RFS Waiver Fight Opens as 2027 Diesel RVO Strains Capacity

The governors of Louisiana and Alabama have formally asked EPA Administrator Lee Zeldin for a partial waiver of 2027 Renewable Fuel Standard obligations, and the numbers behind their petition are stark: required D4 biomass-based diesel RIN generation must hit 11.55 billion RIN gallons in 2027, or 963 million per month — above every monthly total in the historical record and above what U.S. plants can physically produce.

Governor Jeff Landry and Governor Kay Ivey call their request "targeted, prospective and temporary." Landry has urged the governors of Texas, Mississippi and Arkansas to join. Biofuel and farm groups moved quickly to press EPA for rejection. More petitions are likely. So is a long fight.

The University of Illinois farmdoc daily team — Todd Hubbs and Scott Irwin — updated its D4/D5 RIN balance sheet after EPA's August small refinery exemption decisions and the October 13 reallocation proposal. Their work frames exactly what's at stake.

What changed since May?

The May 11 balance sheet showed required D4 net RIN generation of 10.99 billion RIN gallons in 2026 and 11.89 billion in 2027 — monthly paces of 916 million and 991 million. The updated projection cuts 2026 to 8.82 billion, or 735 million per month, a 20% reduction. The 2027 figure barely moves: 11.55 billion, down just 3%.

Required generation still sits 24% above 2025's level in 2026 and 63% above it in 2027. The center of the challenge has shifted from 2026 to 2027. That is exactly where the waiver petitions are aimed.

Six factors drove the revisions:

• Fuel use. EIA's October Short-Term Energy Outlook puts 2026 gasoline and diesel use at 176.2 billion gallons, 4.4 billion below EPA's 180.6 billion assumption, trimming the biomass-based diesel RVO by roughly 0.24 billion RIN gallons.
• D6 ethanol RINs. Projected generation rose to 14.85 billion, cutting the D6 "pull" on D4 RINs from 1.42 billion to 0.47 billion RIN gallons in 2026.
• Export retirements. Slower decline lifts required D4 generation by 0.30 billion in 2026.
• Small refinery exemptions. EPA's August 3 and August 31 decisions exempted 13.38 billion gallons for 2025, versus the 7.55 billion projected in the Set 2 rule. EPA's October 13 supplemental proposal would reallocate the 0.77 billion RIN difference — split equally between 2026 and 2027 under the balance sheet's benchmark assumption.
• RIN bank. The SRE decisions raised the end-2025 D4+D5 bank from 0.96 to 1.89 billion RIN gallons, cushioning 2026. The combined D4+D5+D6 bank falls to 0.5 billion by end-2027. The bank offers almost nothing for 2027.
• Deficits. Set at five-year averages of 3.1% of the biomass-based diesel RVO for D4 and 2.3% for D6.

Can producers hit the pace?

Actual monthly D4 generation tells the story. Production started 2026 at 436 million RIN gallons in January, climbed to 838 million in June — the best month since December 2024 — and rebounded to 786 million in September. The nine-month average: 682 million. That leaves a 474 million cumulative shortfall.

Meeting 2026 would require 893 million per month in the fourth quarter. That beats every month this year and sits just below the December 2024 record of 906 million. If generation holds at September's level instead, the 2026 D4 deficit reaches about 0.60 billion RIN gallons — 6.7% of the RVO, more than double the historical average — pushing the 2027 requirement to roughly 990 million per month.

For 2027, domestic capacity falls short. Operable capacity runs about 878 million RIN gallons per month, computed from EIA data at 1.5 RINs per biodiesel gallon and 1.55 for renewable diesel. Even at 100% utilization, plants miss the requirement by 84 million gallons monthly — roughly 1.0 billion RIN gallons for the year.

The balance sheet assumes utilization rises from 60% in 2025 to 95% in 2027, plus an import rebound from 0.07 billion gallons in 2026 to 1.08 billion in 2027. Imports hit 0.95 billion gallons in 2024, so 2027 needs only 14% more. But the 45Z credit now excludes imported fuel, and 2026's revised credit limits eligibility to North American feedstocks. Imports collapsed to 0.18 billion gallons in 2025. Whether they return is the key uncertainty.

What does this change for feedstock demand?

Each physical gallon of biomass-based diesel requires about 8 pounds of feedstock. At the projected 1.54 RINs per gallon, a 1.01 billion RIN-gallon waiver — enough to bring the requirement down to domestic capacity — equals 5 billion pounds of feedstock demand. A 2.73 billion cut, holding 2027 at the 2026 level, removes 14 billion pounds. Billions of pounds of soybean oil and other feedstock demand hang on the outcome.

Compliance costs fuel the political pressure. The American Fuel & Petrochemical Manufacturers estimate RFS compliance at $106 billion over 2026–2027, or 26 to 35 cents per gallon of gasoline and diesel. The governors argue the 2027 standards would cause "severe economic harm" to their states.

EPA's coming decisions on the waiver petitions, reallocation and future SREs will largely determine whether the record 2027 volumes survive — with the Set 3 half-RIN fight waiting just behind them.