Senate Passes the BBB — But RINs Signal Caution Amid Margin Squeeze

The Senate’s passage of the “Big Beautiful Bill” (BBB) has triggered a firm recovery in feedstock markets, with soyoil futures jumping 1.73% in Chicago and premiums in Europe widening. The bill introduces long-awaited clarity around 45Z eligibility, locks in a $0.20/gal small producer credit (40A), removes ILUC penalties under the new GREET model, and requires the exclusive use of U.S. feedstocks. Yet, while the legislative breakthrough is significant, the D4 RIN market has not responded as forcefully—settling at just 1.21—suggesting structural concerns remain.

In the ARAG physical market, margins look healthier than screens suggest. RME traded at $1,430.25/mt, producing a solid $160/mt gross margin, while UCOME commanded $1,519.75/mt with a $319/mt margin. The spreads reflect a tight physical market supported by higher gasoil and summer blending demand. However, physical pricing strength is not being matched in U.S. forward economics, where the screen biodiesel margin stands at approximately –$0.41/gal—even after including the $1.21 RIN. That shortfall must be made up with policy incentives.

For soybean oil-based biodiesel, the addition of the $0.20/gal small producer credit and the new GREET-modeled 45Z incentive—estimated at another $0.20/gal for SBO—brings producers to rough breakeven levels. These stacked incentives help cover the negative screen margin, but the economics remain marginal and heavily reliant on compliance value stability. Profitability improves significantly only when using lower-CI feedstocks such as UCO, tallow, or corn oil, which can unlock 45Z values in the $0.35–$0.55/gal range.

What continues to suppress RIN value—and, by extension, soybean oil utilization—is the overhang of Small Refinery Exemption (SRE) petitions. As of June 19, the EPA is reviewing 189 active petitions, up from 169 a month earlier. If these are approved—especially retroactively, as they were in 2018–2019—they could erase up to 3.5 billion gallons of obligated blending. This latent threat discourages RIN buyers from aggressively bidding D4s higher, even with positive legislative momentum from the Senate. The EPA, empowered to act unilaterally, has not yet issued guidance. Meanwhile Jul/Dec carry in Soyoil is gone!

Jul/Dec carry is now gone

This SRE risk effectively acts as a ceiling on D4 RINs, restraining their ability to signal stronger demand for high-CI feedstocks like soybean oil. Until EPA resolves these pending petitions or the House decisively codifies tighter SRE rules, the market will continue to hedge RIN exposure—and in turn, biodiesel producers will hesitate to ramp up soybean oil usage despite otherwise improving fundamentals.

Meanwhile, in the SAF space, a divergence is emerging between the U.S. and Europe. While the BBB reduces the SAF credit to $1.00/gal, Germany is reinforcing mandates, including a PtL(Power to Liquid) SAF quota rising to 2% by 2030. More critically, Germany allows up to 5% co-processing of SAF in fossil refineries, a low-cost compliance pathway that risks sidelining standalone HEFA-SPK investments. With a proposal on the table to raise that cap to 30%, developers must now reassess SAF bankability in the European market.