Who Will Bear the Economic Burden of the Renewable Fuel Standard?

Last year (2025), one of the more surprising developments in U.S. biofuel policy was seeing organizations representing farmers, ethanol producers, fuel retailers, and even the American Petroleum Institute standing on the same side of the table. Together, they urged Congress and the Environmental Protection Agency (EPA) to provide long-term certainty for renewable fuels by expanding year-round sales of E15 gasoline while reforming the Small Refinery Exemption (SRE) program.

Fast forward one year, and that coalition appears to be showing signs of strain. Recent reporting indicates that the American Petroleum Institute (API) now opposes the latest Senate Farm Bill proposal, despite continuing to support nationwide year-round E15. At first glance, this may appear to be another battle between Big Oil and Big Agriculture. In reality, the disagreement is far more nuanced. The debate is no longer centered on whether renewable fuels should play a larger role in America's fuel supply. Instead, it has become a debate over a more difficult question: Who should bear the economic burden of complying with the Renewable Fuel Standard? For now, Congress has not answered that question. Until it does, the current disagreement between the petroleum and agricultural industries is likely to continue.

A Rare Alliance

In 2025, several organizations representing agriculture, renewable fuels, petroleum, and fuel marketers jointly supported legislation that would permanently allow year-round sales of E15 gasoline. The proposal paired expanded market access for ethanol with reforms to the Small Refinery Exemption program under the Renewable Fuel Standard.

The coalition was noteworthy because these industries have often found themselves on opposite sides of biofuel policy. Yet both saw value in creating greater regulatory certainty. Farmers and ethanol producers would gain broader access to fuel markets, while refiners would receive clearer rules governing exemptions and compliance.

Although each industry had different motivations, both agreed that the existing system created unnecessary uncertainty.

Different Goals Under the Same Agreement

The apparent unity, however, masked fundamentally different priorities. For corn growers, ethanol producers, and many farm organizations, expanding E15 means stronger domestic ethanol demand and, ultimately, greater demand for U.S. corn. Their long-standing concern has been that widespread use of Small Refinery Exemptions weakens the Renewable Fuel Standard by reducing overall blending obligations.

The petroleum industry views the issue differently.

The American Petroleum Institute has consistently stated that it supports nationwide year-round E15. Its primary concern is not ethanol itself, but how compliance obligations are distributed among refiners. The organization argues that any reform should provide predictable, transparent rules without creating uneven compliance costs between companies. Those different objectives coexisted as long as the proposed legislative compromise addressed both industries' concerns.

Where the Coalition Began to Break

The latest Senate Farm Bill proposal appears to have changed that balance. According to various media reports, API believes the new language no longer reflects the compromise previously supported by the industry coalition. While continuing to support permanent year-round E15, the organization argues that the revised proposal alters how Small Refinery Exemptions would operate and how compliance obligations would be allocated among refiners. Agricultural organizations, meanwhile, remain focused on limiting exemptions that they believe reduce renewable fuel demand. In other words, both sides still support expanding E15. What they no longer agree on is how the costs associated with that expansion should be shared.

The Real Policy Debate

The Renewable Fuel Standard is often discussed as a debate over the volumes of ethanol, biodiesel, or renewable diesel. Increasingly, however, the underlying policy question is becoming economic rather than environmental. Every additional blending requirement creates compliance obligations somewhere within the fuel supply chain.

If one group receives exemptions, another group may ultimately absorb those obligations. Determining where those costs fall affects refinery economics, Renewable Identification Number (RIN) markets, fuel pricing, and ultimately investment decisions throughout both the petroleum and biofuels industries. That is why the current disagreement matters. It reflects not a rejection of renewable fuels, but a disagreement over how the financial burden of compliance should be allocated.

Looking Ahead

It's the beginning of August, and with the Senate's legislative calendar narrowing before the November elections, the prospects for passing a Farm Bill this year appear increasingly uncertain. Whether lawmakers can rebuild the coalition that existed just a year ago may depend less on ethanol itself than on their ability to once again strike a balance between competing economic interests. Until then, the most important question remains unanswered: Who will ultimately bear the economic burden of complying with the Renewable Fuel Standard? The answer will influence not only ethanol demand, but also refinery economics, RIN markets, fuel prices, and future investment across both the petroleum and biofuels industries.

Why the Debate Re-Emerged

One reason the latest disagreement may seem sudden is that the Senate's position has evolved over the course of the Farm Bill negotiations. When Senate Agriculture Committee leaders released an initial discussion draft in June, it did not include permanent nationwide E15, drawing criticism from farm organizations that had made the provision one of their top priorities. The latest Senate text reverses course by incorporating year-round E15 language. While agricultural groups broadly welcomed that change, the revised proposal also includes changes to the Small Refinery Exemption framework that the American Petroleum Institute argues depart from the earlier compromise it had supported. As a result, legislation that initially appeared capable of uniting both industries has instead exposed their differing priorities.