The U.S. Environmental Protection Agency has announced its final Renewable Volume Obligation (RVO) blending rule for biomass-based diesel.

The EPA set the blending mandate for biodiesel and renewable diesel to 5.4 billion gallons in 2026 and 5.5 billion gallons in 2027.

That is a 61 to 64 per cent increase over the 2025 level of 3.35 billion gallons.

“We’re very pleased to see those updates, and Canadian canola can make a meaningful contribution there,” said Canola Council of Canada president Chris Davison.

WHY IT MATTERS: The U.S. is the biggest buyer of Canadian canola oil.

He has not yet seen the EPA’s official regulatory text, but based on the agency’s announcement, there does not appear to be anything preventing Canadian canola oil from helping to meet the feedstock demand for the new RVOs.

“Canola is a modest but important feedstock in U.S. biomass-based diesel production,” said Davis.

The new RVOs should create an “appreciable opportunity” for Canada’s canola crushers who have greatly increased production capacity in recent years.

U.S. oilseed groups were thrilled with the EPA’s announcement.

The American Soybean Association said soybean farmers needed a win to boost domestic markets, and U.S. president Donald Trump’s administration delivered “in a big way.”

“The 2026-27 RVOs will increase soybean oil use, boost U.S. soybean processing and grow domestic biofuel markets for our crop,” ASA president Scott Metzger stated in a press release.

The final rule also reallocates 70 per cent of retroactive small refinery exemption volumes dating back to 2016 back into the blending pool to support additional biofuel production and soybean demand.

The only letdown for U.S. soybean growers was that they did not get their wish for the rule to prioritize domestically sourced biofuel feedstocks in 2026 and 2027.

EPA to reduce credits for imported biofuel, feedstocks

However, the EPA announced that it will reduce credit generation for imported biofuels and biofuel feedstocks by half, beginning in 2028.

If the EPA lives up to that promise, it would serve as a significant additional economic driver for the U.S. soybean sector, according to the association.

Davison is not sure what the EPA means by imported biofuel and feedstocks. At one point, the agency was considering a proposal to create a ring fence covering all of North America, and anything outside that zone would be considered imported.

He needs to see the details of the regulation to figure out what the EPA is considering for 2028.

The U.S. biofuel industry accounts for more than half of all U.S. domestic soybean oil consumption.

Clean Fuels Alliance America noted that biodiesel and renewable diesel facilities were forced to shut down or run far below previous year levels in 2025 due to market uncertainty.

U.S. biodiesel production declined by one-third compared to 2024 levels.

“The robust biomass-based diesel volumes set in this rule support America’s farmers and consumers,” Kurt Kovarik, Clean Fuel’s vice-president of federal affairs, stated in a press release.

Demand from the biodiesel and renewable diesel sector accounts for 10 per cent of the value of every bushel of U.S. grown soybeans.

The National Oilseed Processors Association called it a “landmark rule” that provides certainty and confidence for American farmers and processors.

“The historic volumes for biomass-based diesel, the 70 per cent reallocation of waived gallons, and the commitment to account for SREs (small refinery exemptions) on a go-forward basis, restores program integrity and puts the RFS (renewable fuel standard) back on a growth trajectory,” association president Devin Mogler said in a press release.

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The Environmental Protection Agency set total 2026 biofuel obligations at 26.81 billion RINs and the 2027 obligation at 27.02 billion RINs.

WHY IT MATTERS: While U.S. biofuel mandates set higher demand for oilseeds, the rules could disincentivize American buyers from choosing Canadian canola in the future.

The total mandates include 70 per cent of the blending obligations that were waived under the Small Refinery Exemptions program during the 2023-2025 compliance years, the EPA said.

The EPA in June 2025 had proposed total biofuel blending volumes at 24.02 billion RINs in 2026 and 24.46 billion RINs in 2027.

EPA added on Friday that, starting in 2028, foreign fuels and feedstocks will receive only half of the RINs of American-made products.

The rule ends a period of uncertainty for both the agriculture and refining industry, whose fortunes can be significantly impacted by the country’s biofuels policies.

Farmers and biofuel producers typically want high quotas to spur demand for their products, while refiners view the blending obligations as a costly burden.

On Friday, Canola Council of Canada president Chris Davison said he was pleased with what he’s seen of the EPA’s decision, particularly the increased blending mandate.

“We’re very pleased to see those updates, and Canadian canola can make a meaningful contribution there,” Davison said.

“Canola is a modest but important feedstock in U.S. biomass-based diesel production,” said Davis.

The new RVOs should create an “appreciable opportunity” for Canada’s canola crushers who have greatly increased production capacity in recent years.

Davison said he was not sure what ‘foreign feedstocks’ would mean as at one point the agency was considering a proposal to create a ring fence covering all of North America.

— Reporting by Richard Valdmanis and Daphne Psaledakis

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The decision could be unwelcome news for larger oil refiners that have argued that additional blending obligations would raise their costs. But it could help the biofuel industry by boosting demand for blending credits.

WHY IT MATTERS: U.S. biofuel policy can effect demand for Canadian canola.

Under the Renewable Fuel Standard (RFS), oil refineries have to blend billions of gallons of ethanol and other biofuels into their fuel or buy credits, called RINs, from those that do. But small refineries can have those obligations waived if they demonstrate economic hardship.

The question of whether to reallocate those exempted blending obligations to larger refiners is a point of contention between the agriculture and fuel industries.

Biofuel groups have pushed the administration to fully reallocate the exempted gallons, saying it is crucial to support biofuel producers and the farmers growing their feedstocks. Refiners, meanwhile, have warned that reallocation unfairly forces larger plants to cover for smaller rivals, raising their compliance costs and potentially increasing pump prices.

The issue has taken on added significance after the Trump administration processed a large backlog of waiver requests totaling more than 2 billion gallons for the years 2023 through 2025, representing a sizable share of overall renewable fuel blending requirements.

Potential shift toward higher biofuel blending?

EPA officials in recent weeks have signaled they settled on reallocating at least 50 per cent of the waived volumes for those three years, and that the level could go higher, according to the sources, who asked not to be named discussing the matter.

That reflects a shift in preference toward increased biofuels blending, after the Environmental Protection Agency last year initially sought public feedback on a range of options from zero to 100 per cent.

The EPA did not comment on the Reuters reporting, but said that the agency was considering public comments and aimed to finalize the rule by the end of March.

The White House did not respond to requests for comment about the reallocation plan.

The EPA also sent its proposed 2026 and 2027 biofuel blending quotas to the White House on Wednesday, with a final rule expected before the end of March, an EPA administrator told attendees at an ethanol conference in Florida on Wednesday.

The sources cautioned that no final decision has been made and the approach could change before it is formally released.

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Chris Davison, president of the Canola Council of Canada, hasn’t had a chance to do a deep dive into the proposed regulation, but he likes what he has seen on the surface.

“On first blush, there are a number of provisions that can certainly help support Canadian canola’s access to the U.S. biofuel market,” he said.

It took one year for the U.S. Department of the Treasury and the Internal Revenue Service to clarify how the credit will work.

The credit has been available since January 2025, but producers and farmers have struggled to capitalize on it because there was minimal guidance to accompany the credit.

The newly published guidance helps biofuel producers determine their eligibility for and to calculate the credit made available under the One, Big, Beautiful Bill.

WHY IT MATTERS: The U.S. biofuel sector could be a huge customer for Canadian canola oil.

Davison is pleased to see that the credit limits feedstocks to those grown or produced in the U.S., Mexico and Canada.

“That’s a critical provision in terms of helping ensure that the economic benefits of biofuel accrue back to farmers domestically from the (Canada-U.S.-Mexico Agreement) countries,” he said.

It means biofuel made from used cooking oil and tallow from overseas markets does not qualify for the credit.

Canada’s canola industry is advocating for similar measures to be included in Canada’s Clean Fuel Regulations amendments.

The updated 45Z guidance also confirms that fuel made from Canadian canola is an approved pathway and that the indirect land use change penalties associated with agricultural feedstocks have been removed.

Biofuel is a policy-driven market, and there is one big remaining piece of that puzzle, which is when the U.S. Environmental Protection Agency establishes its Renewable Volume Obligations (RVOs) for 2026 and 2027.

The EPA has floated a proposal that imported biofuel and biofuel made with imported feedstock would be assigned half as many Renewable Identification Number (RIN) credits as fuel made with domestic feedstocks.

That idea has been embraced by groups such as the American Soybean Association but strongly opposed by Canada’s canola sector.

The EPA recently said it expects to issue its final RVO rule during the first quarter of 2026.

Davison said the 45Z credit and the RVO ruling will strongly influence Canada’s canola oil sales to the U.S. market.

He is pleased to see that the first domino appears to have fallen in the right direction.

“This is a positive development and we should recognize that,” he said.

“It recognizes that Canadian canola is an important feedstock for biofuel producers in the U.S. as well as Canada.”

Crux, a capital markets platform for the clean economy, estimates that US$1 billion in 45Z credits were transacted in 2025.

It anticipates the new guidance will unlock an additional $1 to $1.5 billion in credits by the end of the third quarter of 2026.

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The credit has been available since January 2025, but producers and farmers have struggled to capitalize on it because there was minimal guidance to accompany the credit.

WHY IT MATTERS: The U.S. biofuel sector is a potentially huge market for Canadian canola oil.

The newly published guidance helps biofuel producers determine their eligibility for and to calculate the credit made available under the One, Big, Beautiful Bill.

The big news for Canada’s canola producers is that the credit limits feedstocks to those grown or produced in the United States, Mexico and Canada.

That is something that Canada’s canola industry had been hoping for.

The credit has also been extended to Dec. 31, 2029.

Clean Fuels America welcomed the proposed 45Z rules.

“The agency responded to many taxpayer concerns and resolved some uncertainties from the guidance issued a year ago. We anticipate this proposal will provide additional market certainty for biodiesel and renewable diesel producers,” Kurt Kovarik, Clean Fuels’ vice-president of federal affairs, said in a press release.

“The delay in rule-making led to market uncertainty that took a heavy toll on our industry, undercutting fuel production and the value added to agriculture.”

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The delay now under discussion could please domestic oil refiners that have invested in the bio-based diesel sector but would risk frustrating U.S. farmers and biofuel producers.

WHY IT MATTERS: The Trump administration’s proposal to reduce incentives for imported biofuels raised concerns it would reduce demand for Canadian canola.

The proposal for the Environmental Protection Agency to slash the value of renewable fuel credits given by the U.S. government for imported biofuels was initially pitched this year as part of Trump’s “America First” energy agenda, aimed at boosting domestic production and reducing reliance on foreign supply, and was meant to take effect Jan. 1.

The Environmental Protection Agency is now weighing a plan to delay implementation of that proposal until 2027 or 2028, the sources told Reuters, speaking on condition of anonymity.

The EPA said it is reviewing public comments ahead of issuing final rules in the coming months. The agency declined to comment on whether it is considering a delay. The White House did not respond to requests for comment.

Affordability concerns

Big Oil, led by the influential American Petroleum Institute industry group, had argued that limiting credits for foreign supply could constrain availability and push fuel prices higher — an outcome the White House is eager to avoid as affordability remains a central political concern heading into next year’s congressional elections.

Under the proposed cuts in credits for imports, the EPA would allocate only half as many tradable renewable fuel credits to imported biofuels and biofuel feedstocks as to domestic ones. The shift has significant implications for bio-based diesel, which relies on imports to meet federal mandates.

The decision on a possible delay is one of several high-profile regulatory moves by the administration that the fuel industry is closely watching.

Others include finalizing 2026 biofuel blending mandates, determining whether to allow year-round sales of gasoline blended with 15 per cent ethanol, or E15, and deciding how or whether to require larger refiners to compensate for exempted gallons under the small refinery waiver program.

The protracted U.S. government shutdown and efforts to resolve a logjam of small refiner requests for exemptions from U.S. biofuel laws have also contributed to delays in resolving regulatory moves related to biofuels, the sources said.

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During an event at PepsiCo headquarters in Purchase, New York, finalists were selected across six award categories: sustainability, next-gen farming, leadership and advisory, heritage and growth, quality and farmer of the year, which the Perry Family Farm won.

WHY IT MATTERS: Regenerative agriculture continues to be at the forefront of $92-billion dollar PepsiCo as it celebrates its producers across North America, Latin America, Europe, Middle East, Africa and Asia-Pacific with inaugural Global Farmer Awards.

“The award with innovation always impresses me. They do a lot of R&D and storage stuff, building machines from the ground up with algorithms with AI kicking out certain types of potatoes” said Chris Perry, who co-manages the Perry farm with brother, Harold.

Frito-Lay North America nominated the farm.

“It’s an impressive partnership and progressive farmers that are awesome to network with.”

The field of nominees included representation of small and large-scale farmers, multi-generational families and advisers across North America, Latin America, Europe, the Middle East, Africa and Asia-Pacific. Approximately 60 farmers and advisers from 19 countries were recognized for their achievements.

“It’s not just the (Perry) family. We are there, but it’s a farm award with the crew we have and their families that share our core values where sustainability is a huge part of that. It’s embracing some of the crazy, thinking outside the box,” said Chris.

The first-of-its-kind celebration recognized achievements in sustainability, innovation and leadership in agriculture among producers who have done business with PepsiCo. The company sources more than 50 crops and ingredients from more than 60 countries.

“Our business starts with farmers. They are the heartbeat of our supply chain and the foundation of the global food system,” Ramon Laguarta, PepsiCo’s chair and chief executive officer, said in a press release.

The 5,000-plus acre, fourth-generation farm has been operating since its humble beginnings in 1909 and has supplied potatoes to Lay’s for more than 45 years, using innovative land stewardship practices in regenerative agriculture and renewable energy in its productivity practices.

They include composting, multi-species cover crops and the latest water-saving technology in irrigation. Grow the Energy Circle Ltd. is a multi-faceted bioenergy system founded by the Perry family that is a model of sustainable industry.

Harold Perry handles the farm production, which embraces multi-species cover crops that are not common in the area. Success has been found with potatoes that follow barley or winter wheat.

The farm does its best to grow a 15-species cover crop, planting it in mid-August. The biodiversity practices as a whole have netted Perry Farms increased disease suppression in its crops.

“This is out there for sure, keeping our soil covered with a green living plant for as many days as possible during the season,” said Harold.

“We are trying to get the cover crop a foot high in the air and a foot down below in the ground. Twenty per cent of that is still growing in the spring time, with winter crops like winter wheat. We green manure that in with our power hiller and plant our potatoes in that.”

There is also an on-farm bio-gas plant that uses organic waste to produce energy, leaving a nutrient-rich gestate that cuts down on commercial fertilizer use for the farm’s carbon-neutral potatoes.

“The bio-gas facility has been a huge investment for us and has been a challenge for us economically since Day One. You don’t get paid extra for that kind of stuff,” said Chris.

“But, these practices are very important to us.”

Along with potatoes, the Perrys produce green peas, sunflowers, seed canola, wheat and barley.

Recently, PepsiCo expanded its pep+ Positive Agriculture goal, aiming to drive regenerative agriculture and restorative and protective practices across 10 million acres by 2030, having already delivered more than 3.5 million acres globally as of 2024.

PepsiCo helped launch the Climate Resilience Platform, a digital tool that aims to support farmers with insights into climate conditions, potential impacts to yields and climate information.

STEP Up for Agriculture is a pre-competitive initiative developed in collaboration with Unilever and retailers to help strengthen the capacity and sustainability of farmer-facing support organizations by providing tools, training and funding to accelerate the adoption of regenerative practices and build resilient supply chains.

“The emphasis that PepsiCo is putting on the farmer, they are engaging us and really showing us how important the grower is to their whole operation,” said Harold.

“We do these things on our own, but it really aligns with so many values right now that PepsiCo is doing and celebrating. They are very forward thinking.”

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Dennis Voznesenski, agricultural economist with the Commonwealth Bank of Australia, said global production of biodiesel and renewable diesel is forecast to decline 2.4 million tonnes, which will weigh on feedstock demand and prices.

European Union production is forecast to fall to 14.8 million tonnes from 15.5 million tonnes last year.

“Not only is European biodiesel production forecast down this year, but European canola production itself is up due to favourable weather,” he said in a recent Agri Commodity Weekly Alert report.

The European Commission is forecasting 19.92 million tonnes of rapeseed production, which would be 12 percent above the five-year average.

U.S. production of biodiesel/renewable diesel is forecast at 14.2 million tonnes, down from 16 million tonnes last year.

“Poor profit margins for biofuel producers have curbed production,” said Voznesenski.

RIN values are down 47 per cent from last year. They are government credits that biofuel producers receive for producing a unit of biofuel.

Western Producer Markets Desk analyst Bruce Burnett thinks it might be premature to be forecasting a drop in U.S. biofuel production.

The U.S. Environmental Protection Agency was poised to make its final rule on biomass-based renewable volume obligations sometime around the end of October.

However, the decision could be delayed by the partial government shutdown that began Oct. 1, which furloughed nearly 90 per cent of EPA staff, according to a Biodiesel Magazine article.

The EPA released its proposed rule in June, which set a biomass-based diesel mandate of 5.61 billion gallons for 2026 and 5.86 billion gallons for 2027.

That is a massive increase from the 3.35-billion-gallon mandate for 2025 and exceeded the 5.25 billion gallons for which a coalition of oil and biofuel groups had been lobbying .

The bad news for Canadian canola growers is that the EPA also proposed that foreign biofuels and feedstocks would only generate 50 per cent of the RIN credit value relative to U.S. biofuels and feedstocks.

Burnett said U.S. demand for Canadian canola oil will greatly depend on what the EPA decides to do in its final rule because nobody is making any blending decisions based on the proposed rule that came out in June.

“The demand doesn’t appear until the regulation is finalized,” he said.

He agrees with Voznesenski that the forecast for slumping biodiesel/renewable diesel demand in the EU and the region’s large rapeseed crop is troubling.

That was supposed to be a market that could buy more Canadian canola seed, helping offset the recent loss of the Chinese market due to its imposition of a 75.8 per cent anti-dumping duty on Canadian canola seed imports.

The good news is that the U.S. Department of Agriculture is forecasting 229.28 million tonnes of global vegetable oil demand in 2025-26, a 6.78 million tonne increase over last year.

“That’s a substantial amount of vegetable oil,” said Burnett.

That seems to indicate that demand from the food sector is strong, even if biofuel demand might be waning, but it remains to be seen which vegetable oil will benefit the most from that increased demand, he said.

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The proposal submitted by the Environmental Protection Agency and now under review by the White House would require large refiners to cover a range of about 50 per cent or less of the 1.1 billion gallons of the renewable fuel exemptedlast month for small plants, according to the sources.

Why it matters: U.S. biofuel demand could have market implications for Canadian oilseed farmers.

That could mean roughly 550 million gallons of lost demand, potentially increasing the supply of renewable fuel credits and putting downward pressure on their price.

The plan, if adopted, would likely frustrate biofuel producers and farm-state lawmakers who want full restoration of lost demand caused by small refinery exemptions under the Renewable Fuel Standard, the nation’s biofuel law.

The RFS requires refiners to blend billions of gallons of biofuels into the country’s fuel pool each year or buy credits called RINs from those who do. But it also allows smaller refiners to apply for waivers if they can show the requirements would cause them financial hardship.

The EPAin August cleared a backlog of more than 170 small refinery exemption requests dating back to 2016 — a sweeping move that required it to come up with the plan to account for waived obligations.

Plan still under review

The EPA was only required to come up with a plan to reallocate exempted gallons dating back to 2023, however, because RINs generated for previous years have already expired.

The sources said that the review includes the years 2023 and beyond, and the percentages could be applied higher or lower in different years.

The plan remains under review and subject to change, the sources cautioned. It is expected to be released in the upcoming weeks, ahead of an October 30 deadline to finalize biofuel blending quotas for the 2026-2027 years.

“The EPA is in the process of evaluating a range of options that strike an appropriate balance between obligations, reallocation, and other factors that will deliver for farmers, consumers and American energy dominance,” a White House official told Reuters.

The EPA declined to provide details of the proposal.

“Big Oil” vs. the farm lobby

The biofuel industry and its legislative allies have been urging the administration to require refiners to offset 100 per cent of those exempted gallons, while the oil industry is resisting the obligations.

The EPA’s proposal is intended to be a compromise that would keep the market for RINs stable by avoiding a flood of new credits that could depress prices, while also not imposing additional burdens on refiners already facing compliance costs.

The middle ground proposal highlights the long-running clash between Big Oil and the farm lobby — two powerful constituencies that have battled for years over the future of the RFS. That divide threatens to complicate President Donald Trump’s efforts to unify Republicans ahead of a looming budget fight.

The 2023 and 2024 exempted gallons totaled some 1.4 billion credits, equaling some 1.1 billion gallons. The total number of exempted gallons will likely rise as the EPA deals with pending 2025 applications.

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The federal government will invest $370 million in a new biofuel production incentive.

Prime Minister Mark Carney announced the new investment Friday morning as part of a new slate of measures to transform Canada’s strategic industries and help businesses in the face of tariffs and job loss.

“Canada’s government will introduce a new biofuel production incentive, providing more than $370 million to assist domestic producers and help them restructure their value chains,” Carney said.

The measure is meant to address competitiveness for Canadian canola farmers and other producers.

Carney also promised the government will make “targeted amendments” to the clean fuel regulations to “spur the development of a vibrant biofuels industry in Canada,” temporarily increase loan limits for Canadian canola producers to half a million dollars, and invest in agri-marketing and trade diversification measures “to support our entire agriculture and seafood sectors.”

It will also extend reimbursement timelines and introduce new non-reimbursable contributions up to one million dollars in all sectors, including agriculture.

The new measures also included a more comprehensive “Buy Canadian” strategy, “that will move from best efforts to buy Canadian to a clear obligation to do so.”

Several agriculture organizations commended the government on its announcement.

The Canadian Pork Council (CPC) called it an “indication the Government of Canada is taking a broader economic approach to” issues like tariffs and agri-marketing.

“We look forward to continuing our work with the Government of Canada, and governments at the provincial level, to increase our sector’s economic impact for all Canadians,” said CPC chair René Roy in a Friday release.

The Agricultural Producers Association of Saskatchewan welcomed the new measures, noting several of the initiatives aligned with its previous requests.

“These are positive and necessary steps forward, and they reflect progress on the priorities we’ve raised with the federal government,” said APAS President Bill Prybylski in a written release. “The expanded interest-free Advance Payments limits and AgriMarketing focus on market diversification are critical tools for Saskatchewan farmers dealing with the fallout from global trade disputes — it’s good to see the government responding to these pressing needs while also noting the omission of any explicit supports for the pulse sector.”

Prybylski also noted the government’s omission of any mention of the pulse sector and the recent losses experienced by farmers.

A representative from the government of Saskatchewan also told Glacier FarmMedia via email they were “pleased to see financial support for canola producers” though their “focus remains on the removal of Chinese tariffs on canola.”

The full list of measures is available here.

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