HR 1346 — the Nationwide Consumer and Fuel Retailer Choice Act — passed the House by a narrow margin this week and now goes to the Senate for consideration. The bill does three main things:
First, it extends the Clean Air Act’s Reid Vapor Pressure (RVP) waiver to E15. Under current law, the 1-psi RVP waiver that allows summer sales of E10 gasoline does not apply to E15, so E15 has been effectively prohibited during the summer high ozone season in most of the country. That seasonal sales gap has left retailers without a year-round market for the fuel and discouraged investment in E15 infrastructure. The bill resolves the issue by making E15 eligible for the same RVP waiver as E10, allowing year-round sales nationwide.
Second, beginning in 2028, the bill replaces the existing small refinery exemption (SRE) framework with an automatic 75% reduction in RFS compliance obligations for qualifying small refining companies and prohibits EPA from reallocating those gallons to other obligated parties. The eligibility definition also tightens. Under existing law, the 75,000-bpd small-refinery threshold applies facility-by-facility, regardless of the parent company’s overall size — a structure that has allowed integrated majors to qualify through individual small subsidiaries. The bill switches to a company-level cap, aggregating production of obligated fuels across all affiliated entities (subsidiaries, parents, joint ventures, holding companies, spin-offs) and locking eligibility to 2025 production. The pool of eligible refineries is materially smaller as a result.
Third, the bill returns retired 2016–2018 compliance year RINs to small refineries that had outstanding SRE petitions during that period, overriding the standard two-year limit on the life of RINs, and allows returned RINs to be applied to future compliance obligations.
The first two provisions are the centerpiece of the political debate. The third has gotten almost no attention so far, and as I will argue below, it should.
HR 1346 was designed to be a compromise on two hot-button political issues: E15 and SREs. The American Soybean Association (ASA) threw a real spanner in the works when it withdrew support for the bill earlier this week in response to a new report from FAPRI-UM. The reaction from farmers across the Corn Belt has ranged from confusion to anger — including a sense of betrayal between two constituencies that usually pull together. I even saw a video on X of a farmer burning an ASA magazine!
The way to cut through the noise is to think about this as a benefits-versus-costs question from a Corn Belt grain farmer’s perspective. The asymmetry between the two sides of the ledger is what matters most. The benefits — increased corn ethanol demand from E15 adoption — are highly uncertain. The costs — falling on biomass-based diesel demand — are far more certain. Understanding why requires three concepts about how the RFS actually works in practice: the marginal compliance gallon, SREs, and reallocation. Once those concepts are in hand, three distinct costs to soybean producers come into focus.
First, the marginal compliance gallon. Corn ethanol use in the U.S. is constrained by the E10 blend wall, not by the RFS mandate. The reason is economic. Ethanol is a competitive blend component in E10 gasoline because of its high octane value, and refiners will blend up to the E10 level because ethanol is the cheapest source of octane available. Refiners will do this even without a mandate. The RFS has not been the binding constraint on E10 ethanol demand for many years, maybe even predating the RFS itself. Since around 2010, ethanol use has bumped against the blend wall. The conventional RFS mandate first went above the E10 blend wall in 2013. The room between the conventional mandate and the E10 blendwall is called the “conventional gap.” That extra room since 2013 has been filled by biomass-based diesel (mainly FAME biodiesel and renewable diesel) spilling down from the advanced category. Biomass-based diesel (BBD) is therefore the marginal compliance gallon for the RFS as a whole. It satisfies the BBD sub-mandate, fills the advanced mandate above any cellulosic gallons, and spills over into the conventional gap. Crucially, the number one feedstock used to make BBD is soybean oil, which means demand for soybeans is directly tied to the conventional gap.
Second, small refinery exemptions. Under existing law, a small refinery can petition EPA each year for an exemption from RFS compliance on hardship grounds. EPA’s approval rates have swung dramatically across administrations and been heavily litigated. HR 1346’s automatic 75% obligation reduction entirely replaces this case-by-case petition framework. The shift from petition-based and contested to automatic and statutory is a fundamental change in the SRE regime.
Third, reallocation. When EPA exempts a small refinery from its RFS obligation, those exempted gallons can either be reallocated to other obligated parties — keeping the total mandated renewable fuel volume whole — or left unreallocated, in which case the gallons simply disappear from the mandate. HR 1346 prohibits the reallocation of the 75% obligation reduction it grants to qualifying small refining companies. That makes the reduction a permanent loss of RFS volume rather than a redistribution of compliance burden among refiners.
With the three concepts in place, the costs to BBD demand and soybeans can be stated cleanly.
The first cost is the loss of conventional gap gallons that BBD has been filling. As E15 adoption expands, every gallon of ethanol use beyond the E10 blend wall is a gallon of conventional gap no longer available for BBD spillover. This cost is intrinsic to the E15 expansion itself — it would exist even if the bill contained no SRE provisions at all. The benefit to corn producers from rising ethanol demand is the mirror image of a cost to soybean producers from displaced BBD use in the conventional gap.
The second cost is from unreallocated SREs. The bill’s automatic 75% reduction in compliance obligations for qualifying small refining companies, combined with the prohibition on reallocation, removes that volume from the mandate entirely. The marginal compliance gallon principle says the cut falls on BBD, not corn ethanol, and it falls across all three mandate categories — BBD, advanced, and conventional.
The third cost is from the 2016–2018 RIN giveback. The bill returns retired RINs from those compliance years to small refineries with outstanding extension petitions and overrides the standard two-year vintage limit, making those returned RINs eligible for future compliance. Every returned RIN used for compliance is a RIN that does not need to be generated by new biofuel blending. The mechanism is identical in effect to a non-reallocated SRE, and the reduction falls on BBD by the same marginal-gallon logic. In effect, this provision functions as a retroactive SRE expansion stacked on top of the prospective one, adding a material new tranche of “old” RINs to the bank during the early years of the new SRE regime.
The mechanism behind the second and third costs has already been tested. During the first Trump administration, EPA granted dozens of SREs without reallocating the obligations to other refiners — exactly the regime HR 1346 would make permanent. As I showed in a farmdoc daily article last year, ethanol demand up to the E10 blend wall was unaffected by SREs during the first Trump Administration. That demand is driven by octane economics, not by the mandate, and SREs only change the mandate. In contrast, the result was a sharp and measurable destruction in BBD demand, which I documented in another farmdoc daily piece last year. The FAPRI-MU analysis released this week confirms the same mechanism quantitatively for the 2026–2035 projection period.
Now return to the benefit side of the ledger and the asymmetry that gives this post its title. The three costs are real, but their certainty differs. The second and third costs — the unreallocated SREs and the RIN giveback — happen automatically once the bill becomes law. They do not depend on whether E15 adoption materializes. They are largely certain (although we do not yet know exactly the size of potential SRE volumes under the new regime or the precise number of 2016-2018 RINs that would be given back).
The first cost and all of the benefits, by contrast, are wholly contingent on voluntary E15 adoption by consumers and retailers over the next decade. And that adoption is highly uncertain. The bill does not mandate E15 use; it only makes year-round sales legal. Removing the RVP barrier is a necessary step for broader E15 adoption, but it is far from sufficient. Other hurdles remain: retailer infrastructure investment in E15-compatible dispensers and tankage, refinery adjustments in the composition of gasoline blendstock, consumer awareness and price sensitivity, and lingering vehicle compatibility concerns for older vehicles and small engines. How quickly E15 adoption actually expands is therefore an open question that the RVP fix alone does not resolve.
The asymmetry matters most in the low-adoption scenario. If E15 adoption is slow, the corn ethanol demand gains are small, and the displacement cost of BBD from the conventional gap is also small. But the unreallocated SREs and the RIN giveback still play out in full. Soybean producers bear those costs without the offsetting corn ethanol benefit reaching a meaningful scale. The downside in this scenario is stacked against the Corn Belt as a whole.
If, instead, a high-adoption scenario is assumed, then the results are just the opposite. So the key variable in all this is the assumption about E15 adoption rates. For perspective, the FAPRI-UM study assumes a 0.25% per year increase in the average ethanol blend rate. In my view, that is optimistic given the other hurdles to E15 adoption that remain. Consequently, my personal conclusion is that the E15 bill, as written, is a net negative for Corn Belt farmers. At the same time, the dollar cost to soybean producers over 10 years is not a huge number, and the bill would provide more certainty regarding the level of SREs and their market impact. Plus, I could certainly be wrong about the rate of E15 adoption.
In sum, the deficiency in the debate so far is on the cost side. FAPRI did not invent these costs. They simply brought the costs into the open and quantified them. The costs are unavoidable given the underlying RFS mechanics — the marginal compliance gallon, the new automatic SRE regime, and the elimination of reallocation. With the bill now moving to the Senate, the cost side of the ledger deserves at least as much attention as the benefit side has received.
Lastly, if you are interested in digging deeper into the nuances of the RFS, I recommend reading a paper that I co-authored, “The Biofuel Blueprint: Understanding the U.S. Renewable Fuel Standard.” It was published earlier this week on Monday. Pretty good timing I would say.
Laurence J. Norton Chair of Agricultural Marketing
University of Illinois at Urbana-Champaign