EPA Acts on SRE Backlog, Signals Potential for Future Reallocation

EPA’s ongoing Renewable Fuel Standard (RFS) rulemaking for 2026 and 2027 raises renewed concerns about how the Agency will treat Small Refinery Exemptions (SREs). While EMA takes no position on the merits of granting individual exemptions, the association strongly opposes reallocation of exempted volumes. Reallocation alters compliance obligations and injects volatility into downstream fuel markets, disproportionately impacting small business fuel marketers. On August 22, however, EPA appeared to confirm that reallocation of exempted volumes may be part of the program going forward when it announced actions on SRE petitions from the 2016 – 2024 compliance period.

Reallocation occurs when EPA redistributes exempted volumes across other obligated parties, effectively raising their compliance burdens. This practice can inflate Renewable Identification Number (RIN) values and destabilize wholesale fuel pricing. For small and mid-sized marketers operating on tight margins, these swings undermine long-term planning and often must be absorbed or passed along at the pump.

While EPA’s action on the backlog of SRE petitions is a positive development, revealing some of the agency’s approach to SREs, the future of SRE petitions remains unsettled, with ongoing litigation and unresolved questions exemption criteria. Even EPA acknowledges in the RFS proposal that there is “significant uncertainty regarding the number of petitions that could be granted for 2026 and 2027.” While EPA has attempted to mitigate volatility with upper and lower bound projections, these measures cannot eliminate the risks associated with reallocating volumes in a highly fluid regulatory environment.

In the submitted comment letter, EMA urged EPA to reject reallocation to preserve stability and transparency in the RFS program. Policy choices that inflate RIN values or distort wholesale pricing ultimately impose disproportionate hardships on small businesses and their customers.

“A consistent and predictable approach to SRE exemptions is essential for maintaining a level playing field and shielding consumers from unnecessary price swings. Rejecting reallocation represents the clearest path to predictability,” said EMA President Rob Underwood.

See EPA announcement here.

See EMA Comments on 2026-27 RFS here.