-2024-0505, at http://www.regulations.gov. Follow the online
instructions for submitting comments. Once submitted, comments cannot
be edited or removed from the docket. The EPA may publish any comment
received to its public docket. Do not submit to the EPA's docket at
https://www.regulations.gov any information you consider to be
Confidential Business Information (CBI) or other information whose
disclosure is restricted by statute. Multimedia submissions (audio,
video, etc.) must be accompanied by a written comment. The written
comment is considered the official comment and should include
discussion of all points you wish to make. The EPA will generally not
consider comments or comment contents located outside of the primary
submission (i.e., on the web, cloud, or other file sharing system).
Please visit https://www.epa.gov/dockets/commenting-epa-dockets for
additional submission methods; the full EPA public comment policy;
information about CBI or multimedia submissions; and general guidance
on making effective comments.
Public hearing. The virtual public hearing will be held on October
1, 2025. The hearing will begin at 9:00 a.m. Eastern Standard Time
(EST) and end when all parties who wish to speak have had an
opportunity to do so. All hearing attendees (including even those who
do not intend to provide testimony) should register for the virtual
public hearing by September 24, 2025. Information on how to register
can be found at https://www.epa.gov/renewable-fuel-standard-program/proposed-renewable-fuel-standards-2026-and-2027-supplemental-notice.
Additional information regarding the hearing appears below under
SUPPLEMENTARY INFORMATION.
FOR FURTHER INFORMATION CONTACT: For information about this
supplemental proposed rule, contact Dallas Burkholder, Assessment and
Standards Division, Office of Transportation and Air Quality,
Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI
48105; telephone number: (734) 214-4766; email address: [email protected]. For questions regarding the public hearing,
contact Nick Parsons at [email protected].
SUPPLEMENTARY INFORMATION:
Does this action apply to me? Entities potentially affected by this
action are those involved with the production, distribution, and sale
of transportation fuels (e.g., gasoline and diesel fuel) and renewable
fuels (e.g., ethanol, biodiesel, renewable diesel, and biogas).
Potentially affected categories include:
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NAICS \a\
Category codes Examples of potentially affected entities
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Industry........................................ 111110 Soybean farming.
Industry........................................ 111150 Corn farming.
Industry........................................ 112111 Cattle farming or ranching.
Industry........................................ 112210 Swine, hog, and pig farming.
Industry........................................ 211130 Natural gas liquids extraction and fractionation.
Industry........................................ 221210 Natural gas production and distribution.
Industry........................................ 324110 Petroleum refineries (including importers).
Industry........................................ 325120 Biogases, industrial (i.e., compressed,
liquified, solid), manufacturing.
Industry........................................ 325193 Ethyl alcohol manufacturing.
Industry........................................ 325199 Other basic organic chemical manufacturing.
Industry........................................ 424690 Chemical and allied products merchant
wholesalers.
Industry........................................ 424710 Petroleum bulk stations and terminals.
Industry........................................ 424720 Petroleum and petroleum products wholesalers.
Industry........................................ 457210 Fuel dealers.
Industry........................................ 562212 Landfills.
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\a\ North American Industry Classification System (NAICS).
This table is not intended to be exhaustive, but rather provides a
guide for readers regarding entities potentially affected by this
action. This table lists the types of entities that the EPA is
currently aware could potentially be affected by this action. Other
types of entities not listed in the table could also be affected. To
determine whether your entity would be affected by this action, you
should carefully examine the applicability criteria in 40 CFR part 80.
If you have any questions regarding the applicability of this action to
a particular entity, consult the person listed in the FOR FURTHER
INFORMATION CONTACT section.
Participation in virtual public hearing. Information on how to
register for the virtual public hearing can be found at https://www.epa.gov/renewable-fuel-standard-program/proposed-renewable-fuel-standards-2026-and-2027-supplemental-notice. The last day to pre-
register to speak at the hearing is September 29, 2025. Please note
that any updates made to any aspect of the hearing will be posted
online at https://www.epa.gov/renewable-fuel-standard-program/proposed-renewable-fuel-standards-2026-and-2027-supplemental-notice. While the
EPA expects the hearing to go forward as set forth above, please
monitor the website or contact the person listed in the FOR FURTHER
INFORMATION CONTACT section to determine if there are any updates. The
EPA does not intend to publish a document in the Federal Register
announcing updates.
Subject to the number of signups and time constraints, the EPA
intends that each participant will have three minutes to provide oral
testimony. The EPA may ask clarifying questions during the oral
presentations but will not respond to the presentations at that time.
Written statements and supporting information submitted during the
comment period will be considered with the same weight as oral comments
and supporting information presented at the public hearing.
If you require the services of a translator or special
accommodations such as audio description, please pre-register for the
hearing and describe your needs by September 29, 2025. The EPA may not
be able to arrange accommodations without advance notice.
Preamble acronyms and abbreviations. Throughout this document the
use of ``we,'' ``us,'' or ``our'' is intended to refer to the EPA. We
use multiple acronyms and terms in this preamble. While this list may
not be exhaustive, to ease the reading of this
[[Page 45009]]
preamble and for reference purposes, the EPA defines the following
terms and acronyms here:
AEO Annual Energy Outlook
BBD biomass-based diesel
CAA Clean Air Act
EIA Energy Information Administration
EMTS EPA Moderated Transaction System
RFS Renewable Fuel Standard
RIN Renewable Identification Number
RVO Renewable Volume Obligation
SRE small refinery exemption
Organization of this document. The information in this preamble is
organized as follows:
I. Executive Summary
II. Background and Policy Rationale
III. Legal Justification
IV. Proposed SRE Reallocation Volumes
V. Revised Proposed Percentage Standards for 2026 and 2027
VI. Statutory Factor Analysis
VII. Severability
VIII. Statutory and Executive Order Reviews
A. Executive Order 12866: Regulatory Planning and Review
B. Executive Order 14192: Unleashing Prosperity Through
Deregulation
C. Paperwork Reduction Act (PRA)
D. Regulatory Flexibility Act (RFA)
E. Unfunded Mandates Reform Act (UMRA)
F. Executive Order 13132: Federalism
G. Executive Order 13175: Consultation and Coordination With
Indian Tribal Governments
H. Executive Order 13045: Protection of Children From
Environmental Health Risks and Safety Risks
I. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
J. National Technology Transfer and Advancement Act (NTTAA) and
1 CFR Part 51
IX. Statutory Authority
I. Executive Summary
On June 17, 2025, the EPA proposed the renewable fuel volumes under
the RFS program for the 2026 and 2027 compliance years (the ``Set 2
proposal'').\1\ In that action, we proposed to account for SREs we
projected granting for the 2026 and 2027 compliance years consistent
with our regulations at 40 CFR 80.1405(c), using a projection of exempt
gasoline and diesel. In the Set 2 proposal, we projected a range of
exempted gasoline and diesel volumes from zero to 18 billion gallons,
noting that the projection would be informed by the EPA's SRE
policy.\2\
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\1\ 90 FR 25784 (June 17, 2025).
\2\ 90 FR 25833 (June 17, 2025).
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Many commenters on the Set 2 proposal indicated that the EPA's SRE
policy will have a significant impact on the volumes the EPA proposed
to establish and the Renewable Identification Number (RIN) market as a
whole. Some parties stated that the impact of the 2026 and 2027 RFS
standards would be affected not only by SREs granted for those years
but also by SREs granted for previous years. These parties generally
suggested that the EPA should adjust its projections of exempted
gasoline and diesel to better account for SREs. On August 22, 2025, the
EPA issued decisions on 175 SRE petitions, including 56 petitions for
the 2023 and 2024 compliance years.\3\ The August 2025 SRE Decisions
Action exempted 11.4 billion gallons of gasoline and diesel produced by
certain small refineries from incurring a Renewable Volume Obligation
(RVO) for the 2023 and 2024 compliance years, resulting in 1.4 billion
RINs no longer needing to be retired for compliance for these years. We
anticipate that in the coming months we will also issue decisions on
SRE petitions for the 2025 compliance year. While we have not yet taken
action on SRE petitions for the 2025 compliance year, we project based
on the information currently available to the Agency that obligations
equal to 780 million RINs will be exempted for this year. Therefore, we
project that a total of 2.18 billion RINs will not need to be retired
as a result of SREs for 2023-2025.
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\3\ EPA, ``August 2025 Decisions on Petitions for RFS Small
Refinery Exemptions,'' EPA-420-R-25-010, August 2025 (``August 2025
SRE Decisions Action'').
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Considering this additional information, and to give all
stakeholders an opportunity to comment on potential changes to the
proposed standards to account for SREs, we are issuing this
supplemental proposal. Specifically, the EPA is proposing to add a new
``SRE reallocation volume'' term in the percentage standard equations
for 2026 and 2027 that, taken together, would account for the 2023-2025
exempted RVOs. In addition, we are revising our proposed percentage
standards for 2026 and 2027 to include both the proposed SRE
reallocation volumes and a better-informed projection of exempted
gasoline and diesel for 2026 and 2027.
This proposal describes the EPA's authority to consider the impact
of 2023-2025 SRE decisions when establishing the RFS standards for 2026
and 2027, the SRE reallocation volumes we are proposing to add to the
previously proposed applicable volumes for 2026 and 2027, how the
statutory factors were considered, and the methodology used to
calculate the revised proposed percentage standards for 2026 and 2027.
The EPA is co-proposing two approaches: (1) additional volume
accounting for 100 percent of the 2023-2025 exempted RVOs (i.e., 2.18
billion RINs); and (2) additional volume accounting for 50 percent of
the of the 2023-2025 exempted RVOs (i.e., 1.09 billion RINs).
Additionally, the EPA is taking comment on SRE reallocation volumes
equal to other amounts (e.g., 25 or 75 percent of the 2023-2025
exempted RVOs), as well as not accounting for any exempted 2023-2025
RVOs (i.e., no SRE reallocation volumes).
Finally, to better inform stakeholders in providing comments on
this supplemental proposal, we are providing updated estimates of the
volumes of gasoline and diesel that we project will be exempted from
RFS obligations in 2026 and 2027. Based on the percentage standards
equations in the existing RFS regulations, these volumes are taken into
account when establishing the annual percentage standards. We project
that exempted volumes of gasoline and diesel in 2026 and 2027 will be
5.95 billion gallons each year.\4\
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\4\ For the final rule, we intend to update our projection using
the most recent available data, which may include actual decisions
on 2025 SRE petitions.
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Commenters should limit their comments to the data and information
presented in this supplemental proposal and the associated proposed SRE
reallocation volumes. Comments on the Set 2 proposal were due on or
before August 8, 2025, and the EPA intends to respond to comments
received after that date only if they are within the scope of this
supplemental proposal.
II. Background and Policy Rationale
In the Set 2 proposal, the EPA proposed applicable volumes for 2026
and 2027 based on an analysis of the statutory factors and a review of
implementation of the program to date. While acknowledging the
existence of compliance flexibilities in the RFS program, such as the
ability to use carryover RINs and to carry forward a compliance deficit
into the subsequent year, we projected that the proposed volumes could
be met with renewable fuel produced and used in 2026 and 2027. Our
analysis of the statutory factors assessed the proposed 2026 and 2027
volumes and the impacts of the production and use of those volumes.
At the time of the Set 2 proposal, the EPA had not yet determined
its SRE policy. On August 22, 2025, the EPA issued decisions on 175 SRE
petitions in the August 2025 SRE Decisions Action,
[[Page 45010]]
in which the EPA granted full (100 percent) exemptions to 63 petitions,
granted partial (50 percent) exemptions to 77 petitions, denied 28
petitions, and determined seven petitions to be ineligible. The EPA
made these decisions based on a consistent policy approach across all
SRE petitions under consideration, and we intend to use this same
approach going forward.
In this action, we are proposing to revise the percentage standards
equations for 2026 and 2027 to add a new volume we refer to as the
``SRE reallocation volume,'' which would account for the 2023-2025
exempted RVOs. Specifically, we are co-proposing SRE reallocation
volumes that would account for 100 percent or 50 percent of the
exemptions granted for: (1) the 2023 and 2024 compliance years in the
August 2025 SRE Decisions Action; and (2) a projection of exemptions
expected to be granted for the 2025 compliance year.\5\ The SRE
reallocation volumes would correspond to statutory categories of
renewable fuel (cellulosic biofuel, advanced biofuel, biomass-based
diesel, and renewable fuel), such that there would be four SRE
reallocated volumes for each year. Each SRE reallocated volume would
then be added to the proposed volume requirement in the Set 2 proposal
and the sum of the volumes for each year would be used to calculate the
percentage standards for 2026 and 2027, as discussed further in Section
V of this preamble. We propose to divide the exempt volume across two
years to lessen the disruption to the market and the burden on
obligated parties.
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\5\ The exact proposed SRE reallocation volumes for 2026 and
2027 are described in Section IV of this preamble.
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The August 2025 SRE Decisions Action exempted significant volumes
of gasoline and diesel for the 2023 and 2024 compliance years,
resulting in an increased number of RINs available for obligated
parties to use for compliance with their RFS obligations. We expect
additional exemptions will be granted for the 2025 compliance year as
well. These RINs represent renewable fuel produced and used in 2023-
2025 that obligated parties will no longer need to retire for
compliance because of the relieved obligations from SRE exemptions. The
availability of these RINs--and the ability for obligated parties to
use them to comply with their RFS obligations in lieu of RINs generated
for renewable fuel produced and used in 2026 and 2027--could reduce RIN
demand and RIN prices in future years and may ultimately result in the
market failing to produce the volume of renewable fuel anticipated by
the volume requirements in the Set 2 proposal.
The impacts of the exemptions granted in the August 2025 SRE
Decisions Action on the RIN market are as follows.\6\ For the 2023 and
2024 compliance years, 1.4 billion RINs no longer need to be retired
for compliance. While the exemptions granted for these years have no
impact on the volume of renewable fuel actually produced and used in
2023 and 2024 since those years are in the past, they directly increase
the supply of RINs available for other obligated parties to use for
compliance. As a result, obligated parties will be able to use the RFS
program's carryover RIN provisions to roll these RINs forward to the
2025 compliance year and beyond.
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\6\ The RIN volumes and exemptions discussed in this section are
limited to the SRE decisions the EPA issued as of the time of this
proposal (i.e., those in the August 2025 SRE Decisions Action),
which did not include the 2025 compliance year. However, as
discussed in Section IV of this preamble, we are also projecting
exempted volumes for 2025 as part of determining the proposed SRE
reallocation volumes for 2026 and 2027. Thus, the actual effect of
SREs for 2023-2025 will be greater than described in this section.
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CAA section 211(o)(5) requires that the EPA establish a credit
program as part of its RFS regulations and that the credits be valid
for obligated parties to show compliance for 12 months after the date
of generation. The EPA implemented this requirement through the use of
RINs, which can be used to demonstrate compliance for the year in which
they are generated and the subsequent compliance year. Obligated
parties can obtain more RINs than needed in a given compliance year,
allowing them to carry over these RINs for use in the subsequent
compliance year, although the RFS regulations limit the use of these
carryover RINs to 20 percent of the obligated party's RVO. For the
total number of available carryover RINs to be preserved from one year
to the next, individual carryover RINs are used for compliance before
they expire and are replaced with newer vintage RINs that are then held
for use in the next year. For example, 2023 carryover RINs must be used
for compliance in 2024, or they will expire. However, the use of 2023
RINs to meet up to 20 percent of an obligated party's 2024 RVO
increases the number of 2024 RINs that can then be carried over for use
in 2025.
While there may be some impact from the increased number of
carryover RINs as a result of the 2023-2025 SREs on renewable fuel
production and use in 2025, only a few months remain in this year.
Instead, the effect of these RINs is likely to be most acute in 2026
and 2027 when obligated parties could choose to use carryover RINs to
comply with their 2026 and 2027 RVOs in lieu of acquiring renewable
fuel produced in those years, thereby reducing the demand for renewable
fuel production and use in those years. Thus, failure to mitigate the
market impacts of the increased number of carryover RINs due to the
2023-2025 SREs could result in a decrease in demand for renewable fuel
produced in 2026 and 2027. This magnitude of carryover RINs has the
potential to depress RIN prices due to a significant oversupply of
RINs.
While significant quantities of carryover RINs can negatively
impact the production and use of renewable fuels, carryover RINs also
play an important role in providing a liquid and well-functioning RIN
market, as the EPA has stated on multiple occasions.\7\ The continued
success of the RFS program depends on the RIN market. Carryover RINs
provide obligated parties compliance flexibility for substantial
uncertainties in the transportation fuel marketplace. In the August
2025 SRE Decisions Action, the EPA granted SREs for multiple years at a
single time representing significant volumes after the volume
requirements for those years had been established and actual production
for those years had concluded. The resulting influx of additional RINs
in the market could have a deleterious effect on current and proposed
volume requirements without corrective action to address the increased
number of carryover RINs due to the 2023-2025 SREs.
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\7\ See, e.g., 90 FR 25784, 25827 (June 17, 2025). See also,
e.g., 88 FR 44468, 44494 (July 12, 2023), 87 FR 39600, 39613 (July
1, 2022), 85 FR 7016, 7021 (February 6, 2020), 83 FR 63704, 63708-10
(December 11, 2018), 82 FR 58486, 58493-95 (December 12, 2017), 81
FR 89746, 89754-55 (December 12, 2016), 80 FR 77420, 77482-87
(December 14, 2015).
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We also note that, as described in the Set 2 proposal (and before
considering the effects of the 2023-2025 exemptions), while there are
approximately 1.2 billion carryover RINs available for use in 2024,
this number is effectively reduced to zero after accounting for
deficits carried forward from 2023 into 2024.\8\ Because
[[Page 45011]]
of the limited number of carryover RINs available, it may not be
necessary or appropriate to propose SRE reallocation volumes for 2026
and 2027 equal to the full magnitude of the 2023-2025 exemptions to
maintain the intended renewable fuel use in 2026 and 2027. Obligated
parties with carryover RINs can choose to hold these RINs for use in
future years or use them towards their compliance obligations.
Obligated parties holding few or no carryover RINs may have an
incentive to hold any carryover RINs attributable to 2023-2025 SREs as
a compliance flexibility for future years rather than using them
towards their 2026 or 2027 compliance obligations. If obligated parties
hold, rather than use, these carryover RINs, we expect a much smaller
impact, and potentially even no impact, on the RIN and renewable fuel
markets. We are therefore co-proposing SRE reallocation volumes for
2026 and 2027 equal to 50 percent of the 2023-2025 exempted RVOs. We
also request comment on SRE reallocation volumes for 2026 and 2027
equal to other amounts (e.g., 25 or 75 percent of the 2023-2025
exempted RVOs), as well as not accounting for any exempted 2023-2025
RVOs (i.e., no SRE reallocation volumes).
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\8\ EPA, ``RFS Program Standards for 2026 and 2027: Draft
Regulatory Impact Analysis,'' EPA-420-D-25-001, June 2025 (``Set 2
DRIA''), Chapter 1.8. We also note that the number of available 2024
RINs (approximately 23.6 billion) is about 1.3 billion RINs greater
than the volume target for 2025 (22.33 billion RINs). This suggests
that the number of carryover RINs available for use in 2025 will be
higher than the number of carryover RINs available for use in 2024,
even before accounting for the impacts of the August 2025 SRE
Decisions Action. Information on available RINs can be found at:
https://www.epa.gov/fuels-registration-reporting-and-compliance-help/available-rins.
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Notably, we are not proposing to account for any exemptions granted
for compliance years prior to 2023. Pre-2023 vintage RINs that were
returned to small refineries that received an exemption for these years
in the August 2025 SRE Decisions Action are expired and can only be
used to satisfy outstanding, non-exempted pre-2023 obligations by the
small refinery. As of the date of this proposal, and at the time the
exemptions were granted in the August 2025 SRE Decisions Action, RFS
compliance has not yet occurred for 2024 or 2025. Thus, 2023 and newer
vintage RINs remain valid for RFS compliance and have value within the
RIN market. In contrast, 2022 and older RINs are expired and thus
cannot be used for compliance with 2024 or later RFS obligations.\9\
Therefore, we are proposing SRE reallocation volumes for 2026 and 2027
that only account for the 2023-2025 exemptions (i.e., the vintage RIN
that can still be used for RFS compliance in ways that may impact the
production and use of renewable fuels in 2026 and 2027). Obligated
parties can use 2023 RINs to satisfy up to 20 percent of their 2024
obligations, 2024 RINs to satisfy their 2024 or up to 20 percent of
their 2025 obligations, and 2025 RINs to satisfy their 2025 or up to 20
percent of their 2026 obligations.
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\9\ 40 CFR 80.1428(c).
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III. Legal Justification
CAA section 211(o)(2)(B)(ii) directs the EPA to establish
applicable volumes of renewable fuel for use as transportation fuel in
the U.S. for years after those specified in the statutory tables. Under
that provision, the Administrator shall, in coordination with the
Secretary of Agriculture and Secretary of Energy, determine the
applicable volume of each renewable fuel category, based on a review of
implementation of the program and an analysis of statutory factors.
Congress provided the EPA flexibility by enumerating factors that the
Administrator must consider without mandating particular forms of
analysis or specifying how the Administrator must weigh the various
factors against one another. Thus, as the CAA ``does not state what
weight should be accorded to the relevant factors,'' it ``give[s] EPA
considerable discretion to weigh and balance the various factors
required by statute.'' \10\ We are proposing to use this authority to
consider the 2023-2025 exempted RVOs and establish RFS volumes for 2026
and 2027 that incorporate the SRE reallocation volumes discussed in
this supplemental proposal.
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\10\ Ctr. for Biological Diversity v. EPA, 141 F.4th 153, 171
(D.C. Cir. 2024); Sinclair Wyo. Ref. Co. LLC v. EPA, 101 F.4th 871,
887 (D.C. Cir. 2023); see also Brown v. Watt, 668 F.2d 1290, 1317
(D.C. Cir. 1981) (``A balancing of factors is not the same as
treating all factors equally. The obligation instead is to look at
all factors and then balance the results. The Act does not mandate
any particular balance, but vests the [agency] with discretion to
weigh the elements . . . .'').
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As discussed in the Set 2 proposal, there are also several
conditions the EPA uses to determine volumes under CAA section
211(o)(2)(B).\11\ First, CAA section 211(o)(2)(B)(iii) requires that
the EPA set the volume such that the applicable volume of advanced
biofuel is at least the same percentage of the applicable volume of
renewable fuel as in calendar year 2022. As described further in the
Set 2 proposal, the 2022 advanced biofuel volume is 27.3 percent of the
total renewable fuel volume.\12\ The SRE reallocation volumes proposed
in this action, combined with the previously proposed volume
requirements, exceed this 27.3 percent minimum, and thus satisfy this
requirement for 2026 and 2027.
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\11\ 90 FR 25784, 25790 (June 17, 2025).
\12\ Id.
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Second, CAA section 211(o)(2)(B)(iv) requires that the EPA set the
cellulosic biofuel standard based on the assumption that the
Administrator will not need to waive the volume using the cellulosic
waiver authority. The cellulosic waiver authority at CAA section
211(o)(7)(D) requires that the EPA reduce the cellulosic biofuel volume
in circumstances where the projected volume of cellulosic biofuel
production is less than the applicable volume. In these circumstances,
the EPA must reduce the volume to the ``projected volume available.''
In the Set 2 proposal, we proposed cellulosic biofuel volumes at the
``projected volume available'' to satisfy the CAA section
211(o)(2)(B)(iv) condition.\13\ While we are proposing additional
cellulosic biofuel volumes in this action associated with the 2023-2025
exempted RVOs, we also note that comments on the Set 2 proposal
suggested that the EPA's projection of cellulosic biofuel production
for 2026 and 2027 was too low.\14\ We recognize the D.C. Circuit's
indication that the ``projected volume available'' excludes carryover
RINs, and that any ``projection of cellulosic biofuel production''
would likely also exclude any carryover RINs.\15\ Nevertheless, the
newly available cellulosic carryover RINs from SREs, when combined with
the proposed volumes for 2026 and 2027, result in volume requirements
that we do not anticipate needing to waive given the availability of
RINs in the market.
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\13\ Id.
\14\ See, e.g., comments from RNG Coalition and National Waste &
Recycling Association (Docket Item No. EPA-HQ-OAR-2024-0505-0645) at
18; Waste Management (Docket Item No. EPA-HQ-OAR-2024-0505-0613) at
1; and American Biogas Council (Docket Item No. EPA-HQ-OAR-2024-
0505-0604) at 2.
\15\ Sinclair, 101 F.4th at 883-84.
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Alternatively, given the statutory language in CAA section
211(o)(2)(B)(iv) prescribing how the EPA is to set cellulosic volumes,
we request comment on whether the EPA has appropriately considered the
2023-2025 exempted cellulosic biofuel RVOs as part of our review of the
implementation of the program, and whether, as part of that review, we
should include all, some, or none of those volumes in the SRE
reallocation volumes. The EPA further seeks comment on whether, if the
EPA does not include the exempted cellulosic biofuel RVOs, we should
consider reducing the advanced biofuel and total renewable fuel SRE
reallocation volumes as part of our review of the implementation of the
program given the nested nature of the standards.
Finally, CAA section 211(o)(2)(B)(v) requires that the biomass-
based diesel (BBD) volume be greater than 1.0 billion gallons. The
combined SRE reallocation volumes for BBD and the proposed applicable
BBD volumes from the Set 2
[[Page 45012]]
proposal together exceed the 1.0-billion-gallon requirement in 2026 and
2027, thus satisfying this requirement.
IV. Proposed SRE Reallocation Volumes
In this action, we are co-proposing to create new SRE reallocation
volumes for 2026 and 2027 equivalent to the 2023-2025 exempted RVOs. We
are also co-proposing SRE reallocation volumes for 2026 and 2027
equivalent to 50 percent of the exempted RVOs for these years and
requesting comment on other SRE reallocation volumes for 2026 and 2027
equal to other amounts (e.g., 25 or 75 percent of the 2023-2025
exempted RVOs), as well as not accounting for any exempted 2023-2025
RVOs (i.e., no SRE reallocation volumes). Since the EPA has issued
decisions for all the 2023 and 2024 SRE petitions that were before the
Agency, we are able to determine the actual exempted RVOs for the 2023
and 2024 compliance years as of this time. Specifically, we used
information from the SRE petitions and the EPA Moderated Transaction
System (EMTS) compliance data to calculate the total exempted gasoline
and diesel volumes for 2023 and 2024. In turn, we used these exempted
volumes, together with the previously established percentage standards
for 2023 and 2024, to calculate the exempted RVOs for these years.
However, the EPA has not yet issued any SRE decisions for 2025. In
order to develop a projection of the RVOs that will be exempted for
2025, we used data on the volumes of exempted gasoline and diesel for
previous years. Consistent with the approach that the EPA first
advanced in the 2020 RFS Rule (in which the EPA projected future
exempted fuel volumes),\16\ we believe it is appropriate to use average
volumes of exempted gasoline and diesel over a three-year period as our
projection of future exempted volumes of gasoline and diesel in 2025,
rather than the volumes of gasoline and diesel that were exempted in
any single year. This helps to average out the effects of unique events
or market circumstances that occurred in individual years that may or
may not occur in 2025, and thus serves as a better predictor of the
volume of gasoline and diesel that will ultimately be exempted in
2025.\17\ Thus, we used information from 2022-2024 SRE petitions to
calculate the annual average volumes of exempted gasoline and diesel
and used those volumes to represent our projection of the exempted
volumes of gasoline and diesel in 2025, as shown in Table IV-1.\18\
---------------------------------------------------------------------------
\16\ 85 FR 7016, 7051-53 (February 6, 2020). We note that while
we projected exempted volumes of gasoline and diesel in the 2020
final rule, we later revised the 2020 percentage standards via
rulemaking, including adjusting our projection of exempted volume
from SREs. 87 FR 39600 (July 1, 2022) (``Reset Rule'').
\17\ 84 FR 57677 (October 28, 2019); 85 FR 7016 (February 6,
2020).
\18\ We intend to update our projections of exempted gasoline
and diesel volumes in the final rule based on any additional SREs
issued after this proposal.
Table IV-1--Exempted Fuel Volumes for 2022-2025 Compliance Years
[Billion gallons]
----------------------------------------------------------------------------------------------------------------
Exempted fuel
Compliance year -----------------------------------------------
Gasoline Diesel Total
----------------------------------------------------------------------------------------------------------------
2022............................................................ 3.55 2.90 6.45
2023............................................................ 3.20 2.40 5.60
2024............................................................ 3.25 2.57 5.82
2025 (projected)................................................ 3.33 2.62 5.95
----------------------------------------------------------------------------------------------------------------
Using these exempted fuel volumes and multiplying them by the RFS
percentage standards in 40 CFR 80.1405(a), we calculated the 2023-2025
exempted RVOs, as shown in Table IV-2.\19\
---------------------------------------------------------------------------
\19\ For the final rule, we intend to update our analyses using
the most recent available data, which may include decisions on 2025
SRE petitions.
Table IV-2--Exempted RVOs for 2023-2025 Compliance Years
[Million RINs]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percentage standards Exempted RVOs
------------------------------------------------------------------------------------------------
Category 2025
2023 2024 2025 2023 2024 (projected)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cellulosic Biofuel..................................... 0.48 0.59 0.70 30 30 40
Biomass-Based Diesel................................... 2.58 2.82 3.15 140 160 190
Advanced Biofuel....................................... 3.39 3.79 4.31 190 220 260
Total Renewable Fuel................................... 11.96 12.50 13.13 670 730 780
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The 2025 cellulosic biofuel percentage standard represents the EPA's proposed partial waiver of the 2025 cellulosic biofuel volume requirement in
the Set 2 proposal. We are not reopening or soliciting additional comment on the proposed partial waiver.
We then used the 2023-2025 exempted RVOs to determine the co-
proposed SRE reallocation volumes for 2026 and 2027. For the 100
percent reallocation approach, we are co-proposing SRE reallocation
volumes for 2026 equivalent to all the 2023 exempted RVOs and half of
the 2024 exempted RVOs, and for 2027 equivalent to the remaining half
of the 2024 exempted RVOs and all the projected 2025 exempted RVOs. For
the 50 percent reallocation approach, we applied a 50 percent reduction
to the exempted RVOs in Table IV-2 and used the same methodology to
calculate the co-proposed SRE reallocation volumes. The resulting co-
proposed SRE reallocation volumes are shown in Table IV-3.
[[Page 45013]]
Table IV-3--Proposed SRE Reallocation Volumes for 2026 and 2027
[Million RINs]
----------------------------------------------------------------------------------------------------------------
100% Reallocation 50% Reallocation
Category ----------------------------------------------------------------
2026 2027 2026 2027
----------------------------------------------------------------------------------------------------------------
Cellulosic Biofuel............................. 40 60 20 30
Biomass-Based Diesel........................... 220 270 110 140
Advanced Biofuel............................... 300 370 150 190
Total Renewable Fuel........................... 1,030 1,150 510 580
----------------------------------------------------------------------------------------------------------------
Note: All volumes are rounded to the nearest 10 million RINs. To avoid overestimating, volumes ending in five
were rounded down for 2026 and rounded up for 2027.
V. Revised Proposed Percentage Standards for 2026 and 2027
The obligated parties to which the percentage standards apply are
producers and importers of gasoline and diesel, as defined by 40 CFR
80.2. The formulas used to calculate the percentage standards
applicable to obligated parties are provided in 40 CFR 80.1405.\20\
Each obligated party multiplies the percentage standards by the sum of
all non-renewable gasoline and diesel they produce or import to
determine their RVOs. The RVOs are the number of RINs that the
obligated party is responsible for procuring to demonstrate compliance
with the applicable standards for that year. Since there are four
categories of renewable fuel under the RFS program, there are likewise
four RVOs applicable to each obligated party for each year.
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\20\ In the Set 2 proposal, we proposed additional modifications
to the percentage standard equations, including removing the 1.6
multiplier for biomass-based diesel, eliminating unnecessary terms,
and clarifying the definition of some terms. In this action, we are
including those proposed changes in the revised proposed percentage
standard equations, but we are not reopening or soliciting
additional comment on those proposed changes from the Set 2
proposal.
---------------------------------------------------------------------------
In this action, we are proposing to revise the percentage standard
equations in 40 CFR 80.1405 such that the numerator in the percentage
standard equations for 2026 and 2027 would be the sum of the annual
volume requirement (RFV) and SRE reallocation volume (SRERV).\21\
Consistent with the Set 2 proposal, we also account for a projection of
the gasoline and diesel volumes exempted through SREs in 2026 and 2027
in the denominator of the percentage standard equations for 2026 and
2027. These equations incorporating the SRE reallocation volume would
only be used for the 2026 and 2027 percentage standards. In the future,
we intend to continue our policy of prospectively accounting for
exempted volumes of gasoline and diesel such that there will be no need
to include SRE reallocation volumes in this manner again.
---------------------------------------------------------------------------
\21\ The amendatory instructions for the proposed regulations
associated with this action, including both the 100 percent and 50
percent reallocation approaches, are provided in ``Proposed
Regulations for Set 2 Supplemental Proposal,'' available in the
docket for this action.
---------------------------------------------------------------------------
In addition to the required volumes of renewable fuel, the
percentage standard equations also require estimates of the volumes of
non-renewable gasoline and diesel, for both highway and nonroad uses,
that are projected to be used in the year in which the standards will
apply. Consistent with the Set 2 proposal, we are using projections
provided by the U.S. Energy Information Administration (EIA) in the
Annuel Energy Outlook (AEO) 2023.\22\ As in the Set 2 proposal, these
projections include volumes of renewable fuel (e.g., ethanol,
biodiesel, renewable diesel) used in gasoline and diesel. Since the
percentage standards apply only to the non-renewable portions of
gasoline and diesel, the volumes of renewable fuel are subtracted out
of the EIA projections of gasoline and diesel as part of the percentage
standard equations.
---------------------------------------------------------------------------
\22\ While we acknowledge that EIA released AEO2025 earlier this
year, this release occurred after we had already completed our
analyses for the Set 2 proposal. Because we have not developed new
analyses for this action (e.g., determining a new No RFS Baseline,
updating E10 ethanol consumption volumes, etc.), we used the AEO2023
projections to calculate the revised proposed percentage standards.
In the Set 2 proposal, however, we indicated our intent to use
updated projections from AEO2025 in the Set 2 final rule, including
updating our methodology for adjusting gasoline and diesel
projections from the EIA. This action provides public notice of our
proposed approach for using AEO2025 to project gasoline and diesel
volumes in 2026 and 2027, including using new gasoline and diesel
projection adjustment factors. Discussion of these new adjustment
factors and the AEO2025 projections we would use to calculate the
2026 and 2027 percentage standards in the Set 2 final rule is
available in ``AEO2025 Projections and Adjustment Factors for Set 2
Supplemental Proposal,'' available in the docket for this action.
---------------------------------------------------------------------------
Finally, the percentage standard equations also require projections
of the exempted volumes of gasoline and diesel.\23\ As discussed in
Section IV of this preamble, we have already developed a projection of
exempted gasoline and diesel volumes for 2025 using a three-year
average of the actual exempted gasoline and diesel volumes from 2022-
2024 (3.33 billion gallons of gasoline and 2.62 billion gallons of
diesel). We believe this projection is an appropriate estimate of
exempted gasoline and diesel for 2026 and 2027 as well.
---------------------------------------------------------------------------
\23\ The D.C. Circuit upheld the EPA's change to the regulatory
formula for percentage standards to account for future exempted
volumes in Sinclair, 101 F.4th at 892-93 (challenge to the Reset
Rule). See also 40 CFR 80.1405(c).
---------------------------------------------------------------------------
Using the SRE reallocation volumes in Table IV-3 (both the 100
percent and 50 percent reallocation approaches) and assuming 5.95
billion gallons of exempted gasoline and diesel, we calculated the
revised proposed percentage standards for 2026 and 2027. The resultant
percentage standards under both co-proposals, as well as the original
proposed percentage standards in the Set 2 proposal, are shown in Table
V-1.\24\ These percentage standards are included in the proposed
regulations at 40 CFR 80.1405(a) and would apply to producers and
importers of gasoline and diesel.\25\
---------------------------------------------------------------------------
\24\ For more detail on these calculations, including
adjustments made to the EIA's projections, see ``Calculation of
Revised Proposed 2026 and 2027 RFS Percentage Standards,'' available
in the docket for this action.
\25\ Note that while in the amendatory instructions for 40 CFR
80.1405 we have also included the percentage standards from previous
compliance years, we are not reopening or soliciting additional
comment on any previously established percentage standard.
[[Page 45014]]
Table V-1--Revised Proposed Percentage Standards for 2026 and 2027
--------------------------------------------------------------------------------------------------------------------------------------------------------
Set 2 proposal 100% Reallocation 50% Reallocation
-------------------------------------------------------------------------------------------------
2026 (%) 2027 (%) 2026 % 2027 (%) 2026 (%) 2027 (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cellulosic biofuel.................................... 0.87 0.92 0.83 0.89 0.81 0.87
Biomass-based diesel.................................. 4.75 5.07 4.53 4.86 4.46 4.78
Advanced biofuel...................................... 6.02 6.40 5.75 6.15 5.66 6.03
Total renewable fuel.................................. 16.02 16.54 15.47 16.01 15.14 15.65
--------------------------------------------------------------------------------------------------------------------------------------------------------
VI. Statutory Factor Analysis
The EPA considered the statutory factors specified in CAA section
211(o)(2)(B)(ii) in proposing the applicable volumes for 2026 and 2027
in the Set 2 proposal. In light of the August 2025 SRE Decisions
Action, the purpose of this supplemental proposal is to account for the
2023-2025 exempted RVOs in the 2026 and 2027 volumes. Absent this
proposed action, SREs granted for 2023-2025 could increase the number
of carryover RINs available for use in 2026 and 2027, which could in
turn reduce demand for renewable fuels in those years. We acknowledge
that neither this proposed action nor SREs granted for 2023-2025 will
affect the volume of renewable fuel produced or consumed in the U.S. in
2023 and 2024, and that any effect these decisions may have on
renewable fuel production and use in 2025 would be limited. Instead,
SREs granted for 2023-2025 will result in lower-than-anticipated RVOs
for those years and, all else being equal, will result in a higher
number of carryover RINs available for use in 2026 and future years.
Increased numbers of carryover RINs can negatively impact the demand
for renewable fuel and the associated RINs. This is because obligated
parties can use carryover RINs years to meet their compliance
obligations in 2026 and 2027 in lieu of acquiring RINs generated in
these years. An increase in the availability of carryover RINs to meet
obligated parties' compliance obligations in 2026 and 2027 could
decrease the demand for current-year RINs. The co-proposed SRE
reallocation volumes for 2026 and 2027 are intended to prevent
increased numbers of carryover RINs from decreasing demand for
renewable fuel below the proposed applicable volumes for 2026 and 2027
in the Set 2 proposal.
We are co-proposing SRE reallocation volumes as part of setting
overall RFS standards pursuant to our authority in CAA section
211(o)(2)(B)(ii). As discussed in Section III.A of this preamble, the
CAA requires that renewable fuel volumes established using this
authority are based on a review of implementation of the program and an
analysis of statutory factors.
We are considering the SREs granted for 2023-2025 under our
directive to review the implementation of the program. These exemptions
have a direct impact on the RFS obligations both for the exempted small
refineries (which now have reduced or zero RFS obligations) and for all
obligated parties in aggregate (which can now retire a greater number
of carryover RINs and fewer current year RINs to satisfy their combined
RFS obligations for 2024 and 2025). Further, because obligated parties
can now use the carryover RINs that otherwise would have been retired
for compliance but for the 2023-2025 exemptions, SREs granted in one
year can have an impact on the market for RINs and renewable fuel in
future years.
We have also considered the statutory factors specified in CAA
section 211(o)(2)(B)(ii) in proposing these SRE reallocation volumes.
We project that the portion of the RFS obligations represented by the
SRE reallocation volumes would be met with carryover RINs attributable
to the 2023-2025 exempted RVOs. We therefore do not expect that this
action will increase the production and use of renewable fuel beyond
the volumes previously proposed for 2026 and 2027 (24.02 billion RINs
and 24.46 billion RINs, respectively). Conversely, if the EPA does not
account for the 2023-2025 SREs, the increase in available carryover
RINs resulting from these decisions could result in lower commercial
production of renewable fuels in 2026 and 2027 than projected in the
Set 2 proposal.
In general, the statutory factors that the EPA must consider when
establishing the applicable volumes for years after 2022 are impacted
by the production and use of renewable fuel and are not impacted by the
use of carryover RINs. Increased production of ethanol or biodiesel is
expected to have an impact on air quality, climate change, conversion
of wetlands, ecosystems, wildlife habitat, water quality and supply,
energy security, infrastructure, job creation, the prices and supply of
agricultural commodities, rural economic development, or food prices.
The use of carryover RINs to satisfy RFS obligations is not expected to
impact these factors. Given this supplemental proposal's purpose in
maintaining the volumes originally proposed in the Set 2 proposal, we
have also considered the impact on the expected rate of commercial
production of renewable fuels.\26\ We intend that this supplemental
proposal, if finalized, would not result in an impact on the expected
rate of commercial production of renewable fuels in 2026 and 2027.
---------------------------------------------------------------------------
\26\ In developing this proposal, we have also considered the
statutory factors that are impacted by the production of renewable
fuels. See ``RFS Program Standards for 2026 and 2027: Draft
Regulatory Impact Analysis,'' EPA-420-D-25-001, June 2025.
---------------------------------------------------------------------------
This supplemental proposal is intended to account for the
anticipated market impacts of the 2023-2025 exempted RVOs, rather than
to propose changes that would result in higher (or lower) volumes of
renewable fuel than previously proposed for 2026 and 2027. In the Set 2
proposal, we analyzed the proposed volumes for 2026 and 2027, as well
as alternative volumes in relation to the No RFS Baseline. We believe
this analysis remains proper, as this supplemental proposal seeks to
maintain the production and use of renewable fuel volumes in the Set 2
proposal. We determined that the proposed volumes are proper, and we
seek to maintain those volumes. We have therefore largely not revised
our analysis of the impact of the proposed volumes for 2026 and 2027 on
the statutory factors presented in the Set 2 proposal and associated
Draft Regulatory Impact Analysis \27\ as we do not project that this
action would result in renewable fuel production and use in 2026 and
2027 that differ materially from the volumes previously analyzed.
However, uncertainty remains regarding the amount of reallocation
necessary to maintain the production of proposed volumes, and we
therefore have co-
[[Page 45015]]
proposed SRE reallocation volumes representing 100 percent and 50
percent of the exempt volumes.
---------------------------------------------------------------------------
\27\ EPA, ``RFS Program--Standards for 2026 and 2027: Draft
Regulatory Impact Analysis,'' EPA-420-D-25-001, June 2025 (``Set 2
DRIA'').
---------------------------------------------------------------------------
The one statutory factor that we do project would be impacted by
this proposed action is the impact on the cost to consumers of
transportation fuel and the cost to transport goods. The proposed SRE
reallocation volumes would result in higher percentage standards for
obligated parties than would otherwise be the case, and which in turn
require obligated parties to acquire greater quantities of RINs to
retire for compliance. We project that, in aggregate, obligated parties
would acquire these additional RINs by purchasing carryover RINs from
other parties rather than blending additional quantities of renewable
fuel. Because we do not expect this action to result in an increase of
the production and use of renewable fuel, we do not anticipate impacts
on most statutory factors. We do, however, expect that, on average at
the national level, obligated parties would pass on the costs of
purchasing additional RINs to consumers, and that this action could
increase the cost of transportation fuel to consumers.
In the Set 2 proposal, we estimated that the proposed volume
requirements would increase the price of gasoline by 4.4[cent] and
4.7[cent] per gallon in 2026 and 2027, respectively, and the price of
diesel by 9.1[cent] and 10.6[cent] per gallon in 2026 and 2027,
respectively.\28\ These estimates were relative to the No RFS Baseline
and based on the upper-bound estimate of the percentage standards,
which represented a scenario where the EPA projected granting all SRE
petitions for these years and prospectively accounted for these
exemptions in the percentage standards. Note that this analysis uses
the same projected prices for renewable fuels, petroleum-based fuels,
RINs, etc. as the Set 2 proposal. If the impacts of this action were to
ultimately result in higher (or lower) RIN prices, we would expect to
see larger (or smaller) impacts on fuel prices due to these changes in
RIN prices.
---------------------------------------------------------------------------
\28\ 90 FR 25832 (June 17, 2025).
---------------------------------------------------------------------------
Notably, as shown in Table VI-1, the revised proposed percentage
standards for 2026 and 2027 in this action, after accounting for both
the SRE reallocated volumes and an updated projection of exempted
gasoline and diesel for 2026 and 2027, are lower than those we
considered in the Set 2 proposal. This is true whether the SRE
reallocated volumes represent 100 percent or 50 percent of the 2023-
2025 exempted RVOs. While this action proposes SRE reallocation volumes
for the 2026 and 2027 RFS standards that would directionally increase
the RFS percentage standards (and thus direction increase the impact on
fuel prices) for 2026 and 2027 above what was proposed in the Set 2
proposal, it also includes an updated projection of the exempted
gasoline and diesel volumes for 2026 and 2027 that are much lower than
the 18 billion gallons assumed in the upper-bound estimate in the Set 2
proposal. The overall effect is that the revised proposed percentage
standards are less than the original proposed percentage standards in
the Set 2 proposal, as shown in Table V-1.\29\ Because the total RIN
acquisition costs in our projected impacts of this action on fuel
prices are based on the percentage standards, the lower revised
proposed percentage standards result in lower projected impacts on fuel
prices relative to the impacts in the Set 2 proposal.
---------------------------------------------------------------------------
\29\ When considered separately, the updated projection of
exempted gasoline and diesel would reduce the total renewable fuel
percentage standards for 2026 and 2027 by 1.19 percent and 1.25
percent, respectively, compared to the upper-bound estimate. The 100
percent reallocation approach would increase the total renewable
fuel percentage standards for 2026 and 2027 by 0.64 percent and 0.72
percent, respectively, while the 50 percent reallocation approach
would increase the total renewable fuel percentages for 2026 and
2027 by 0.31 percent and 0.36 percent, respectively.
Table VI-1--Estimated Effect of Revised Proposed Percentage Standards on Retail Fuel Prices Relative to No RFS Baseline
--------------------------------------------------------------------------------------------------------------------------------------------------------
Set 2 proposal 100% Reallocation 50% Reallocation
-------------------------------------------------------------------------------------------------
2026 2027 2026 2027 2026 2027
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percentage Standard:
Cellulosic Biofuel................................ 0.87% 0.92% 0.83% 0.89% 0.81% 0.87%
BBD............................................... 4.75% 5.07% 4.53% 4.86% 4.46% 4.78%
Other Advanced Biofuel \a\........................ 0.40% 0.41% 0.39% 0.40% 0.39% 0.38%
Conventional Renewable Fuel \b\................... 10.00% 10.14% 9.72% 9.86% 9.48% 9.62%
Total Rin Cost ($/gallon)............................. 11.9[cent] 12.3[cent] 11.5[cent] 11.9[cent] 11.2[cent] 11.7[cent]
Price Impact ([cent]/gallon):
Gasoline.......................................... 4.4[cent] 4.7[cent] 4.0[cent] 4.4[cent] 3.8[cent] 4.2[cent]
Diesel............................................ 9.1[cent] 10.6[cent] 8.7[cent] 10.3[cent] 8.5[cent] 10.1[cent]
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Other advanced biofuel is not a fuel category for which a percentage standard is established but is calculated by subtracting the cellulosic biofuel
and BBD standards from the advanced biofuel standard.
\b\ Conventional renewable fuel is not a fuel category for which a percentage standard is established but is calculated by subtracting the advanced
biofuel standard from the total renewable fuel standard.
Note: To best illustrate the impact of this action on fuel price impacts, we have used the same data and methodology as in the Set 2 proposal and only
updated the percentage standards. We have not updated the projected prices of renewable fuels, gasoline, diesel, RINs, etc. We will provide an updated
estimate of fuel price impacts in the final rule that accounts for updates to all these factors for which more recent data is available. For more
detail on the methodology used to estimate fuel prices, see Set 2 DRIA Chapter 10.5.
VII. Severability
If finalized, we intend for the 2026 and 2027 SRE reallocation
volumes to be severable from the remainder of the 2026 and 2027
applicable volumes. This is because the EPA's reasoning for
implementing the 2026 and 2027 SRE reallocation volumes is distinct
from the EPA's action to establish applicable volumes for 2026 and
2027. The applicable volumes proposed in the Set 2 proposal represent
new renewable fuel production in 2026 and 2027 (i.e., new RIN
generation). In contrast, the SRE reallocation volumes represent
renewable fuel that was produced in 2023-2025, but for which RINs were
not retired to meet compliance obligations in those years due to SREs.
In this action, we are co-proposing SRE reallocation volumes to account
for these RINs given their potential impact on the RIN and renewable
fuels markets. Given this independent reasoning to justify the 2026 and
2027 applicable volumes proposed in the Set 2 proposal,
[[Page 45016]]
we intend that were the 2026 and 2027 SRE reallocation volumes not in
effect, the remainder of the 2026 and 2027 applicable volumes would
stand in place.
VIII. Statutory and Executive Order Reviews
Additional information about these statutes and Executive Orders
can be found at https://www.epa.gov/laws-regulations/laws-and-executive-orders.
A. Executive Order 12866: Regulatory Planning and Review
This action is an economically significant regulatory action that
was submitted to the Office of Management and Budget (OMB) for review.
Any changes made in response to OMB recommendations have been
documented in the docket.
B. Executive Order 14192: Unleashing Prosperity Through Deregulation
This action is expected to be an Executive Order 14192 regulatory
action. There are no quantified cost estimates for this supplemental
proposal because it does not change the applicable volumes proposed in
the Set 2 proposal.
C. Paperwork Reduction Act (PRA)
This action does not impose an information collection burden under
the PRA. OMB has previously approved the information collection
activities contained in the existing regulations and has assigned the
following OMB control numbers: 2060-0725, 2060-0740, and 2060-0749.
This action co-proposes SRE reallocation volumes and revised percentage
standards for 2026 and 2027 and does not impose new or different
reporting requirements on regulated parties than already exist for the
RFS program.
D. Regulatory Flexibility Act (RFA)
I certify that this action will not have a significant economic
impact on a substantial number of small entities under the RFA. The
small entities directly regulated by the annual percentage standards
associated with the RFS volumes are small refiners that produce
gasoline or diesel fuel, which are defined at 13 CFR 121.201. The EPA
believes that there are currently six refiners (owning seven
refineries) producing gasoline and/or diesel that meet the definition
of small entity by having 1,500 employees or fewer. In the Set 2
proposal, we evaluated the impacts of the proposed 2026 and 2027 volume
requirements on small entities by conducting a screening analysis to
assess whether we should find that this action will not have a
significant economic impact on a substantial number of small
entities.\30\ In that analysis, we evaluated the worst-case scenario in
which small entities, all of which only operate small refineries, would
comply with the upper-bound estimate of the proposed 2026 and 2027
percentage standards that assumes that all small refineries are granted
an exemption. The resultant cost-to-sales ratio test showed that the
costs to small entities of the proposed 2026 and 2027 percentage
standards were far less than one percent of the value of their
sales.\31\ While this action co-proposes SRE reallocation volumes for
the 2026 and 2027 RFS standards that would directionally increase the
RFS percentage standards for 2026 and 2027 above what was proposed in
the Set 2 proposal, it also includes an updated projection of the
exempted gasoline and diesel volumes for 2026 and 2027 that are much
lower than the 18 billion gallons assumed in the upper-bound estimate
in the Set 2 proposal. As shown in Table V-1, both the co-proposed
percentage standards are lower than the proposed percentage standards
in the Set 2 proposal under the worst-case scenario. Thus, we are able
to conclude that the cost-to-sales ratios for small entities under this
supplemental proposal are also far less than one percent of the value
of their sales. Furthermore, this action does not change the compliance
flexibilities currently offered to small entities under the RFS program
(including the SRE provisions we continue to implement). We have
therefore concluded that the impact on directly regulated small
entities from implementation of this rule will not be significant.
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\30\ See Set 2 DRIA Chapter 11.
\31\ A cost-to-sales ratio of one percent represents a typical
agency threshold for determining the significance of the economic
impact on small entities. See ``Final Guidance for EPA Rulewriters:
Regulatory Flexibility Act as amended by the Small Business
Regulatory Enforcement Fairness Act,'' November 2006.
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E. Unfunded Mandates Reform Act (UMRA)
This action does not contain an unfunded mandate of $100 million
(adjusted annually for inflation) or more (in 1995 dollars) as
described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or
uniquely affect small governments.
F. Executive Order 13132: Federalism
This action does not have federalism implications. It will not have
substantial direct effects on the states, on the relationship between
the national government and the states, or on the distribution of power
and responsibilities among the various levels of government.
G. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments
This action does not have Tribal implications as specified in
Executive Order 13175. This action will be implemented at the Federal
level and affects transportation fuel refiners, blenders, marketers,
distributors, importers, exporters, and renewable fuel producers and
importers. Tribal governments will be affected only to the extent they
produce, purchase, or use regulated fuels. Thus, Executive Order 13175
does not apply to this action.
H. Executive Order 13045: Protection of Children From Environmental
Health Risks and Safety Risks
The EPA interprets Executive Order 13045 as applying only to those
regulatory actions that concern environmental health or safety risks
that the EPA has reason to believe may disproportionately affect
children, per the definition of ``covered regulatory action'' in
section 2-202 of the Executive Order. Therefore, this action is not
subject to Executive Order 13045 because it co-proposes SRE
reallocation volumes and revised percentage standards for 2026 and 2027
and does not concern an environmental health risk or safety risk. Since
this action does not concern human health, the EPA's Policy on
Children's Health also does not apply.
I. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
This action is not a ``significant energy action'' because it is
not likely to have a significant adverse effect on the supply,
distribution, or use of energy. This action co-proposes SRE
reallocation volumes and revised percentage standards for 2026 and
2027. The RFS program is designed to achieve positive effects on the
Nation's transportation fuel supply by increasing energy independence
and security.
J. National Technology Transfer and Advancement Act (NTTAA) and 1 CFR
Part 51
This action does not involve technical standards.
IX. Statutory Authority
Statutory authority for this proposed action comes from sections
114, 203-05, 208, 211, 301, and 307 of the Clean Air
[[Page 45017]]
Act, 42 U.S.C. 7414, 7522-24, 7542, 7545, 7601, and 7607.
List of Subjects
40 CFR Part 80
Environmental protection, Administrative practice and procedure,
Air pollution control, Diesel fuel, Fuel additives, Gasoline, Imports,
Incorporation by reference, Oil imports, Petroleum, Renewable fuel.
40 CFR Part 1090
Environmental protection, Administrative practice and procedure,
Air pollution control, Diesel fuel, Fuel additives, Gasoline, Imports,
Incorporation by reference, Oil imports, Petroleum, Renewable fuel.
Lee Zeldin,
Administrator.
[FR Doc. 2025-18111 Filed 9-17-25; 8:45 am]
BILLING CODE 6560-50-P