The American Coalition for Ethanol (ACE) submitted comments today to the U.S. Environmental Protection Agency (EPA) in response to the Agency’s supplemental proposed rule for the “Set 2” Renewable Fuel Standard (RFS) program covering 2026 and 2027, urging the Agency to fully reallocate the impacts of Small Refinery Exemptions (SREs) and finalize the rule before year-end.
“We appreciate the important step EPA is taking with this supplemental proposal to rectify and reallocate the impacts of SREs issued for the 2023 and 2024 RFS compliance years, as well as reallocation for SREs anticipated for 2025,” said ACE CEO Brian Jennings in written comments. “If the volumes of renewable fuel represented by the SREs are not reallocated, obligated parties could use the oversupply of low-priced RINs to satisfy future renewable volume obligations instead of buying and blending physical gallons of ethanol and other renewable fuel. This type of demand destruction would undermine the integrity of the RFS.”
ACE emphasized that history has shown how harmful SREs can be to ethanol demand. “SRE-induced demand destruction occurred in 2018 and 2019 when D6 RIN values cratered from $1.00 per gallon to $0.20 or less following EPA’s decision to grant 85 SREs covering the 2016 through 2018 compliance years,” Jennings noted. “More than 4 billion gallons of blending obligations were effectively erased for refiners through EPA’s action at that time, discouraging refiners from blending ethanol above E10 and restraining sales of E15, E30, and E85.”
Jennings said EPA has an opportunity to prevent that from happening again. “EPA must reallocate 100% of the 2023 through 2025 exempted RVOs – an estimated 2.18 billion gallons – to the final Set 2 rule. The 100% full reallocation approach is the only way to ensure blending obligations remain whole for 2026 and 2027.”
Beyond reallocation, ACE reiterated support for EPA’s proposal to set record-high renewable fuel volumes and encouraged EPA to consider conventional biofuel levels exceeding 15 billion gallons to offset potential export market losses and ensure conventional ethanol maintains its role in the fuel supply.
ACE’s comments also backed EPA’s proposal to reduce RIN generation for imported fuels and foreign feedstocks and called for improvements to the Agency’s lifecycle modeling for biofuels. “We encourage EPA to modify its methodology to align with real-world observations and actions taken by Congress, including use of GREET and GTAP-BIO modeling approaches,” Jennings said.
Finally, ACE pressed EPA to act swiftly. “It is imperative to finalize this rulemaking before the end of the 2025 calendar year to get the RFS back on track and provide certainty to all parties,” Jennings concluded.