House Bill Offers Year-Round E15 With SRE Compromise

Members of the Domestic Rural Energy Council are set to introduce a bill to the House of Representatives on Wednesday that would finally offer year-round access to E15 blends while also significantly changing the scope and administration of the small refinery exemption (SRE) program under the Renewable Fuel Standard (RFS), according to a copy of the measure shared with OPIS.

The introduction comes after months of negotiations between the council and lobbyists from the refining and renewable fuel industries on a compromise that would trade access to the fuel blend for notable changes to the oft-controversial SRE program.

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The Domestic Rural Energy Council, chaired by Republican Reps. Randy Feenstra of Iowa and Stephanie Bice of Oklahoma, was created in January after a bill affirming summertime access to E15 did not make its way into a package to fund the federal government, much to the chagrin of the renewable fuel and refining interests that spent months at that point brokering a deal on the long-sought allowance.

And following months of further negotiations on a potential compromise, the council produced a bill that — alongside securing summertime E15 access — would shift the relief offering to a scheme where only a select group of refineries can continue to receive a waiver on their RFS requirements so long as they comply in each successive year with certain requirements.

To achieve year-round access to the fuel blend, the bill would alter a provision in the Clean Air Act (CAA) on Reid Vapor Pressure (RVP) limits to include E15 alongside E10 as a fuel “for commerce in the area during the high ozone season.”

The fuel blend has been banned since 2011 during the smog season spanning June 1 to Sept. 15, but over the past four summers, the federal government has allowed retailers to sell the blend under a series of emergency waivers issued as a balm to fuel supply concerns.

The U.S. Environmental Protection Agency announced last month that it would offer yet another round of these waivers this summer due to the conflicts ongoing in the Middle East, but proponents for the ethanol industry have argued in recent months that the emergency relief does not provide the certainty that retailers need to invest toward expanding E15 access.

Beyond the E15 access, the bill would also prevent the EPA from reallocating any future volumes waived through SREs back into the RFS from 2028 and beyond. The topic of reallocated volumes has drawn strong reactions from proponents for both the ethanol and refining industries in recent comments to the EPA, with the former arguing that the agency should seek full reallocation while the latter implored the agency to avoid returning volumes to the program altogether.

The agency ultimately decided on somewhat of a compromise in full guidance on the Renewable Volume Obligation (RVO) for the 2026 and 2027 compliance years issued last month, in which EPA landed on a 70% rate for reallocating volumes from SREs issued for the 2023 through 2025 compliance years.

That reallocation calls for 0.21 billion RINs of biomass-based diesel in 2026 and 0.21 billion RINs in 2027, 0.28 billion RINs of advanced biofuel in 2026 and 0.34 billion RINs in 2027, and a sum of 0.99 billion RINs of total renewable fuel in 2026 and 1.04 billion RINs in 2027.

Perhaps most importantly for the refining industry, the bill would significantly restrict the SRE program and cordon it off in the future to only a few select refineries that can prove annually that they still require the relief.

Namely, the bill would alter the definition of “small refining company” in the CAA so that a facility would only be able to claim an SRE if they processed 75,000 b/d or less in a calendar year, “across all of the facilities of the company, entity, or group of affiliated entities that produced transportation fuel subject to the requirements of paragraph.” Companies that are able tocomply with the newly altered requirements would receive a 75% waiver on their RVO burden.

That fix could have a seismic effect on a few companies that regularly petition the EPA for SREs at several of their individual facilities.

The bill would also prevent future participants to the SRE program.

The EPA currently operates the SRE program by issuing individual determinations to refineries on a case-by-case basis, though that process has often resulted in delays on issuing relief, lawsuits tied to decisions, and reallocation of volumes back to the RFS.

Under Wednesday’s bill, that burden would be somewhat shifted off of the agencyin favor of a system where small refineries are rewarded with relief if they meet certain compliance requirements with each successive year.

The new scheme would likely cordon off the program to a much smaller number of participants, with those pushed out unable to receive any SRE-based relief in the future unless they apply for an emergency exemption.

And it would also place the burden on the qualifying refineries to maintain their operations, as failure to stay below the 75,000-b/d threshold would make a company ineligible for relief going forward “regardless of whether the average aggregate daily production of obligated fuels of the small refining company drops below that limit again.”

But the agency will have a carveout available to offer “at-risk” refineries future relief even if they cannot demonstrate a string of exemptions under the bill.

Under that provision, refineries can petition the EPA for relief “for the reason of the imminent risk of closure, permanent idling, or conversion to a renewable fuel production facility.”

That carveout could be tricky to achieve, however, as it requires that a given refinery can demonstrate that their closure risk “is solely caused by the cost of compliance…” Companies hoping to earn such relief would need to provide an attestation from a senior corporate officer proving the dire nature of their financial outlook.

The bill would also require that the agency return credits associated with SRE decisions from the 2016 to 2018 compliance years back to those refineries.

While the measure faces a somewhat long road as a standalone measure, sources have told OPIS this week that they expect legislators will likely attempt to tack it on to the upcoming farm bill or a potential supplemental measure to fund the war in Iran.