Published on
Thursday, June 18 2026
Authors :
Ben Sarver - Director, Fuels Regulatory Practice
While the face of H.R. 1346 seems to be E15, small refinery exemptions are the more impactful element of this legislation, having passed the House and now sitting in the Senate. The small refinery exemption (SRE) program has been comparatively quiet since the EPA’s August 2025 decision, with the agency having largely caught up on the backlog of pending petitions even as related litigation remains active. That quiet may be ending. Congressional attention has now turned to H.R. 1346, a bill that would reshape how the Renewable Fuel Standard (RFS) treats small refineries. Here, we examine the details of this proposed legislation and what it means for E15 and SREs.
What H.R. 1346 Would Change
At its core, H.R. 1346 amends the Clean Air Act (CAA) and reshapes the RFS framework that flows from it on two fronts. First, it would allow E15 to be sold year-round by extending the summer 1-psi Reid Vapor Pressure (RVP) waiver to ethanol blends up to 15%. Second, it sunsets the SRE program as we know it — ending the disproportionate economic hardship (DEH) petition and replacing it with an automatic volume reduction for the smallest companies plus a narrow, capped exemption for a defined set of at-risk refineries.
What It Means for E15
If H.R. 1346 is passed into law as written, E15 would be allowed year-round, but there is no apparent change for consumers and blenders. From a practical marketplace impact, E15 has been available in the summer season since 2022 through EPA’s use of its emergency fuel waiver authority. H.R. 1346 would eliminate any claim of uncertainty due to the statutory 20-day waiver limit and may prompt marketers to build out E15 retail capacity and offerings; however, that retail buildout will take time.
On the regulatory follow-through, the bill directs the EPA — within 18 months of passage and through notice-and-comment rulemaking — to amend the E15 labeling and underground storage tank (UST) compatibility requirements. This represents a linchpin to meaningful E15 expansion as current regulations prohibit higher ethanol blends like E15 in USTs and associated leak detection equipment, retail piping, or dispensers (fuel pumps) without demonstrated compatibility from the manufacturer or via third-party. Additionally, current labeling only allows E15 in 2001 or newer and flex-fuel vehicles.
While vehicle compatibility is generally not expected to be a significant barrier, broader market adoption will still require time for infrastructure and supply chains to adapt. Retailers and terminal operators must verify equipment compatibility, implement labeling changes, and establish ethanol blending and distribution logistics to support higher E15 volumes. As a result, even if year-round E15 is authorized, meaningful expansion is likely to occur gradually rather than immediately. The rulemaking timeline matters for retailers weighing E15 build-out or conversion from E10.
There are refining and logistics wrinkles if E15 demand increases in the future. As E15 penetration increases, refiners may need to evaluate how their existing gasoline blending programs are positioned to support evolving specifications. Depending on refinery configuration and market strategy, optimization opportunities may exist around base gasoline (BOB) octane targets, RVP management, reformer severity and blendstock production. The economic and operational impacts are likely to vary significantly by refinery and market. Fungible pipelines may consider a common BOB for both E10 and E15 with a lower RVP by roughly 0.1–0.2 psi. Alternatively, with more high-octane ethanol in E15 blends, a standalone E15 BOB avoiding the octane forfeiture might be more desirable if shipper demand can justify the segregated tankage.
What It Means for Small Refinery Exemptions
The most consequential effects land on the SRE program itself: as written, the program as we know it would be sunset and replaced. The bill amends the CAA’s SRE language and the headline change is the termination of DEH as the basis for granting exemptions after the 2027 compliance year. No DEH petition for any compliance year would be accepted after July 1, 2028, with the EPA required to decide any remaining petitions by October 1, 2028. After that, the hardship-petition pathway that has defined the SRE program for years simply closes. In its place, a near-sheer cliff defines who is in and who is out.
The New Default: An Automatic 75% RVO Reduction
In place of the hardship petition, a new approach would take effect January 1, 2028. Small refining companies would receive an automatic 75% reduction in their renewable volume obligation (RVO) — no petition required. H.R. 1346 defined a “small refining company” as an entity, including its affiliates, parents, and subsidiaries, that in calendar year 2025 had a daily average aggregate production of obligated fuels not exceeding 75,000 barrels per day (KBD). Today we estimate around 13 small refineries, across nearly 10 companies would receive the default RVO reduction.
The 75 KBD threshold is a hard ceiling going forward: any exceedance in 2026 or a later year would permanently disqualify the company from the 75% adjustment. In this future, some small refining companies may have to choose between production expansion or the automatic reduction. Critically, the House has said that EPA may not reallocate any of the 75% reduction volume to other obligated parties. Of course, with prior exempted RINs making up low single-digit percentages of the overall RVO, it will be challenging to identify the concrete absence of the new, annually reduced and exempted volumes in subsequent RVO rules.
A Narrow New Petition for “At-Risk” Refineries
Beyond the automatic reduction, the bill creates a separate, much narrower exemption process available only to at-risk qualifying small refineries. A “qualifying small refinery” is one that either received the initial 2009 exemption or to-be-determined micro-crude refiners who began production between 2007 and 2026.
Eligibility to petition is tightly drawn. Consideration is limited to a refinery facing an “imminent risk of closure, permanent idling, or conversion to a renewable fuel production facility,” where that risk is caused solely by the cost of RFS compliance, and where there has been no change in ownership since the law’s passage. That last condition is worth watching — it may shape near-term M&A behavior, since a sale could forfeit eligibility. The mechanics of this new petition are deliberately constrained in several respects:
| • | The EPA’s grants are capped in total — across all D codes — at an energy content equal to that of 150 million gallons of conventional biofuel. EPA would adjust the volume cap annually in proportion to the 2028 RVO. | ||
| • | Refinery RVO relief may be partial, and limited to the extent necessary to prevent closure, idling, or conversion. | ||
| • | Petitions must be submitted before December 31 for the relevant compliance year, and the EPA has 90 days from receipt to decide. | ||
| • | There is no requirement or mention of Department of Energy consultation — a departure from prior practice. | ||
| • | Petitions would be made publicly available within 30 days of submission and are not treated as confidential business information. |
In place of the hardship petition, a new approach would take effect January 1, 2028. Small refining companies would receive an automatic 75% reduction in their renewable volume obligation (RVO) — no petition required. H.R. 1346 defined a “small refining company” as an entity, including its affiliates, parents, and subsidiaries, that in calendar year 2025 had a daily average aggregate production of obligated fuels not exceeding 75,000 barrels per day (KBD). Today we estimate around 13 small refineries, across nearly 10 companies would receive the default RVO reduction.
The 75 KBD threshold is a hard ceiling going forward: any exceedance in 2026 or a later year would permanently disqualify the company from the 75% adjustment. In this future, some small refining companies may have to choose between production expansion or the automatic reduction. Critically, the House has said that EPA may not reallocate any of the 75% reduction volume to other obligated parties. Of course, with prior exempted RINs making up low single-digit percentages of the overall RVO, it will be challenging to identify the concrete absence of the new, annually reduced and exempted volumes in subsequent RVO rules.
The Bottom Line
On balance, H.R. 1346 is an endeavor to revise these complicated RFS programs at the source. Most stakeholders would agree that the current E15 and SRE provisions of the CAA have grown unwieldy given the whipsaw effect of changing administrative policy directives and litigation outcomes. The harder question is one of legislative design. Does H.R. 1346 facilitate meaningful relief to small refineries in a way that doesn’t upend the RFS at large?
| • | Bonafide year-round E-15 could be in sight, but real changes to fuel supply in the market will take time. | |||
| • | There is hope for a more stable and predictable SRE program through | |||
| – | the reduced number of petitions and the submission deadline which could enable reasonable response times from EPA, | |||
| − | the fixed RVO reduction scope and capped volume of exemptions, which could facilitate a more ratable RIN market impact from SREs, | |||
| − | and addressing the SRE reallocation question alone removes a recurring source of disputes and uncertainty. | |||
| • | However, as written, EPA will need to contend with the application of “solely caused by the [RFS] cost of compliance” language | |||
| • | Most of all, this draws a clear line in the sand for small refineries – are the definitions of “at risk qualifying small refineries” and “small refining companies” as well as the exemption cap right sized? | |||
As E15 adoption and the SRE program evolves, refiners, marketers, and other fuel supply chain participants will need to assess the potential impacts on gasoline production, blending economics, logistics, and product specifications. TM&C routinely evaluates refinery-specific gasoline blending strategies, fuel quality constraints, and market impacts and can assist clients in understanding how higher ethanol blends may affect their operations, competitiveness, and investment decisions. We are watching this one closely and will share updates as the bill goes through the legislative process. If you have questions about how H.R. 1346 or the broader E15 and SRE landscape could affect your operations or compliance position, the TM&C team is ready to assist.
