For many decades now a federal policy called the Renewable Fuel Standard (RFS) has raised gas prices and transferred billions of dollars from consumers to politically-connected special interests. The RFS is a policy requiring that gas at the pump contains corn-based ethanol and other bio-fuels. The mandate can raise gas prices by as much as 30 cents a gallon.
Its intention was to reduce air pollution and reduce America’s reliance on foreign oil. But its political goal was to help farm states by increasing demand for corn and other ag products mixed into every gallon of gas Americans buy.
Today, the most egregious abuse lies in the so-called Small Refinery Exemption (SRE) program. What began in 2010 as a temporary safety net for tiny, struggling refiners has morphed into a lucrative loophole for mid-sized and even large publicly traded refining companies. They aren’t “struggling.” And 11 years into the program, it’s clearly not temporary.
Here’s how the game is played. On earnings calls and in SEC filings, these companies boast of booming profits, stock buybacks, dividends, and expansion plans—even in years when no exemptions were granted. Yet when they show up in Washington, they suddenly plead poverty and claim that eliminating SREs would force plant closures, destroy jobs, and send gasoline prices soaring. Both stories can’t be true. And the financial evidence makes clear which one is fiction.
The exemptions are not saving refineries on the brink of collapse. They are padding balance sheets. In practice, these exemptions from the RFS have become cash windfalls for firms that would be perfectly profitable in a real market. That isn’t relief—it’s corporate welfare.
To be clear: I’m very much in favor of repealing the RFS - which has been a failed policy costing our industries, truckers, and families tens of billions of dollars. The U.S. is producing record amounts of oil thanks to the America First “drill baby, drill” strategy and prices have fallen.
But IF Congress maintains the RFS policy, it should apply to everyone fairly - without exempting mid and large firms with the highest price lobbyists. This is corporate welfare of the worst kind. The exemptions only undercut the case for the mandates in the first place.
Congress is now considering reforms that would restore some sanity to the system by tying SRE eligibility to actual financial hardship and company size, rather than legal maneuvering. That’s a step in the right direction. Profitable, well-capitalized companies should not be exploiting a program designed for small refineries that are genuinely distressed. Paired with the pro-energy policies that helped deliver record production and lower prices during the Trump years, refiners can compete and thrive without relying on undeserved handouts.
The real victims of the current system are consumers paying more at the pump, truckers and farmers facing higher fuel costs, and truly small refiners that lack the political clout to secure exemptions and are forced to absorb full compliance costs.
Ironically, the market consequences of the RFS are only rewarding more refinery consolidation while marginal plants are shutting down as the bigger players gobble up the exemption subsidies. This not only reduces refinery competition but has made our refinery system more fragile and more vulnerable to storms, supply shocks, or global disruptions.
Even state attorneys general in farm states like Iowa, Nebraska, and South Dakota have raised red flags. In a letter to federal regulators, they pointed to companies telling radically different stories to gaming the system to take advantage of an exemption they were never intended to receive.
This RFS exemption fiasco is a classic case of the Reagan maxim that in Washington there is nothing more permanent than “a temporary government.
Once a carve-out exists, lobbyists swarm. Costs get shifted, market signals get scrambled, and political access replaces efficiency as the path to profit. That’s not capitalism—it’s cronyism. And everyone driving a car or truck pays the price at the pump.
Congress should act decisively. Farm state Republicans, environmentalists, and free market fiscal hawks should come together to either eliminate the RFS entirely, or at a very minimum, ensure that exemptions are strictly limited to genuinely small, financially distressed refiners, as originally promised. But lawmakers should also recognize the broader lesson: policies that require constant exemptions are a sign of flawed design. Americans deserve affordable, reliable energy and a system that rewards innovation, investment, and hard work—not corporate welfare disguised as compassion.
Scrap the crony carve-outs, restore market discipline, and unleash American energy. Prices will fall, reliability will improve, and prosperity will follow. That’s the supply-side way—and it’s the only path to real energy security.
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