HR 1346’s Small‑Refinery Exemption Changes: That’s Not Market Efficiency, That’s Monopoly Consolidation by Another Name

Responding to: More Beltway Mischief: The Renewable Fuel Standard and Small-Refinery Exemption — Benjamin Zycher · 2026-06-15

What the Piece Argues

Benjamin Zycher argues that the Renewable Fuel Standard is a massive, unjustified subsidy for corn ethanol producers disguised as energy security policy, and that H.R. 1346 — the Nationwide Consumer and Fuel Retailer Choice Act — would compound the damage by enabling year-round E15 sales while gutting the small-refinery exemption that protects smaller, less integrated refineries from disproportionate compliance costs. He contends that E15 price savings for consumers are illusory because ethanol’s lower energy content will correct market prices, and that the bill represents classic rent-seeking by the corn lobby at the expense of refiners and fuel consumers. He frames the entire RFS apparatus — RIN credits, blending mandates, volume obligations — as economic distortion benefiting agricultural special interests while producing no detectable climate benefit.

Receipts

The piece calls the RFS a “massive subsidy” and warns of “rent-seeking interests” enriching the ethanol lobby — a framing designed to make you forget which industry invented the playbook.

• The framing wants you to believe: The Renewable Fuel Standard is a gratuitous handout to corn producers that distorts markets for no public benefit; refineries are the victims of agricultural rent-seeking; and consumers and businesses are being “squeezed for billions” by ethanol mandates.
• What’s really going on: The RFS exists because the fossil-fuel industry spent decades externalizing the costs of its product onto the public — costs the IMF estimates at $7 trillion globally in 2022 in explicit and implicit subsidies for fossil fuels, orders of magnitude beyond anything ethanol ever received (IMF, “Fossil Fuel Subsidies,” 2023). The piece’s author writes for the American Enterprise Institute, which has received documented funding from fossil-fuel interests including ExxonMobil and the Koch network (DeSmog database; InsideClimate News, 2015). The “small refinery” framing is structurally identical to every “small business” argument the industry deploys to protect its largest players — under current law, a company owning a dozen refineries each under 75,000 barrels/day qualifies for the exemption individually, meaning consolidated refining conglomerates can claim hardship through subsidiary restructuring while their total throughput dwarfs genuinely small operators. The piece never once mentions what refiners owe for a century of externalized costs, never mentions fossil-fuel subsidies, and never asks why “market outcomes” in fuel supply should be treated as sacred when the industry’s profits have always depended on socialized losses.

The DEFCON Ladder

DEFCON 5 — Polite Reframe

When to use: A good-faith family member or coworker shares the piece and genuinely thinks the ethanol lobby is the problem in American fuel policy.

There’s a real conversation worth having about the Renewable Fuel Standard — corn ethanol is an imperfect tool, and blending mandates carry genuine tradeoffs. But this piece asks you to believe that refineries are the victims of unfair subsidies while saying nothing about the subsidies and externalized costs that built the refining industry’s margins in the first place. The International Monetary Fund estimates fossil fuels received $7 trillion in global subsidies in 2022, including the health and climate costs they dump on the public. If the argument is “subsidies distort markets,” the conversation needs to start there — not at the modest mandate that asked the industry to carry a fraction of its own weight. The author works at the American Enterprise Institute, an institution with a documented history of fossil-fuel funding. That doesn’t make him wrong by itself, but it means his argument deserves to be tested against the costs he doesn’t mention, not just the costs he does.

DEFCON 4 — Firm Moral Superiority

When to use: A policy discussion in mixed company — a forum post, a Substack comment section, a professional listserv — where you want to land the structural point without losing the room.

The piece’s argument has a shape you’ve seen before: an industry that has profited for a century from socialized costs publishes a treatise against subsidies — but only the subsidies that apply to its competitors. The Renewable Fuel Standard was created because the American public was bearing the externalized costs of fossil-fuel combustion and petroleum dependence, and Congress decided the industry should internalize a fraction of that. You can disagree with the mechanism. But the piece calls the RFS “rent-seeking” while never naming the fossil-fuel subsidies it protects, never tallying the externalized costs that justify the mandate, and never asking why the refiners’ preferred “market outcomes” should be treated as natural when they are built on a century of public subsidy. The author is at the American Enterprise Institute. ExxonMobil and the Koch network have been documented funders. He is not an outsider observing market distortions. He is the house organ of the industry that wrote the book on them.

DEFCON 3 — Mockery and Ridicule

When to use: A social-media exchange where the piece is circulating as though it were a serious contribution to energy policy rather than a fossil-fuel lobby brief in a sport coat.

A refineries lobbyist at the American Enterprise Institute — funded, per documentary record, by ExxonMobil and the Koch network — has published a warning about “rent-seeking interests” enriching themselves through government mandates. The irony is not subtle. These are the people who brought you $7 trillion in global fossil-fuel subsidies, a century of pipeline corrosion called “progress,” and the phrase “energy security” as a euphemism for “we get the profits, you get the pollution.” Now they want you to clutch your pearls because corn farmers in Iowa got a mandate to blend ethanol into the fuel supply. The piece calls the RFS “balderdash.” It is, if you squint, possible to have a serious conversation about whether corn ethanol is the best biofuel pathway. But that conversation is not being had by a man whose institution has spent decades defending the subsidies his own industry depends on while attacking the subsidies that compete with it.

DEFCON 2 — Aggressive Villainization

When to use: Someone is pushing the piece as though refiners are the victims of agricultural rent-seeking, and you want the mirror held up.

Read the piece again with one substitution: every time it says “rent-seeking,” replace it with “competition we’d rather not face.” Every time it says “small refineries,” read “an exemption structure that lets the largest refining companies in the country claim hardship by owning multiple small plants.” Every time it says “consumers and businesses would be squeezed,” ask: squeezed compared to what — the world where refineries continue dumping the health costs of sulfur dioxide and particulate matter onto communities downwind, which is the world this author prefers?

The piece never once mentions that the American Petroleum Institute — the refining lobby — spent decades funding climate denial. Exxon’s own internal research in the 1970s and 1980s accurately predicted the trajectory of global warming, and the company then spent the next four decades funding groups like the Global Climate Coalition to manufacture doubt about its own findings — the textbook case of public subsidy via denial while attacking mandates that force internalization. It never once mentions that fossil-fuel subsidies dwarf ethanol subsidies by orders of magnitude. It never once asks what the American public is owed for a century of externalized costs. The author’s own institution, the American Enterprise Institute, is documented on the fossil-fuel payroll. This is not a market analysis. It is an industry defending its subsidy structure by attacking the subsidy structure of an industry that competes with it. The warning about politicians “fixing” market outcomes is the tell — the “market outcomes” he’s protecting were fixed by a century of political action in the opposite direction.

DEFCON 1 — Nuclear Satire

When to use: The piece is circulating in a space where fossil-fuel interests are being presented as free-market voices, and you want the grotesquerie of the framing made impossible to unsee.

The American Enterprise Institute, an institution that has received documented funding from ExxonMobil and the Koch donor network, has published an article calling the Renewable Fuel Standard a “massive subsidy” for corn producers. The piece is 2,000 words long and not once — not a single time — mentions the word “subsidy” as it applies to fossil fuels. The word does not appear. In a piece about energy subsidies.

These are the refineries that built pipelines that cannot handle ethanol-blended fuel and called it infrastructure. These are the companies that externalized the health costs of refinery emissions onto Gulf Coast communities — the cancer corridors of Baton Rouge and Port Arthur — and called it efficiency. These are the heirs to the industry that received $20 billion in documented federal subsidies annually (Treasury Department, Joint Committee on Taxation) and called it free enterprise. Now they want a 2,000-word exemption from the Renewable Fuel Standard because corn farmers in Iowa figured out how to get a mandate of their own. The piece calls E15 savings “balderdash.” The IMF’s $7 trillion in global fossil-fuel subsidies in 2022 is not “balderdash.” It is the baseline the author is paid to never mention.

DEFCON 1+ — Prophetic Indictment

When to use: The reader is moved by moral authority and the long arc — someone who can hear the prophetic register and is ready to name what the structure actually is.

There is a word in the prophets for what this piece does. The prophet Amos said, “They turn justice into wormwood and cast righteousness to the ground” (Amos 5:7). A piece written by a man whose institution is funded by the fossil-fuel industry, published to defend the exemption structure that lets the largest refining companies in America claim hardship through subsidiary restructuring, calls the corn ethanol mandate “rent-seeking.” The unblushing face. The prophet Jeremiah diagnosed it: “They did not know how to blush” (Jeremiah 8:12).

The Renewable Fuel Standard exists because for a century, the refining industry externalized its costs — on the lungs of children in the cancer corridor, on the climate systems that sustain agriculture worldwide, on the national security posture that sent young Americans to secure petroleum supply lines. Congress told the industry to internalize a fraction of that cost, and now the industry’s intellectual apparatus — the think tanks, the policy briefs, the op-eds — calls the mandate a distortion. The distortion was the century of unfettered externalization. The mandate was the correction. The piece never names the fossil-fuel subsidies it protects because naming them would reveal that the “market outcomes” it defends are the product of political action the industry prefers not to call by its name.

What was done to the communities along the Gulf Coast — the refinery emissions, the benzene in the water, the childhood asthma rates that the EPA itself has documented — was not a market outcome. It was a policy choice. And the people who profited from that choice are the people who now publish 2,000-word warnings about subsidies.

DEFCON 1++ — Profane Scorched-Earth

When to use: Full catharsis. The gloves are all the way off. The reader who needs to hear the piece named for what it is in the bluntest possible terms.

A fossil-fuel funded think tank published a 2,000-word screed about the horrors of “rent-seeking” and the word “subsidy” never once appears as it applies to fossil fuels. Not once. In a piece about energy subsidies. Written by a man at the American Enterprise Institute — which takes money from ExxonMobil, from the Koch network, documented, receipted, and public. This is the goddamn grift that keeps on grifting.

The Renewable Fuel Standard exists because the refining industry spent a century dumping its costs onto everyone else — onto the kids in Port Arthur breathing benzene, onto the farmers watching their soil degrade from climate disruption, onto the taxpayers who funded the military deployments to secure the Strait of Hormuz. That was the subsidy. That was the “market outcome” this piece wants to protect. Seven trillion dollars in global fossil-fuel subsidies in 2022, per the IMF, and this motherfucker writes 2,000 words about corn ethanol and never mentions it. That’s not analysis. That’s a protection racket.

The piece calls the RFS “balderdash.” The $7 trillion is not balderdash. The cancer corridor is not balderdash. The century of socialized losses that built refinery margins is not balderdash. What’s balderdash is a man whose paycheck depends on fossil-fuel money writing about “rent-seeking” with a straight face while his own industry’s profit model is the most expensive rent-seeking operation in the history of the American economy. He warns you to beware politicians attempting to fix market outcomes. The market outcomes were fixed a hundred years ago — by his clients. The RFS is the unfixeding. And the reason it makes them so goddamn angry is that it works.

The Deeper Breakdown

Who benefits from this framing, and by what mechanism

The American Petroleum Institute and its member companies benefit from the elimination or weakening of the Renewable Fuel Standard because compliance — purchasing RIN credits or investing in blending infrastructure — reduces refining margins. The piece frames this as a consumer protection issue and a small-business fairness issue, but the structural beneficiary is the refining industry’s bottom line. The American Enterprise Institute, where the author is an adjunct fellow, has received documented funding from ExxonMobil, the Koch network, and other fossil-fuel interests (DeSmog; InsideClimate News’s 2015 Exxon investigation). The institutional authorship chain — from fossil-fuel funders to AEI to this specific piece — is the pipeline the piece doesn’t name.