The truth about small refinery exemptions

August 27, 2026 | Matt Herman

Every time the oil industry lobbies the EPA to hand out small refinery exemptions, the message from the oil industry is always the same: Oil refiners are struggling financially, and these exemptions will lower gas prices. The truth is that refiners are raking in record profits as they operate beyond capacity to meet strong global demand for refined fuel. The second part of that claim has never held water, and here’s why.

Under the Renewable Fuel Standard, a refiner incurs an obligation to buy Renewable Identification Number credits for the gasoline it produces. They claim this is a cost. However, when that gasoline is blended with ethanol, that now blended gallon of E10 generates RINs valued at roughly the same cost of the obligation. In other words, the cost of the obligation and the value of the RIN cancel each other out.

When SREs drove D6 RIN prices from 90 cents to 10 cents between late 2017 and 2019, gas prices didn’t budge. Economists at MIT and Harvard studying RIN pass-through costs found no statistical relationship between RIN prices and retail E10 prices. Nothing in the law requires an exempt refinery to lower prices. In other words, the exempt small refiners simply got fatter margins.

During the last wave of SREs, ethanol came through largely intact. University of Illinois research found no measurable drop in ethanol blending across the entire exemption period. Biodiesel, and the soybeans it is produced from, were not as lucky. That’s because biodiesel operates as the ‘marginal’ gallon of fuel, filling three of the four compliance buckets created by the RFS. When the exemptions shrank the size of all those buckets, soy-based biodiesel (the marginal supply) was the first fuel pushed out of the market and thus suffered the greatest losses.

The carnage of these SREs was 1.73 billion gallons of biomass-based diesel demand destroyed between December 2017 and January 2020 and $6.7 billion in lost revenue to producers.

That is the trade being discussed right now in Washington, D.C. Practically zero savings to consumers driving down the road, billions of farm income lost and more profits pocketed by refiners who are operating in a record margin environment.

Just this week, it was reported that changes to small refinery exemptions under the RFS could be coming. Reports indicate exemptions for the 2025 compliance year could exceed 1.8 billion RIN credits, nearly twice the level the EPA anticipated when establishing current biofuel blending requirements. If approved, the increased exemptions could eliminate an estimated 500 million gallons of biomass-based diesel demand and cost U.S. soybean farmers approximately $1 billion in lost revenue during a period of already tight profit margins.

We are asking that the president hold EPA to the level of exemptions projected in the March Renewable Volume Obligation. If EPA feels the need to issue exemptions at these extreme levels being reported in the press, there is an easy fix. Simply reallocate the exempted gallons. If the exemptions go through without reallocation, well, that’s a movie we have seen and we know how it ends.

Doubling SREs would further erode demand and the price you’re offered for your soybeans. Make your voice heard on this issue by visiting our Soy Action Center.

Written by Matt Herman, ISA chief officer of demand and advocacy.

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