The US Senate is pondering a farm bill that would expand small refinery exemptions from Renewable Fuel Standard (RFS) blending obligations and allow year-round sales of ethanol fuel blends up to 15pc (E15).
The bill, also known as Farm Bill 2.0 and introduced by Senator John Boozman (R-Arkansas) on 31 July, provides a new avenue for advancing provisions from the stalled HR 1346 bill, with some changes.
HR 1346 made little progress in the US Senate after passing the US House of Representatives in May, as some lawmakers balked at supporting year-round E15 sales without negotiating broad changes to the RFS, sources familiar with the discussions said. Like HR 1346, the proposed bill would allow year-round sales of fuel blends up to E15, which are currently restricted during the summer to limit ground-level ozone. The US Environmental Protection Agency (EPA) has increasingly issued and extended summertime E15 waivers from Clean Air Act regulations in recent years.
Both bills would direct the EPA to conduct a rulemaking to modify fuel dispenser labeling and underground storage tank requirements for compatibility with E15 within 18 months of enactment.
The biggest difference between the two bills concerns exemptions for small refiners from annual biofuel blending mandates under the RFS.
The RFS requires refiners to blend various types of biofuels each year or buy credits, known as renewable identification numbers (RINs), from others that do so to cover their obligations. Refining facilities with a nameplate capacity of no more than 75,000 b/d can request an annual exemption from the EPA if they can show that compliance would cause disproportionate economic hardship.
These are referred to as small refinery exemptions (SRE). The EPA decides whether to grant full, partial or no relief.
Under the new proposal from the Senate, the EPA would reduce the compliance obligations of any qualifying small refinery by the lesser of two amounts: Its highest actual annual production volume from 2023-25, or its production volume for the calendar year in which the agency applies the reduction. For the former volume, the facility must have petitioned for an extension of its SRE by June 2026 for any of its 2023-25 obligations.If a refinery's actual annual production volume exceeds its highest volume from the 2023-25 period, only the additional amount is subject to RFS obligations. If a refinery no longer qualifies as a small refinery in 2028 or any year after, the EPA cannot grant a waiver from its RFS blending obligations in any subsequent year.
The EPA would need to reallocate any RFS obligations exempted from small refineries under these proposed requirements, minus an amount equal to the energy content of 500mn USG of conventional biofuels, based on its estimate of annual exempted fuel when determining program compliance obligations. The agency would start in 2028 then compare its estimate with the actual amount of exempted fuel, with any required adjustment reflected in the next year of obligations.
The EPA would also return RINs retired as part of 2016-18 obligations to small refiners that meet certain eligibility requirements, similar to HR 1346.
However, HR 1346, in contrast, would have tightened the definition of a small refiner to apply only to companies or entities that did not exceed 75,000 b/d across all facilities in 2025. The EPA would reduce by 75pc RFS obligations for qualifying small refineries starting in 2028, if they did not in 2026 or any other year exceed the 75,000 b/d threshold. The House version of the bill prohibits the EPA from reallocating any exempted volumes onto other RFS participants.
The addition of E15 and SRE language is a departure from the initial discussion draft of Farm Bill 2.0 released in June, which contained nothing about either provision.
Lawmakers were reluctant to add E15 and SRE provisions into the bill as of last month, citing already narrow support, with Democratic committee members' approval resting on ongoing Supplemental Nutrition Assistance Program (SNAP) negotiations and the medical absence of senator Mitch McConnell (R-Kentucky), sources familiar with discussions around the bill told Argus.
It is unclear what changed sentiment, but the committee's Democratic members have not indicated that the newest version of the bill achieves the SNAP changes required for their support to move it out of committee. The current farm bill expires on 30 September.
Ethanol-focused industry groups Growth Energy and the Renewable Fuels Association said they plan to continue engaging on the bill.
While the American Petroleum Institute (API) had put its support behind the "common sense" House version of SRE amendments, it is now urging Congress to reject the Senate language.
"The proposal included in the Senate farm bill fails to deliver that balanced approach, replacing it with flawed provisions that weaken America's fuel supply instead of providing the long-term certainty consumers, farmers, biofuel producers and refiners need," API told Argus.
The Senate Agriculture, Nutrition and Forestry Committee will hold a markup for the bill on 6 August. The Senate will leave for recess on 7 August, while the House is already on recess until 31 August, meaning significant progress will likely not happen until September.
