The U.S. Environmental Protection Agency (EPA) on August 31, 2026, released decisions on 34 small refinery exemption (SRE) petitions from 2025. EPA granted 18 petitions a 100 percent exemption and 11 petitions a 50 percent exemption. In addition, the agency denied three petitions and found two others ineligible. In total, EPA said its actions exempted 1.76 million Renewable Identification Numbers (RINs). The petitions serve as requests to be exempted from RIN retirement obligations for a specific compliance year – in this case, the 2025 compliance year.
EPA stated that the decisions are consistent with the methodology first promulgated by the agency in a series of SRE decisions released in August 2025 and used again in subsequent SRE decisions. However, the final decisions for 2025 resulted in a much higher number of RINs being exempted than EPA previously estimated. In the Final Set 2 Rule issued in March 2026, EPA estimated approximately 990 million RINs would be exempted for 2025 based on the three-year average of exemptions. In addition, EPA reallocated 70 percent of the estimated exempted RINs to 2026 and 2027 renewable volume obligations. The agency also said that once it acted on the 2025 SREs, it would not revisit the reallocation to adjust to actual exemption volumes.
However, EPA has changed its approach to reallocation, announcing a rulemaking to reallocate 100 percent of the 2025 exempted volumes. As a result, an additional 770 million RINs will be reallocated to the 2026 and 2027 renewable volume obligations. This will impact the annual percentage standards and, consequently, increase the number of RINs that nonexempt obligated parties are required to retire. EPA has previously stated that it would not reallocate any SRE volumes to the cellulosic biofuel (D3) category.
Next Steps
The proposed rule to reallocate volumes will be released by the end of October 2026 and is likely to include a 30-day or 45-day comment period. Nonexempt obligated parties are expected to object to reallocation, especially to compliance year 2026, which will have concluded or be nearing completion by the time the rule is finalized. At this time, it seems likely that EPA will finalize a rule that reallocates 100 percent of the 2025 exempted RINs, though reallocation could be applied prospectively beginning in 2027 rather than retroactively to 2026. Litigation regarding reallocation in the Final Set 2 Rule is moving through the U.S. Court of Appeals for the District of Columbia Circuit but is unlikely to be completed before the end of 2027.
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