Major US fuel groups agree on the framework for a bill that would authorize a higher ethanol blend in gasoline and revamp a separate program requiring biofuel blending. But there is more work ahead before a final deal can be reached, sources told Argus.
The American Petroleum Institute withdrew support earlier this year for a slimmer bill allowing year-round sale of gasoline blends with 15pc ethanol (E15), kickstarting a new round of negotiations. The group has since been pitching the White House and biofuel groups on a larger bill that would both allow E15 and restrict small refiners' ability to skirt biofuel quotas.
The oil group, ethanol advocates and fuel retailers last week publicly endorsed the general framework of a bill to allow year-round E15 and limit small refinery blending exemptions, and negotiations are ongoing. The issue has the attention of President Donald Trump, who asked a farmer at a White House event this week if E15 would be "a big deal".
The US requires oil companies to annually blend biofuels, while allowing small refiners to seek hardship exemptions. Sales of ethanol blends above 10pc are limited in the summer due to smog rules.
Whether the groups can compromise and persuade Congress to act will shape crop demand, biofuel production margins and retail fuel prices in the coming years. Past proposals to legalize E15 year-round, a longtime priority for the ethanol industry, have failed.
The idea
The American Petroleum Institute's pitch for reining in exemptions is to reduce the number of eligible companies and to make it harder for them to prove distress, according to five people familiar with the group's lobbying. A Trump administration plan that would require refiners without exemptions to blend more biofuels to compensate for refiners with exemptions has raised the stakes of the debate and riled larger oil companies.
The oil group has floated restricting exemptions to companies with limited collective refining capacity, excluding larger enterprises like Delek that own multiple smaller units.
The group has also proposed scrapping a Department of Energy hardship scoring system that has yielded unpredictable results over the years and that a 2022 Government Accountability Office study found was "critically flawed".
Instead, refiners would have to prove that hardship stems directly from the biofuel program, and regulators could offer "proportional" exemptions based on the evidence, three of the people said. The US currently waives either all or half of the blend mandates for refiners that prove hardship.
The Trump administration this year granted dozens of requests for exemptions from prior-year mandates, and more petitions are pending.
More work ahead
While these ideas address longstanding concerns from biofuel and crop groups that waivers curb demand for their products, the American Petroleum Institute also wants to permanently bar regulators from requiring other oil companies offset biofuel volumes lost to exemptions — a tougher sell in the Farm Belt.
Another concern is timing. The American Petroleum Institute initially pushed for the exemption changes and ban on redistributing biofuel obligations to take effect next year. But some energy lobbyists want a delay until 2028, fearing that immediate changes could delay the Trump administration's work to finalize new biofuel blend mandates, three people said. New quotas for 2026 and 2027 are already late.
Oil interests outside the American Petroleum Institute could also push back if negotiations advance. Refiners so far have been divided. Some want to protect their ability to win lucrative exemptions, while others have long taken issue with special rules for their competitors and hotly oppose Trump's plan to make them blend more biofuels to compensate.
Even if the groups reach a deal, convincing Congress is its own challenge. An E15 proposal last year was pulled out of a larger spending package at the last minute, and farm-state lawmakers have been unsuccessful more recently in their efforts to add E15 to a defense bill. One option lobbyists have eyed is adding any new E15 agreement to legislation to fund the government after 30 January.
The Renewable Fuels Association, which represents ethanol producers, said that it "continues to have serious discussions with multiple stakeholder groups and we are encouraged by the progress of those conversations". The American Petroleum Institute and ethanol industry group Growth Energy declined to comment.
The Environmental Protection Agency said it is "committed to strengthening American energy security and supporting American farmers" but noted that changing rules around E15 and small refinery exemptions "requires an act of Congress".
It is not clear how much more ethanol drivers would burn if the US permitted year-round E15. Most gas stations do not currently offer the blend, which advocates blame on regulatory hurdles deterring retailers from investing in new infrastructure. Rising vehicle fuel efficiency and electric vehicle sales have also cut into liquid fuel demand.
