How New Subsidy Guidelines Could Make Brown Grease the New Gold

Recent changes, including replacing the blenders tax credit with 45Z, removal of the indirect land-use change penalty, and potential reductions in subsidies to foreign fuel and feedstock under both 45Z and RFS programs, are fundamentally rewriting feedstock economics.

In June 2025, the U.S. EPA shocked the renewable fuel world with proposed changes to the Renewable Fuel Standard including record-high mandates in forward years, and a 50 percent reduction in standard renewable identification number (RIN) credit-generation values to imported feedstock. A month later, as part of the “big, beautiful bill,” the clean fuel production credit (section 45Z) was modified to exclude feedstock from outside of North America.

Industry groups have argued both for and against the changes. Five months later, in late November, the administration was said to be considering a two-year delay on implementing many of these changes. Exclusion of imported feedstock, which makes up about 30 percent of the U.S. supply, would have an impact on the markets. The initial announcement caused the soybean-oil market to jump 16 percent over the course of a few trading days. Since then, however, prices have slowly fallen back to the prior range, leaving some concerned that a reversal of the pro-North American policy changes could be an unwelcome wet blanket to a soybean market needing demand for its outputs and a domestic recycling industry simultaneously fighting input-cost inflation and lower-cost import competition.

As of late November, it’s unclear exactly how 2026 will play out. In the worst-case scenario, we could see a continuation of the global dynamics we’ve seen in 2025, leading to an average year in the oilseed complex. In the best-case scenario, with a reduction of imports, we’d see a strong year with high prices and demand for domestic feedstock.

If both the 45Z and RFS policies are implemented as proposed, purchasers will be considering two distinct categories of feedstocks. Collecting full subsidies will be U.S.-based feedstocks such as domestic soybean oil, used cooking oil (UCO), yellow grease, tallow, and trap brown grease (TBG). Collecting the least subsidies, a 50 percent reduction in RINs and a 100 percent reduction in 45Z would be feedstocks from outside North America. At present, there are two major demand centers for commodity oilseeds at the current price levels: European-subsidized biofuels, and U.S.-subsidized biofuels. The effect on non-U.S. and EU markets would be particularly dramatic if the EU simultaneously reduced its subsidy availability to poorly regulated foreign markets.

And while this “keep subsidies domestic” push in both the EU and U.S. would decimate demand for external suppliers, the resulting domestic “booms” would be substantial. Initially, producers in the U.S. would need to turn to soybean oil to fill the majority of the feedstock gap left vacant by foreign feedstock exclusion. This would elevate bean-oil prices, improving margins for the crusher, the farmer and the other markets that follow the lead of soybean oil such as UCO, yellow grease and TBG. The elevated margins in these industries will then trigger further investment in these industries, particularly the TBG industry where substantial efficiency and volume gains are still possible.

Everyone already knows that UCO and yellow grease are “liquid gold,” but only some have recognized that even lower-quality oils are now the equivalent of “sour crude.” What makes TBG such a huge opportunity is that so much of it remains unharvested. While soybean oil and other better-known domestic feedstocks would be the immediate winners in a “reduced subsidies for imports” regime, the medium- to longer-term winners will be alternate feedstocks such as brown grease that are currently untapped but have the potential to fill major gaps in domestic supply.

While it was common to see TBG trading at 50 percent or less of these higher-grade feedstocks in past decades, its value has been steadily rising for over five years relative to UCO, soybean oil and other international feedstocks. Reducing the value of subsidies generated from nondomestic fuel and feedstock imports would open the door to a flood of entrepreneurs ready to find ways to capture and refine “dirty” feedstocks such as TBG. Keep reading to learn how you can help your company turn TBG into a valuable revenue stream, regardless of the regulatory landscape.

EPA, IRS Policy Shift to Disfavor Subsidizing Foreign Markets

One USDA analysis found that roughly a third of biomass-based diesel feedstock used in the U.S. was imported—including UCO from Asia and Europe.

The newly proposed RFS rules state that imported feedstocks would be eligible for half the RIN subsidies of domestic feedstocks. The value of the D4 RIN varies—over the past two years it has ranged from 38 cents per gallon (cpg) to $1.27 per gallon, and in November 2025, one RIN was worth $1. At that rate, a gallon of biofuel earns 1.74 RIN credits or $1.74 per gallon. But for biofuel made outside the U.S., or made with feedstocks from outside the U.S., a biofuel producer would only earn 0.87 RINs, or 87 cpg. To be worth buying, the foreign feedstock would need to be 87 cpg cheaper than domestic feedstock.

Plus, the U.S. treasury department may also restrict tax incentives to those of North American origin only. The 45Z subsidy is worth around 50 cpg for domestic feedstocks, but feedstocks coming from outside of the U.S., Canada and Mexico would be completely ineligible. If the feedstock or fuel comes from outside North America, the producer would forfeit this credit.

Anticipating these changes, producers pushed foreign feedstock through the system before the end of 2025 to avoid the penalty, causing a temporary spike in foreign feedstock run rates and a drop in domestic run rates. But we could have far fewer cargoes carrying foreign feedstock coming into the U.S. going forward.

If these new regulations are realized, we at Reiter USA expect imports of renewable diesel, biodiesel, and fats and oils—at least from outside North America—to plummet. We could see some imports for edible oil and livestock, but the economics into fuels likely won’t work.

The demand for domestic feedstocks would climb and there would be a gap in supply. Biofuel producers will want to find domestic feedstocks that qualify for full credits under the new guidelines. The result could be sustained higher fats, oils and grease (FOG) prices. While TBG is often more difficult to harvest and transform into biofuel, the high cost of today’s soybean oil and UCO incentivize the extra effort.

The TBG Solution

Soybean oil and domestic UCO are already major contributors to the U.S. market. But if a significant volume of imported UCO is phased out of the subsidy program, producers will still need more feedstock. One attractive option is TBG. Your facility might need some updates to handle it, but it’s better than not having feedstock.

The U.S. produces an estimated 1.5 billion to 2 billion pounds of trap grease annually, much of which is still landfilled or sent to anaerobic digestion. That’s a lot of untapped feedstock.

For years, TBG—the low-grade waste oil collected from grease traps and wastewater—was seen as too costly to clean and process, but with help from Reiter USA, that doesn’t have to be the case. Even if the regulations stay exactly the same, the investment can be worth it for many in the industry. Reiter USA spent years working with fuel producers to scrub TBG preproduction, but more recently the company has started helping grease-trap pumpers implement low-cost TBG recovery systems.

We are in a unique position to help because we don’t represent a specific equipment company. We focus on designing the process that best fits your situation, then source the commonly available components you need to make it happen. Working with Reiter USA saves clients time and can cut your costs in half.

How to Start Collecting TBG, Maximize Revenue

Reiter USA’s consulting division guides companies through facility design and equipment procurement at a fraction of the cost of other companies. Often, we will outfit an entire facility for a client for less than the cost of a single component sold by competitors. That’s because Reiter USA is unbiased. We’re not selling equipment—we are designing solutions. An unbiased advisor like Reiter USA can guide your component purchases, putting together a process and plant that is tailored to your location and needs, and you’ll still pay less than what you would if you were purchasing off-the-shelf equipment.

Once you’ve gotten your facility built, you’ll need to be able to track your pickups in order to get the greatest return on investment. EPA and California Air Resources Board require “cradle to grave tracking” for TBG just like for UCO. Without records, which need to be stored for 10 years in case of an audit, your grease is less valuable to biofuel producers. We have low-cost and easy-to-use software dedicated to this purpose accessible to clients of all sizes. We even offer a free “starter tier” to help companies get off the ground at minimal cost while still maintaining sound regulatory footing.

Records matter. It was a unique situation, but near the end of 2025, Reiter USA was able to offer clients contracts that paid 6 cents more for TBG with records on Route Simplified—a software we offer to collectors—than we could offer for TBG without documentation.

The records are worth it. You don’t want your material shipped to animal-feed producers in nearby countries with less strict feed-control rules and then sold back to us as pork, chicken or beef. This is where the low-quality, “untraceable” material often ends up to avoid domestic feed regulations.

If you want to be successful in collecting and selling TBG, no matter where you are in the process, your first step is to call Reiter USA at the number below. We’ll walk you through facility design and setup. We’ll help you find the right equipment at the right prices to get you into production quickly and easily, and in compliance with common fire and environmental-design standards. Once you’re ready to collect, we’ll get you on the Route Simplified software so you can gain 20-plus percent operational efficiency and easily track the data necessary to sell into the domestic renewable fuel market. And when you’re ready to sell, we’ll make sure you capture the full market value. Reiter USA is here to help you, from start-up through the ultimate sale of your company and transition into retirement.

Our 18 years in the biofuel and feedstock space mean we can help our clients capitalize on opportunities and avoid mistakes at all points in their development process. From consulting to software and trading, Reiter is committed to the success of our clients.

Reiter USA is prepared to support UCO collectors and biofuel producers throughout their lifespans. Give us a call if you are looking to build, expand, improve operational efficiency and maximize revenue every step of the way.

Author: Kristof Reiter

CEO, Reiter USA

888-428-5617

kristof@reiterscientific.com