In a politically charged move, Senator Mike Lee (R-UT) and colleagues from major oil-producing states have unveiled the Protect Consumers from Reallocation Costs Act of 2025, targeting a contentious provision in the Renewable Fuel Standard (RFS). The draft legislation would amend the Clean Air Act to forbid the Environmental Protection Agency (EPA) from transferring compliance burdens-specifically, renewable fuel blending obligations-from small to larger refineries.

At the center of this dispute lies the EPA's recent action on its backlog of small refinery exemption (SRE) requests: between 2016 and 2024, the agency processed 175 petitions-granting 63 in full, approving 77 partially, and denying 28-dramatically altering the landscape of biofuel blending credit (RIN) availability. Although these exemptions relieved some small refiners, they also triggered a broader debate: should larger refineries be forced to make up for the exempted volumes to preserve demand for ethanol and biodiesel?

Biofuel producers and U.S. farmers argue that reallocation is essential to maintain crop market stability, while oil industry advocates warn it would unfairly increase their costs and drive up consumer fuel prices.

In defending the new bill, Senator Lee stated, "Punishing American energy producers who comply with the EPA's made-up rules isn't just unfair, it's bad for everyday consumers. Americans will pay more at the pump and Utah's refineries will suffer."

The legislation, supported by Senators John Barrasso (R-WY) and Bill Cassidy (R-LA), arrives at a delicate political moment. Lawmakers are already battling over federal funding deadlines, and the contentious nature of small refinery exemptions may further splinter the Republican coalition as the government shutdown deadline nears.

Meanwhile, the White House and EPA are actively reviewing proposals on how to manage the exempted biofuel volumes for future compliance years-specifically 2026 and 2027. A preferred reallocation option and alternatives are under consideration, with a formal decision expected in the coming weeks.

Why It Matters for U.S. Agriculture and Energy Stakeholders

• Crop Demand & Co-ops: Reallocation could offset revenue losses for growers and co-ops affected by reduced ethanol blending, sustaining after-harvest income and commodity prices.

• Input Costs & Fuel Prices: Preventing reallocation may ease immediate pressure on oil refiners but risks suppressing demand for agriculture-based biofuels, potentially impacting farmers' planning and input-cost returns.

• Policy Alignment: Balancing mandates, exemptions, and reallocations implicates the broader farm bill, USDA strategy, precision ag adoption, and sustainable agriculture goals-areas requiring deft coordination.

• Supply Chain Stability: Uncertainty in blending obligations affects both refinery operations and biofuel supply continuity, raising risks for manufacturers, logistics, and farm supply chains.