LINCOLN, Neb. (DTN) -- The U.S. Environmental Protection Agency finalized 2026-2027 Renewable Fuel Standard volumes on Friday, setting biofuel volumes higher than proposed numbers released last year.

EPA set overall volumes to include reallocation of small-refinery exemptions at 26.81 billion gallons for 2026 and 27.02 billion gallons for 2027 -- providing a 70% reallocation. Corn-based ethanol also maintains a 15-billion-gallon market in the final rule.

The agency had been considering a range of SRE reallocations from zero to 100%, with biofuels and agriculture industries pushing for full reallocation.

"This approach will balance a number of factors that come into play when considering volume requirements and the impacts of SREs, including protecting biofuel demand while maintaining a stable and functioning credit market," the EPA said in a news release on Friday.

Biomass-based diesel volumes for 2026 were set at 9.07 billion gallons and jump to 9.2 billion gallons in 2027. The advanced biofuels volumes were set at 11.1 billion gallons and 11.32 billion gallons for those years.

The new volumes represent a 60% increase over 2025 for both biodiesel and renewable diesel, according to EPA.

EPA also announced, starting in 2028, foreign fuels and feedstocks will receive half the RFS compliance value compared to American-made products, "providing American biofuel producers with time to prepare for the change while ensuring that American farmers benefit from the RFS program and American energy independence," the agency said.

DTN Lead Analyst Rhett Montgomery said the RFS announcement did provide a boost to the soybean oil market on Friday.

"It really seems like a 'buy the rumor, sell the fact' type trade, but soybean oil has recovered to again be slightly higher currently," he said.

"Overall, I'd say the mandated volumes combined with a 70% reallocation of small-refinery exemptions is in line with what traders have been expecting the past few months, which has contributed to the almost 20-cent per-pound rally in soybean oil futures through 2026 thus far."

Montgomery said because the foreign feedstock requirement will not go into effect until 2028 it may "leave some traders anxious, especially considering the lost share of demand soybean oil has suffered compared to used cooking oil in recent years; but this will need to be monitored as it may at the end of the day be price dependent."

As for corn, he said the corn-ethanol mandate is a neutral development for the corn market at this point as "the ethanol industry remains a strong and steady corn demand source.

"I expect the ongoing push for year-round E15 will continue to be the demand story to watch in coming years as it pertains to expanding the ethanol industry," Montgomery said.

The EPA earlier this week granted a waiver to allow E15 sales to continue throughout the summer, https://www.dtnpf.com/….

EPA released the final volumes at the start of an agriculture event at the White House on Friday during which President Donald Trump touted the RFS release along with a grab bag of ag issues.

Geoff Cooper, president and CEO of the Renewable Fuels Association, said the final RFS numbers represent a "robust" boost for fuel consumers and farmers.

"The final rule locks in the highest-ever renewable fuel volume obligations and provides clarity for farmers, ethanol producers, oil refiners, and fuel distributors alike," Cooper said.

"Today's action by EPA and the White House will boost the farm economy, strengthen American energy security, and reduce fuel prices for hardworking families. We applaud the Trump administration for recognizing the important role renewable fuels and agriculture can play in meeting our nation's energy dominance objectives."

The EPA estimated the Set 2 RFS rule would generate over $10 billion for rural economies and create over 100,000 new jobs in the agricultural and manufacturing sectors.

Brian Jennings, CEO of the American Coalition for Ethanol, said EPA's decision to set RFS volumes at their highest level ever helps "fulfill" Congress's original intent of the law.

"We've consistently advocated for strong final blending obligations for 2026 and 2027 reflecting the full potential of the RFS and ensuring small-refinery exemptions do not erode demand for renewable fuels," Jennings said in a statement.

"It is critical that EPA set blending requirements at levels that fully account for any SREs granted. Failing to do so risks undermining the intent of the RFS by allowing obligated parties to rely on surplus renewable identification numbers rather than driving actual blending and use of renewable fuels. The integrity of the RFS depends on ensuring volume obligations translate into real-world demand. Any gap between required volumes and actual blending undermines the program and creates uncertainty for ethanol producers, farmers and rural communities."

Kurt Kovarik, Clean Fuels' vice president of federal affairs, said the biodiesel and renewable diesel industries are anxious to get to work.

"The entire U.S. clean fuel industry -- from farmers and feedstock providers to fuel customers -- is grateful to see this rule finalized," he said in a statement.

"U.S. biodiesel, renewable diesel, and SAF (sustainable aviation fuel) producers are eager to get to work and bring the 7 billion gallons of existing production capacity up to speed to meet 10% or more of America's demand for diesel fuel."

In 2025, biodiesel and renewable diesel facilities were forced to shut down or run far below prior-year production levels because of market uncertainty. As a result, U.S. biodiesel production declined by one-third in 2025 compared to 2024.

EPA ACTIONS ON DEF

EPA also announced Friday that it is removing the diesel exhaust fluid, or DEF, sensor requirement for all diesel equipment.

In August 2025, the Trump administration announced new guidance that allows farmers and truckers to revise software to prevent sudden speed and power losses caused by DEF.

Starting with model year 2027, that guidance requires all new diesel on-road trucks to be engineered to avoid sudden and severe power loss after running out of DEF.

In February, EPA announced it is requesting information from the top 14 manufacturers that account for 80% of all products that use DEF systems, on data on warranty claims, failure rates and repair information for model years 2016, 2019 and 2023 emission control products.

On Friday, EPA announced it had received the data it requested from 11 of the manufacturers.

"The preliminary review of the warranty data suggests that DEF sensor failures are a significant source of warranty claims and DEF-related inducement," EPA said in a news release.

"Farmers and truck drivers should not have their vehicles stop working because a sensor isn't working properly. EPA is taking immediate action on this new information. The agency's new guidance makes clear that under existing regulations, manufacturers can stop inaccurate DEF system failures by removing traditional emission sensors, known as urea quality sensors, and switching to nitrous oxide sensors."

The agency said Nox sensors can be installed without being treated as illegal tampering under the Clean Air Act.

Read more on DTN:

"DEF System Failures Under EPA Scrutiny," https://www.dtnpf.com/…

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

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