US to finalize 2026 biofuel quotas by early March, drop import penalties, sources say

The administration of President Donald Trump plans to finalize 2026 biofuel blending quotas by early March, keeping them close to its initial proposal while dropping a plan to penalize imports of renewable fuels and feedstocks, according to two sources familiar with the plans.

If finalized, the plan would mark a partial compromise between rival oil and farm industry groups by preserving increased blending targets sought by biofuel producers while dropping a proposal that U.S. refiners had warned would disrupt fuel markets and raise costs.

The U.S. Environmental Protection Agency, which oversees U.S. biofuel policy, has told industry stakeholders it aims to send the final proposal to the White House budget office for review later this month, with finalization expected roughly 30 days later after the White House conducts industry interviews.

The EPA in June proposed total biofuel blending volumes at 24.02 billion gallons in 2026 and 24.46 billion gallons in 2027, up from 22.33 billion gallons in 2025. The total included a target of 5.61 billion gallons for bio-based diesel, a significant jump from the 3.35 billion gallons in 2025. 

The EPA is now considering a range of 5.2 to 5.6 billion gallons for bio-based diesel in 2026, the sources told Reuters.

The potential downward adjustment is partially related to the EPA's plan to ditch a proposal that would slash the value of renewable fuel credits given by the U.S. government for imported biofuels, an "America First" policy hailed as a victory by the soybean and biodiesel industries. 

Big Oil, led by the influential American Petroleum Institute industry group, had argued that limiting credits for foreign supply could constrain availability and push fuel prices higher - an outcome the White House is eager to avoid as affordability remains a central political concern heading into midterm elections this year.

Reuters previously reported that the EPA was considering delaying the proposal for at least a year.

Benchmark Chicago Board of Trade soybean futures jumped 1.3% after the news and soyoil, a key feedstock for biofuels, rallied around 3.5% to a four-month high.

"This administration has put a priority on petroleum and I think there was a little concern that green energy might be left behind. Based on this story, that's not the case," said Craig Turner, a grain broker at StoneX.

The EPA told Reuters the agency is still reviewing comments on the proposed rule. "As publicly stated in court filings, the agency aims to finalize in the first quarter of 2026," the agency said. 

The EPA is also expected to decide whether to require larger refiners to make up for gallons exempted under the agency's small refinery waiver program, a determination that could significantly affect overall biofuel blending quotas.

The EPA in August cleared a backlog of more than 170 small refinery exemption requests dating back to 2016. It has issued additional exemptions since then. 

The biofuel industry and its legislative allies have been urging the administration to require refiners to offset 100% of those exempted gallons, while the oil industry is resisting the obligations. The EPA has sought comment on various proposals, ranging from zero reallocation to 100%. 

Reuters previously reported that the EPA is considering a plan for refiners to offset 50% of those exempted gallons.