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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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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1. On the better soil, the crops are good or at least better than expected.
2. On the lighter or poorer crop ground, we see half of the crop on better soil.

This all goes to water retention or the ability of the soil to capture and hold moisture in the soil. Certain regions received rain earlier than others, and some types of soil have a limited capacity for retaining moisture. But, we can fix this by adding organic matter. The simplest way to do this is by grazing bales in the lighter soil.

On our farm this year, we have a patchwork of green oasis amid a sea of dried-up forages. It goes to prove the adage that water is the first and most important of the nutrients required for growing plants. You can have all the other nutrients balanced for the plants to grow and be healthy, but we need the right amount of water first.

As producers, it’s easy for us to become focused on the little things that influence our environment. Sometimes, we need to stop and look over the horizon.

Tariffs and farm profit

I follow producers from all around the world online. I enjoy seeing how producers in other areas of the world deal with the same problems we deal with. There is always more than one way to solve a problem.

So far, the new tariffs introduced in the United States haven’t had much impact on us at our farm and others in my network. Hopefully, that remains the case. But, from my take, it has been six months of confusion for nothing.

I recently met and talked with a group of regenerative producers from Australia (they were touring regen ag practicing operations in Western Canada) and they too could not understand the tariff goal on their country. It was one more thing we had in common.

Now, with abundant supply of crops, the price has dropped off the charts and below the cost of production. It is hard for any producer to forward market their next crop for a loss; they are dreaming of locking in a break-even price.

The U.S. can make payments to their crop producers this year to keep them in business, but the crop inventory surplus is still there and still needs marketing, thereby kicking the can down the road.

In Canada, the main cash crop for annual production has been canola; now dealing with tariffs from China. In the last few years, canola has been paying the bills and paying to grow a rotation crop (wheat, oats, barley) to reduce disease pressure. When I sit back and think about the market price on canola, I am pleasantly surprised that it has not dropped further than it has.

There has been talk about using canola and soybeans for biofuel. We already use corn and wheat for ethanol to mix into gasoline. Biofuel is planned to be incorporated into or used as a substitute for diesel fuel. I do have to question the ethics of “Food for Fuel” … do we no longer have hungry people to feed? Do we change the mantra from “farmers feed the world” to “farmers power the world?”

Another question I have about these practices is about the best use of energy: calories of energy going into a product versus calories of energy out of a product. How many calories of energy go into producing canola, to produce biofuel and, in turn, how many calories of energy will that biofuel produce? In my view, diesel fuel will produce cheaper calories of energy. We as Canadians need to have this discussion before we start putting our own and government money into these projects.

The science is out there, but no one is talking about this. I am not against value adding, I believe we as a producers should be encouraging value adding and making use of the byproducts in every way we can. Up-valuing all we can keeps money here in Canada.

Long-term beef planning

The livestock market is hot and getting hotter every day. Now is the time to plan how to stay in the beef business when it cycles back to falling markets, like the annual crop production is now.

All ag products run on cycles of supply and demand, high production and low production, profit and loss. Producers will often say when the returns are high, “this time it will be different” and when it crashes back down will say “Please give me one more chance at a high price and I will not spend it all on new equipment.”

When we look at the beef cycle, we see that we have finished the consolidation phase and have now entered the expansion stage of the cycle.

The demand for beef has been holding out well and should remain strong as long as the economy holds on. If consumers restrict their beef purchases because of personal finances, we will see a new reality.

From my conversations with ag lenders in the area, they are lending to a few young producers for cattle purchases. All these new producers are coming in with cattle experience from home and are adding to the family operation. Overall, we are still seeing many older producers leaving the industry and few producers stepping up to replace them.

Despite the beef market boom, over last five years we have seen many pastures and hay fields broken up for annual crop production. I strongly believe that 20 to 30 per cent of these acres should be put back into forages, primarily to maintain the cow herds and improve soil health, reduce disease and weed pressure. Of course, that raises the other side of the equation: if that put back were to occur, would there be enough forage seeds to plant 20 per cent of annual crop land to forage?

Now is the time to sit down with paper and pencils and work out how you are going to make your operation more profitable and survive the current crop market downturn. Remember that no one has the right answer for your operation, but by reaching out to leading producers in your area, government agencies like Manitoba Agriculture, Agriculture and Agri-Food Canada or Manitoba Agricultural Services Corporation, and research groups like universities or the Beef Cattle Research Council, you can improve your own knowledge. If you are facing challenges, you cannot expect better results by doing the same thing repeatedly, as many producers tend to do. We must be proactive in our surroundings, not reactive. We need to take charge of our world.

At our local grazing club out of Lenore, the farm tour is always the highlight each year. We travel around our area to see what local producers are doing and trying out. We also visit with neighbours and, of course, consume a few barley pops to avoid dehydration.

A few years ago, I met a no-till producer who, after 25 years, was not happy with his soil health journey. He wanted to see bigger soil health gains and he thought that he needed to add a legume forage to his rotation.

He has since been happy with the soil’s response to an approach where he seeds once and harvests for the next three crops. In his mix he has 30 pounds an acre of fall rye, five pounds of hairy vetch, 20 pounds of oats, three to five pounds of millet, two to three pounds each of meadow bromegrass and orchard grass and three to five pounds of alfalfa.

On the first year, he does a chemical burnoff of spring growth and direct-seeds the blend in with a starter fertilizer. Late July or early August, a neighbour cuts and bales the crop, or cuts it for silage (silage seems to work better). In the second year, rye and hairy vetch are harvested for feed or seed in early July. After three to four years, hay is cut in July, then a chemical burn down is used before planting the following spring when the land returns to rotation. This has been a win-win deal for the annual no-till cropper and the cow-calf producer next door.

Please remember to reach out to others in this busy season and ask how they are doing. If you need to talk to someone, please reach out to the groups in the province that have farmer hot lines. You are not alone dealing with it all.

I hope to see you all at the 2025 Manitoba Forage and Grassland Association Regen Ag Conference Nov. 12-13 at the Victoria Inn in Brandon. It looks like another awesome agenda and the MFGA conference is always a great venue and opportunity for discussions and catch up with farmers interested in learning more about things you want to learn more about.

Larry Wegner is a former board member of the Manitoba Forage and Grassland Association and MFGA Wall of Fame inductee. This article first appeared as a blog post published by the Manitoba Forage and Grassland Association.

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That was one message from this year’s Fields on Wheels Conference, hosted by the University of Manitoba and the Transport Institute on Oct. 8.

WHY IT MATTERS: Investment is a hard sell when markets and trade policies sit on unstable ground, and the earth underpinning Canadian agriculture and agri-food business decisions has been rocking hard all year.

Both tariffs and protectionism are reshaping Canada’s agricultural landscape, particularly with the country’s two most critical export markets, the United States and China. If historical patterns hold, current uncertainty levels could trigger a 25 per cent drop in business investment and push unemployment up one percentage point, according to Trevor Tombe, an economics professor at the University of Calgary.

“By far the larger shock that Canada’s been experiencing, and many sectors have been experiencing, is the uncertainty shock,” Tombe said. “We’re one tweet away from the fundamental economic relationship being completely upended between Canada and the United States.”

Market barriers hit

That uncertainty is already taking a toll. Cam Dahl, general manager of Manitoba Pork, said the sector should be seeing major investments in new facilities during this phase of the production cycle, but money has dried up.

“A new hog barn, it’s not $10,000, it’s $15 million to $20 million,” Dahl said. “We should be seeing investment in additional processing, but that investment is not happening. And the significant reason that that is not happening is because of global and trade uncertainty, in particular with the United States.”

Manitoba’s pork sector produces eight to 8.5 million pigs annually and exports 90 per cent of production, either as pork products or live animals. The industry supports 22,000 jobs and contributes $2.3 billion to provincial GDP, Dahl said.

For canola, the challenges are multiplying. China, which has historically been the top buyer of Canadian canola seed, imposed preliminary anti-dumping duties of 75.8 per cent last August, on top of retaliatory tariffs on pork, canola oil and meal, peas and fish announced back in March.

There’s also the recent changes to U.S. biofuel policy, which speakers noted have temporarily reduced canola oil’s competitiveness in the renewable fuel market, though there are some positive policy signals emerging, according to Brittany Wood, senior manager of trade and transport policy with the Canadian Canola Growers Association.

North of the border, the federal government promised $370 million to biofuel production incentives in the wake of canola’s difficulties, part of a support measures package that was welcomed by biofuel producers, although the cash advance changes that were part of the same announcement, and which be of more immediate impact to canola producers, failed to gain traction with growers.

Domestic biofuel production has potential for growth, Wood said, with new renewable diesel facilities in Canada creating significant new demand for canola oil.

A facility producing one billion litres of renewable fuel requires one million metric tonnes of canola oil, attendees heard, equivalent to Canada’s second and third-largest seed export markets combined.

“That is like a whole new market,” Wood said.

U.S. market importance

Both Dahl and Wood agree that, while market diversification is important, it cannot replace the U.S. market for Canadian agriculture. The U.S. market accounted for $7.7 billion of Canada’s $14.4 billion in agricultural exports in 2024.

Dahl warned that protectionism predates recent political changes and is appearing in multiple forms beyond traditional tariffs. He pointed to California’s Proposition 12, which extends state animal welfare regulations across North America, forcing Manitoba farmers to comply with California rules. The pork sector has long argued that such measures threaten to throw a wrench into the harmonized U.S.-Canada market.

“We didn’t negotiate a trade agreement with individual states. We negotiated it with the United States of America,” Dahl said. “So, this extrajudicial reach of sub-national governments is something that does need to be addressed.”

CUSMA review looms large

The coming review of the Canada-U.S.-Mexico Agreement (CUSMA) represents a critical juncture, speakers said. Agriculture needs a unified strategy before negotiations intensify, Dahl believes.

“If you’re a trade negotiator or you’re the federal minister of agriculture, and you have 400 different opinions, you can do whatever you want, or you can do nothing,” he said. “Agriculture needs to get together and have a strategic plan, and we probably should have done that two years ago.”

Building U.S. alliances key

Dahl urged Canadian producers to build stronger relationships with U.S. farm organizations and state governments. He believes that senators are more likely to listen to voices from their home states than to Canadian officials.

“We need to be reaching out to our partners in the United States,” he said. “Senators aren’t going to listen to the Canadian agriculture organization. Two senators from Iowa are going to listen when the president of the Iowa Farm Bureau calls.”

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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.

WHY IT MATTERS: Canadian grain farmers have hoped that biofuel will open up new markets for their commodities.

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 package of policy initiatives includes $370 million in biofuel production incentives aimed at making Canada’s producers more competitive with their counterparts in the United States.

“The government intends to make targeted amendments to the Clean Fuel Regulations (CFR) to introduce a time-limited production incentive for renewable diesel and biodiesel producers and work with provinces and territories to explore complementary measures,” the Prime Minister’s office stated in a press release.

The incentive will be applied on a per litre basis and will be available from January 2026 to December 2027 for up to 300 million litres per facility.

Advanced Biofuels Canada Association (ABFC) welcomed the announcement.

“It gives our domestic biofuels sector the chance not only to compete, but to grow,” ABFC president Fred Ghatala said in a press release.

“This new program will help restore competitiveness for domestic producers, enabling facilities to restart operations and expand capacity, and will shore up struggling feedstock markets.”

The group had been lobbying Ottawa for an incentive program that would make Canadian biofuel producers competitive with their U.S. counterparts when it comes to meeting Canada’s CFR.

U.S. biofuel producers are collecting the new U.S. 45Z production tax credit and then exporting their product to Canada where their heavily subsidized fuel competes with Canadian biofuel in meeting the CFR targets.

Canadian biofuel is not eligible for the 45Z credit and is thus at a significant disadvantage.

Ghatala said U.S. soybean-based biodiesel and renewable diesel collects a tax credit worth an average of $0.24 per litre.

The Liberal government also announced it is investing an additional $75 million over five years in Agriculture Canada’s AgriMarketing program starting in 2026-27.

The money will be spent on expanding the program into high-growth areas such as Africa, the Middle East and the Indo-Pacific.

And Ottawa is temporarily doubling the interest-free portion for canola advances in the Advance Payments Program to $500,000. The new rules will be in place for the remainder of the 2025 program and the 2026 program year.

Farmers disappointed

The canola sector said the government support came up short.

“The measures announced today do not reflect the seriousness of the challenge facing the value chain,” Chris Davision, president of the Canola Council of Canada said in a press release.

“We have communicated the need for appropriate financial and policy supports, and the federal government has missed the mark.”

Canadian Canola Growers Association president Rick White said farmers should not be expected to borrow their way out of the situation.

“The Advanced Payments Program is not designed to provide the required support canola farmers need under this situation,” he said in the joint press release.

Davison said the government failed to recognize the extensive impacts on the rest of the value chain, noting that exporters and processors are also facing “significant financial impacts” due to the closure of the Chinese market.

The groups were happy to see there was some support for the biofuel sector but noted that the incentive does not go far enough in driving meaningful additional domestic demand for canola.

They called on Ottawa to provide “meaningful and impactful” support for an industry navigating a trade crisis and to “pursue all avenues” for resolving the dispute with China.

Advanced Biofuels Canada also had some further requests.

It would like to see the government provide a domestic content requirement in the CFR like there is in the proposed revisions to the U.S. Renewable Fuel Standard.

Ghatala would like Ottawa to follow the lead of British Columbia and Ontario, which both moved quickly to put domestic content requirements in place in their provincial regulations.

Lastly, the organization would like Ottawa to provide a firm commitment to continuing the CFR program.

“This policy is working and should be maintained,” said Ghatala.

The CFR has come under attack recently by Conservative leader Pierre Poilievre who calls the policy “carbon tax 2.0,” noting that it will increase fuel prices $0.17 per litre by 2030.

He said the Liberals’ second carbon tax will cause a $6.4 billion contraction in the Canadian economy.

Ghatala said the CFR is as pro-agriculture as a policy can get. Canola accounted for 50 percent of the biodiesel and 22 percent of the renewable diesel credits under the CFR in 2024.

“The Clean Fuel Regulations will add $1.09 in value per bushel, creating or preserving average farm revenue by $60,000,” he said.

“Foreign markets can shut out Canadian canola with the stroke of a pen based on policies that canola farmers can’t control. What they can control is support for a Canadian policy that goes directly to their operation’s bottom lines.”

He said Poilievre should keep that in mind considering he now represents the people of Battle River-Crowfoot, the second-largest canola producing constituency of Alberta.

There is a canola crush plant in the constituency and Canada’s largest renewable diesel facility, the Imperial Oil plant at Strathcona County, is located nearby.

Canada produces about 500 million litres of biodiesel and 2.1 billion litres of renewable diesel annually.

Ghatala said if the CFR is properly updated and maintained it could create a market for another 2.3 billion litres of renewable diesel production.

That could in turn potentially create a new market for 5.9 million tonnes of canola, which is the volume of exports that will be lost by the closure of the Chinese market due to its 75.8 per cent anti-dumping tariff.

He said it is imperative that the Canadian government bolster the market for domestically produced biofuels because flow of the fuel south into the U.S. market has slowed tremendously due to the inability to qualify for the 45Z tax credit.

Canada’s biodiesel exports to the U.S. slowed to 2,000 barrels per day during the first half of 2025, down from 35,000 barrels per day the same period one year ago.

Renewable diesel exports were 5,000 barrels per day during the first half of 2025 compared to 33,000 barrels per day last year.

“The stats speak for themselves,” said Ghatala.

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Continued wrangling on biofuel policy

U.S. industry groups continue to spar with the Trump administration over a proposal to slash incentives for biofuel imports. The Environmental Protection Agency (EPA) proposal, which could be finalized before the end of the year, would allocate half as many renewable fuel credits to imported biofuels and biofuel feedstocks as to domestic ones.

Effectively, U.S. biofuel plants using Canadian canola would earn 12 cents less per pound from fuel credits than if they used U.S. soybean oil, wrote FCC senior economist Justin Shepherd in an Aug. 13 report.

The American Petroleum Institute said in a letter to the EPA that the country lacks enough feedstock to meet federal quotas without imports.

“As proposed it is unworkable and would have significant harmful effects on the overall (Renewable Fuel Standard) program and could place upward pressure on fuel costs,” the institute said.

The institute also challenged the legality of the proposal.

U.S. producers, specifically soybean farmers, hailed the proposed shift as a victory, arguing the Renewable Fuel Standard was always intended to boost domestic production and that countries like China were flooding the market with cheap supply.

Canadian impacts

“Canada exports more vegetable oil – mainly canola – to the U.S. for biofuel production than it uses domestically,” Shepherd wrote.

Canada used a bit more than 1 million tonnes of vegetable oil for domestic biodiesel and renewable diesel, but exported 2.8 million tonnes to the U.S, he said.

The U.S. tax credit for biofuels has also shifted from being granted at the point of blending to a producer-based model. This changed excludes imported Canadian biodiesel and renewable diesel.

“This adjustment may reduce opportunities for Canadian exports of these biofuels, leading domestically produced biodiesel and renewable diesel to seek alternative markets,” Shepherd said.

Canadian biodiesel and renewable diesel output ramped up in 2024 as two new facilities came online, however the FCC report shows production dropped off as the new year began. It attributes this to uncertainty around the U.S. blender tax credit.

The EPA also announced higher-than-expected blending targets for 2026 and 2027, which boosted North American oilseed markets.

Hopeful signs?

“These considerations indicate that biodiesel and renewable diesel produced in Canada may face demand constraints,” wrote Shepherd.

However, the USDA projects that more than half of U.S.-produced soybean oil will be used for biofuels. This could send domestic and international buyers to Canadian vegetable oil as an alternative. Since canola oil is closely linked in price to soybean oil, it could see some market support.

Canadian oilseed producers could also see some opportunity down the line in sustainable aviation fuel (SAF) production. Sustainable aviation fuel production is produced via similar methods to renewable diesel and also typically uses vegetable oils as feedstocks.

“Canada does not have operational plants, though future development is anticipated,” Shepherd said.

—With files from Reuters

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The Canadian International Trade Tribunal published its decision on Monday and said in a news release that it had terminated its inquiry into the matter.

The investigation was launched in early March after British Columbia-based Tidewater Renewables Ltd. filed a complaint with the Canadian Border Services Agency.

Tidewater alleged that due to an increase in the volume of dumped and subsidized U.S. imports, it lost market share and sales, and saw depressed prices and profitability.

The complaint was not related to ongoing trade disputes with the U.S., the company said.

The tribunal is an independent, quasi-judicial body that reports to Parliament through the Minister of Finance.

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The coalition also recommended total federal biofuel blending mandates for 2026 at 25 billion gallons, the sources said. The coalition, led by the American Petroleum Institute, a top U.S. oil trade group, presented the figures to the EPA in a meeting last week.

Why it matters: The trajectory of the U.S. biofuel market has implication for Canadian oilseed producers

While the recommendations were for one year of mandates, the EPA is expected to release a proposal that covers both 2026 and 2027, Reuters previously reported.

API declined to comment on specific numbers, while the EPA did not respond to a request for comment.

The coalition’s suggestion of 5.25 billion gallons for biomass-based diesel mandates was slightly lower than the range of 5.5 billion to 5.75 billion gallons considered ahead of the meeting and previously reported by Reuters.

Big Oil and the Farm Belt’s biofuel makers are traditional competitors in the multibillion-dollar U.S. gasoline market, but have come together to form a consensus at the request of the White House in recent months in hopes of avoiding the type of clashes that defined the first Trump administration.

The new 5.25 billion-gallon figure from the API-led coalition is in line with a number recommended to the EPA by Clean Fuels Alliance America – a U.S. biodiesel trade group – along with farm and feedstock groups.

In a mid-March letter to EPA Administrator Lee Zeldin, that coalition said EPA’s previous mandates failed to support the growth of the advanced biofuel industry and undercut the market.

The EPA set biomass-based diesel mandates for the 2025 compliance year at 3.35 billion gallons.

Under the U.S. Renewable Fuel Standard, oil refiners must blend billions of gallons of biofuels into the nation’s fuel mix, or buy tradable credits from those that do.

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