Exclusive: White House Considers Plan to Clear Record Backlog of Small Refinery Biofuel Waivers

WASHINGTON, May 29 (Reuters) - The White House is weighing a plan to clear a record backlog of requests from small refineries for exemptions from U.S. biofuel laws, which could include approving many current applications and requesting industry input to deal with older ones, according to three sources familiar with the plans.

The U.S. Renewable Fuel Standard requires refiners to blend biofuels like corn-based ethanol into the nation's fuel supply or buy renewable fuel credits, known as RINs, from those who do.

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Small refiners can petition the Environmental Protection Agency to receive an exemption if they can show financial hardship. There are more than 160 outstanding requests for exemptions that represent potentially billions of dollars worth of tradeable credits.

A decision from U.S. President Donald Trump's administration to clear the backlog would have consequences for the oil and agricultural industries, and impact the price of commodities from gasoline and renewable diesel to soybeans and corn, along with the companies that produce them. In the past, widespread exemptions have sent credit prices lower, along with prices for soybeans and ethanol.

The White House is considering granting many of the 19 requests for exemptions from 2024, and issuing a rule seeking input on how to deal with the others, some of which date back to 2016, the sources said.

The Trump administration sees approving some requests and delaying others as less of a shock to the multi-billion-dollar credit market than deciding on all of them at once, the sources said.

The White House would also likely force larger refiners to make up for the exempted gallons in a process known as reallocation, but the details are still being worked out, the sources said.

No final decision on a path forward has been made, the sources said, and details could change as industries step up engagement with the administration.

The White House declined to comment.

Molly Vaseliou, an EPA spokesperson, said there have been multiple reports about how the administration plans to tackle the exemptions, with different conclusions. She said news reports were "rumors" from people trying to influence the biofuel credit market. She did not confirm or deny the details reported by Reuters.

Renewable fuel (D6) credits fell to trade at 90 cents each after Reuters reported the White House consideration, traders said. Credits were trading around 94 cents before the report.

Decisions on small refinery exemptions are made in a collaborative effort by the U.S. Department of Energy and the EPA, but the White House's Energy Dominance Council — along with White House aide Stephen Miller — has taken a lead role this time around, underscoring its importance, the sources told Reuters.

During the first Trump administration, the EPA significantly increased the number of exemptions approved, driving down the price of the renewable fuel credits and angering the Farm Belt, which said the exemptions hurt a program that drove investment in the Midwest.

The administration of former President Joe Biden was critical of the exemptions. The Biden administration did try to deny many petitions but those actions were rejected by a federal appellate court, which sent back the actions for further review.

The RFS gives refiners who need to buy credits to comply with the program roughly two years to submit them to the EPA, complicating the administration's efforts to resolve outstanding credits from 2016 until 2022 that are effectively worthless.