LINCOLN, Neb. (DTN) -- The Trump administration is planning to reallocate biofuels gallons lost through small-refinery exemptions to the Renewable Fuel Standard, according to a proposal released by the U.S. Environmental Protection Agency on Tuesday.

The question is, will it be 50%, 100%, another percentage, or even none of the gallons lost through exemptions from 2023 to 2025?

The EPA announced in August it had granted full exemptions on 63 petitions, partial exemptions on 77 petitions and denied 28 petitions on SRE requests covering 2016 to 2024.

EPA is proposing two approaches to reallocate volumes lost. One proposal accounts for 100% of the 2023-25 exempted renewable volume obligations -- or 2.18 billion gallons total. The other approach is to account for 50% of the 2023-25 exempted gallons -- or 1.09 billion gallons total.

The agency said it also is taking comments on other possible percentages, including reallocating no gallons, 25% or even 75%.

In addition, EPA is proposing to add a new SRE reallocation volume term in the percentage standard equations for 2026 and 2027, to account for small-refinery exemptions granted for the 2023-25 compliance years.

The agency said the proposed reallocation volumes and updated exempted projections would lead to revised proposed percentage standards for 2026 and 2027 that are lower than the original proposed standards in the current RFS volumes proposal yet to be completed.

PUBLIC HEARING, COMMENT PERIOD TO FOLLOW

Once the proposal is published in the Federal Register, the EPA said it will hold a public hearing followed by a 30-day public comment period.

EPA said it also expects "additional exemptions" to be granted for the 2025 compliance year.

"The ability for obligated parties to use these RINs to comply with the 2026 and 2027 RVOs is expected to impact demand for renewable fuel if not carefully considered," the agency said in a news release.

"This proposal is an important step in the EPA's tireless work to repair the damage done after four years of the Biden-Harris administration neglecting key components of the RFS program, including threats to transform the RFS program into a subsidy for electric vehicle charging stations as part of a larger strategy to electrify the transportation sector. The Trump administration reaffirms its renewed commitment to honor the program's purpose to support biofuels as an essential part of a thriving liquid fuels market."

The EPA said it "recognizes the importance" of issuing one final Set 2 rule that establishes the RVOs for 2026 and 2027 and addresses the reallocation of SREs from 2023-2025.

RFA ENCOURAGED BY PROPOSAL

The Renewable Fuels Association said in a statement Tuesday that it was "encouraged" by EPA's proposal.

"While we continue to question whether any SREs for 2023-2025 are truly justified in the first place, we are encouraged that EPA is proposing to add the exempted volumes back to future RFS requirements for 2026 and 2027," said Geoff Cooper, RFA president and CEO.

"We support EPA's proposed option to fully reallocate 2023-2025 SREs and believe such an approach will ensure intended levels of renewable fuel consumption are maintained over the long-term. We appreciate that EPA continues to focus on SRE approaches that minimize marketplace disruptions, while honoring the congressional purpose and intent of the RFS program. EPA clearly recognizes that an unmitigated influx of RIN credits from SREs could devastate markets and undermine renewable fuel production and consumption."

GROWTH ENERGY COMMENDS EPA

Growth Energy CEO Emily Skor said her group also supports the full reallocation option presented by EPA.

"With this proposal, EPA acknowledges how important biofuels like ethanol are to the rural economy," she said in a statement.

"We commend the Trump EPA for being the first-ever EPA to propose a way to ensure past-year SRE gallons don't compromise renewable fuel demand. Full reallocation of exempt gallons is a surefire way to drive income to America's rural communities."

More information about the comment period and public hearing can be found here: https://www.epa.gov/….

Read more here: "Trump Grants Full SREs on 63 Petitions," https://www.dtnpf.com/… .

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

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