H.R. 1346, Nationwide Consumer and Fuel Retailer Choice Act of 2025

Bill Summary

H.R. 1346 would revise sections of the Clean Air Act to permit year-round sales of E15, a gasoline blend that contains up to 15 percent ethanol. The legislation also would revise the Renewable Fuel Standard (RFS), a federal policy that requires gasoline and other transportation fuels to contain minimum amounts of fuel from renewable resources.

Estimated Federal Cost

The estimated budgetary effects of H.R. 1346 are shown in Table 1. The costs of the legislation fall within budget function 350 (agriculture).

Basis of Estimate

For this estimate, CBO assumes that the legislation will be enacted near the beginning of August 2026. Estimated outlays are based on historical spending patterns for the affected programs. Estimated costs for the Department of Agriculture (USDA) support programs incorporate the effects of sequestration (the cancellation of a portion of budgetary resources). CBO estimated the budgetary effects relative to CBO’s February 2026 baseline.

CBO estimates that enacting H.R. 1346 would increase direct spending by $2.7 billion and revenues by $0.4 billion, resulting in a net increase in the deficit of $2.3 billion over the 2026-2036 period.

Background

CBO expects that enacting H.R. 1346 would affect demand for biofuels in various ways. Those changes in demand, in turn, would affect direct spending and revenues, as explained below. The effects of the changes to E15 sales and the RFS are considered separately below, but the estimates of budgetary effects account for interactions between the two provisions.

Sales of E15 Under Current Law. The Clean Air Act restricts sales of E15 during the summer months because E15, a gasoline blend consisting of 10 to 15 percent ethanol, does not comply with the act’s limits on fuel volatility, which are intended to reduce smog. In recent years, the Environmental Protection Agency (EPA) has provided temporary waivers from that seasonal limitation for all states and has granted permanent waivers to several.

Most regular gasoline sold is E10, which consists of 10 percent ethanol. Ethanol has a higher octane number than gasoline alone (octane indicates the fuel’s ability to improve engine performance and control premature ignition, or engine knocking). Lower-octane gasoline is blended with ethanol to attain an octane number of 87, which most passenger vehicles require.

Sales of E15 Under H.R. 1346. The legislation would allow year-round sales of E15 by removing the requirement for a summertime waiver, which CBO expects would result in a modest increase in E15 sales because the Clean Air Act’s current restriction on E15 is not the only factor limiting demand for E15.

Transitioning to expanded use of E15 will result in costs to some retailers and refiners. Because E10 and E15 require separate or specialized tanks and pumps, retailers wanting to sell E15 would confront the additional expense of installing new equipment. In addition, some refiners will incur additional costs as they adjust their refinery processes to produce the appropriate gasoline to be blended into E15.

CBO expects that allowing year-round E15 sales would decrease direct spending because of the resultant effects on USDA’s agricultural support programs. Under the permanent E15 waiver, CBO anticipates that demand for corn-based ethanol would increase and grow slowly over the 2026-2036 period. Increased demand for corn-based ethanol would correspondingly increase demand for corn and modestly raise corn prices. The costs of USDA’s programs that support commodity prices and insure crop production and revenue depend on the prices of commodities covered by those programs to determine payments to farmers. The net effect on those programs from higher corn prices would be a decrease in payments to farmers and thus a reduction in direct spending.

Year-round E15 sales also would modestly increase federal revenues, on net. Because ethanol has a lower energy content than gasoline, higher ethanol blending would reduce fuel economy and increase gasoline consumption, thus increasing revenues from the federal excise tax on gasoline, which is levied on a per-gallon basis. Domestic producers of low-emission transportation fuels, including certain ethanol producers, can claim a tax credit for fuel produced and sold before the end of calendar year 2029. Increased claims by some ethanol producers would reduce revenues and offset the effects of higher gasoline tax revenues until that credit expires.

Taken by itself, allowing year-round sales of E15 would tend to reduce the deficit.

Renewable Fuel Standard Under Current Law. EPA’s RFS requirements direct a share of all petroleum-based transportation fuels sold in the United States include some percentage of fuel from renewable sources, such as animal fats, vegetable oil, crop and forest residues, and corn or other starches.

Since 2022, periodic rulemaking from EPA has set the renewable volume obligation (RVO), an annual requirement for various categories of renewable fuels. (The Set 2 Rule, the most recently issued rule, established RFS volumes for calendar years 2026 and 2027.)[1]

The largest category under the RVO is total renewable fuel, followed by advanced biofuel, biomass-based diesel, and cellulosic biofuel. The smaller categories of biomass-based diesel and cellulosic biofuel are given more weight under the RFS because of their higher ratings for reducing greenhouse gas emissions. They also are nested within the larger categories and can be used to fulfill the RFS within those categories.

For example, renewable diesel fuel derived from soybean oil can be used to meet the biomass-based diesel RVO, the advanced biofuel RVO, and the total renewable-fuel RVO. By contrast, corn-based ethanol can be used only to meet the total renewable-fuel RVO.

RVOs are met when an oil refiner or importer demonstrates compliance by obtaining and retiring the requisite quantities of renewable identification numbers (RINs) for their operations for a calendar year. Refiners or importers obtain RINs by generating them (producing renewable fuels) or by purchasing them in the market (RINs are effectively a tradeable commodity). RINs represent gallons of biofuel; each gallon receives a RIN and the values differ based on the fuel’s ratings for reducing greenhouse gases. For example, the RIN value of a gallon of corn-based ethanol is 1 and the RIN value of a gallon of renewable diesel is between 1.5 and 1.6. RINs are valid for compliance purposes for up to two calendar years.

The RFS program allows small refineries to claim disproportionate economic hardship in petitions to EPA for exemptions from RVO compliance. (Small refineries process less than 75,000 barrels of crude oil per day, on average.) There is no cap on the number of small-refinery exemptions EPA can grant, and the agency typically has reallocated exempted volumes to other refineries through the RVO. Reallocation of exempted volumes to larger refineries allows EPA to maintain its targeted renewable-fuel volume for a given calendar year.

Renewable Fuel Standard Under H.R. 1346. The changes to the RFS in H.R. 1346 would primarily affect exemptions for small refineries. Beginning on January 1, 2028, the legislation would permanently remove EPA’s authority to exempt small refineries from the RVO on the basis of disproportionate economic hardship, but those exemptions would be replaced with two permanent adjustments.

Starting in 2028, the first adjustment would provide exemptions to at-risk small refineries. To qualify, a small refinery would need to demonstrate imminent risk of closure or permanent idling or affirm its conversion to produce fuel from renewable sources. Total exemptions for at-risk small refineries could not exceed the equivalent gallons of 150 million RINs in 2028; that cap on exemptions would then be adjusted in proportion to the regulatory change in the RVO (up or down) in subsequent calendar years.

Also beginning in 2028, the second adjustment would grant small refining companies an automatic 75 percent exemption from the RVO. H.R. 1346 defines those entities as refineries that, when considered collectively with their affiliates, subsidiaries, parent companies, joint ventures, holding companies, spin-offs, or other associated corporate or legal structures, had an average daily aggregate production below 75,000 barrels in 2025. Thus, fewer small refineries would qualify for the 75 percent exemption under H.R. 1346. An affiliate of a larger refinery that might qualify as a small refinery under current law would probably not qualify as a small refining company under H.R. 1346.

The legislation would prevent EPA from reallocating to other refineries the RVOs that are exempted as part of the automatic 75 percent exemption for small refining companies.

The legislation also would provide RIN credits that would never expire to small refineries that retired them and submitted petitions for small-refinery exemptions for the 2016 to 2018 compliance years. Those credits could be used to demonstrate compliance in future years.

CBO estimates that the budgetary effect of the changes to small-refinery exemptions under H.R. 1346 would be a net increase both in direct spending and in revenues arising from the expected decrease in demand for biomass-based diesel.

Because EPA would be prohibited from reallocating to other refineries the volumes of renewable fuel automatically exempted for small refining companies, the RVO would decrease under H.R. 1346, as would demand for renewable fuels. That decline would disproportionately affect demand for biomass-based diesel. Demand for such fuel largely depends on the RFS policy; biomass-based diesel costs more to produce and sell than petroleum-based diesel and its production capacity has increased significantly in response to the RVO. By contrast, demand for corn-based ethanol is no longer dependent on the RFS mandate and is competitive in the market as a source of octane in gasoline.

Effect of H.R. 1346 on Crop Markets

The largest feedstock for biomass-based diesel is soybean oil. A reduction in demand for biomass-based diesel would translate to a reduction in demand for soybeans and lower soybean prices. Because corn and soybeans are commonly grown in rotation and compete for planted acres, a price change for one can affect the price of the other. Under the legislation, CBO expects some shifts in soybean supply and use in response to the reduction in demand for soybean oil: Greater supply and weaker prices would probably improve prospects for soybean exports to some degree and also shift some planted acres from soybeans to corn, although not enough to fully account for the additional supply of soybeans. The end result would be greater stocks of both corn and soybeans, relative to CBO’s February 2026 baseline projections.

CBO expects that under the legislation, the loss in demand for soybeans resulting from the prohibition on EPA from reallocating exemptions for small refining companies would more than offset the modest positive effects of E15 on corn prices. The net effect of the legislation on corn and soybeans would be a price decrease. And because corn and soybeans account for the two largest shares of acres planted in the United States each year, price effects on those crops have spillover effects on other crops that also are eligible for agricultural support payments.

The crops most directly affected after corn and soybeans are wheat and grain sorghum, but negative price effects would not necessarily be limited to those crops. Minor oilseeds, such as canola and sunflower, also could experience lower prices in response to the declining value of vegetable oil. The direct spending effects for minor oilseeds, however, would be significantly smaller because of their smaller share of planted acres and production in the United States. For this estimate, CBO considered only the price effects on corn, soybeans, wheat, and sorghum.

Direct Spending

CBO estimates that enacting H.R. 1346 would increase direct spending, on net, by $2.7 billion over the 2026-2036 period (see Table 2).

Commodity Support Programs. USDA’s Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs provide price and revenue support to producers of corn, sorghum, soybeans, and wheat, among other commodities. A producer is permitted to enroll in just one of those programs each year. The programs make payments either when the season-average price drops below a predetermined support price for a commodity or when county- or farm-level revenue drops below their respective benchmark revenues (some additional adjustment factors are applied to payments).

Producers of corn, sorghum, soybeans, and wheat also are eligible for USDA’s marketing-assistance loans, which provide liquidity to farmers immediately after harvest and support commodity prices at lower price levels than the ARC and PLC programs do. The loans must be repaid within nine months. When the price of a commodity drops below the per-unit loan rate, the loan program makes up the difference either with a payment to the farmer or with a reduction in the loan repayment amount. Such net outlays occur infrequently for crops like corn, sorghum, soybeans, and wheat. However, downward movements in price increase the possibility that payments could be made under that program as well.

Taken together, the changes in prices and production for corn, sorghum, soybeans, and wheat are expected to increase direct spending under H.R. 1346 for the ARC, PLC, and marketing-assistance loan programs by $8.0 billion over the 2026-2036 period. Offsetting that increase would be a decrease of $0.3 billion resulting from budgetary sequestration. After accounting for sequestration, CBO estimates that the increased cost under the legislation for ARC, PLC, and marketing-assistance loans would be $7.7 billion over the period.

Section 5 Authority. The increased costs for ARC, PLC, and marketing-assistance loans under H.R. 1346 would be partially offset by a reduction in Commodity Credit Corporation (CCC) funds available for elective use by the Secretary of Agriculture.

The CCC is the funding source for myriad programs administered by USDA and has direct borrowing authority with the Treasury. The largest programs funded by the CCC are the ARC and PLC programs, the Conservation Reserve Program, and other conservation programs. The CCC’s borrowing authority with the Treasury enables it to fund those and other programs enacted through legislation (typically in farm bills). That borrowing authority is capped and cannot exceed $30 billion at any time. Congressional appropriations are authorized to pay off the CCC’s net realized losses with the Treasury after the close of each fiscal year.

Section 5 of the Commodity Credit Corporation Charter Act provides USDA with budget authority to create new programs to support agricultural commodities in various ways. That authority has been used extensively since 2018 to create programs intended to support agricultural commodities through international trade disruptions and difficulties with supply chains, among others. CBO’s baseline projections incorporate the assumption that USDA will continue to use the CCC section 5 authority to the extent possible under the $30 billion borrowing limit.

Because the CCC’s spending is subject to a borrowing cap that is replenished through annual appropriations, increases in the cost of other programs that are funded through the CCC reduce USDA’s ability to fund programs using its section 5 authority in a given year. Thus, the increased costs of the ARC, PLC, and marketing-assistance loan programs under H.R. 1346 would in some years reduce or eliminate the funds that would otherwise be available for section 5 programs. CBO estimates that, after adjusting for sequestration, enacting H.R. 1346 would reduce the CCC’s spending under section 5 by $3.8 billion over the 2026‑2036 period.

Crop Insurance. Changes in prices and production affect the cost of crop insurance, and in the case of H.R. 1346, CBO expects that such changes would result in lower projected outlays for the federal crop insurance program. Crop insurance provides farmers with subsidized coverage for losses in crop yield and revenue. Because the coverage depends on a crop’s value, a reduction in prices typically results in lower insurance costs. Changes in production move in the opposite direction: Greater production raises costs under the program and lesser production reduces costs. On net, CBO estimates, enacting H.R. 1346 would reduce direct spending for crop insurance by $1.3 billion over the 2026-2036 period.

Revenues

CBO estimates that enacting H.R. 1346 would increase revenues, on net, by $0.4 billion over the 2026-2036 period because the legislation would reduce demand for biomass-based diesel and increase use of ethanol-blended fuel. Domestic producers of low-emissions transportation fuels, including biomass-based diesel and qualified ethanol, can claim a tax credit for fuel produced and sold before the end of calendar year 2029. Through 2029, most of the net estimated increase in revenues reflects reduced claims of the clean-fuel production credit, because CBO expects that less biomass-based diesel would be produced given the lower demand for that fuel. Increased claims by producers of low-emissions ethanol in response to permission for year-round E15 sales would partially offset those effects.

Because ethanol has a lower energy content than gasoline, higher ethanol blending would reduce fuel economy and increase gasoline consumption, thus increasing revenues from the federal excise tax on gasoline. After the clean-fuel production credit expires, higher gasoline tax receipts would account for the increase in revenues. An offset has been applied to the estimates to reflect reduced income and payroll taxes that would result from higher fuel taxes.[2]

Uncertainty

The magnitude and timing of budgetary effects under H.R. 1346 are subject to considerable uncertainty, from several sources, including the:

• Extent of E15 Market Penetration. Consumer and retailer adoption of year-round E15 depends on multiple factors, and faster or slower E15 uptake would affect both direct spending and revenues.
• Volume of Exemptions for Small Refining Companies. If the number of exemptions is higher than CBO expects, increases in direct spending would be larger; if it is lower, those increases would be smaller.
• Price Changes in Crop Markets. The extent to which estimated changes in demand for corn-based ethanol and for biomass-based diesel would affect prices for corn, sorghum, soybeans, and wheat can easily shift in response to adverse growing conditions, changes in global production of these crops, or unanticipated shifts in demand.
• Claims of Tax Credits for Clean-Fuel Production Through 2029. Changes in production volumes of low-emissions ethanol and biomass-based diesel would affect the amount of tax credits claimed. Determining the carbon emissions intensity of fuels (the lifecycle greenhouse gas emissions per unit of fuel energy), which varies by feedstock and production method, adds further uncertainty.

Pay-As-You-Go Considerations

The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting direct spending or revenues. The net changes in outlays and revenues that are subject to those pay-as-you-go procedures are shown in Table 3.

Increase in Long-Term Net Direct Spending and Deficits

CBO estimates that enacting H.R. 1346 would increase net direct spending by more than $2.5 billion in all of the four consecutive 10-year periods beginning in 2037.

CBO estimates that enacting H.R. 1346 would increase on‑budget deficits by more than $5 billion in at least one of the four consecutive 10-year periods beginning in 2037.

Mandates

H.R. 1346 would impose private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA) on refineries by limiting the exemption that currently relieves small refineries from the obligation to produce transportation fuel blends that contain specified concentrations from renewable sources. By reducing the number of exemptions and narrowing the group of eligible refineries, the bill would increase the refineries’ cost of compliance with the RFS. Using industry data and information on the value of current exemptions, CBO estimates that the cost of the mandate would be above the private-sector threshold established in UMRA ($214 million in 2026, adjusted annually for inflation).

The bill also would require EPA to issue new regulations that modify requirements for labeling and storage of E15 fuel.If EPA imposed stricter regulations, that provision could impose a private-sector mandate on the entities that are subject to the regulations. Because EPA has not issued such regulations, CBO cannot determine whether the cost to comply with the mandate would exceed UMRA’s private-sector threshold.

The bill does not contain any intergovernmental mandates as defined in UMRA.

Estimate Prepared By

Federal Costs:
Tiffany Arthur (for Department of Agriculture commodity support programs)
Erik O’Donoghue (for Department of Agriculture crop insurance)

Revenues: Molly Sherlock

Mandates: Erich Dvorak, Lucy Marret

Estimate Reviewed By

Ann E. Futrell
Chief, Natural and Physical Resources Cost Estimates Unit

Joshua Shakin
Chief, Revenue Projections Unit

Kathleen FitzGerald
Chief, Public and Private Mandates Unit

H. Samuel Papenfuss
Deputy Director of Budget Analysis

John McClelland
Director of Tax Analysis

Estimate Approved By

Phillip L. Swagel

Director, Congressional Budget Office