U.S. Foreign Assistance to the Middle East: Historical Background, Recent Trends, and the FY2021 Request

Summary: Since 1946, the United States has provided an estimated total of $346 billion (obligations in current dollars) in foreign assistance to the Middle East and North Africa (MENA) region. For FY2021, overall bilateral aid requested for MENA countries amounts to $6.6 billion, or about 15% of the State Department's International Affairs budget request. The State Department estimates that the Middle East stands to receive 42% of the geographically specific assistance in the budget request, more than any other region. As in previous years, more than 90% would support assistance for Israel, Egypt, and Jordan. The region also receives a sizable portion of annual emergency humanitarian assistance appropriations, which are not included in the region-specific aid figures.

Summary: Policy changes during the Trump Administration, coupled with legislation passed by Congress, have halted various types of U.S. aid to the Palestinians. The Administration withheld FY2017 bilateral economic assistance, reprogramming it elsewhere, and ceased requesting bilateral economic assistance after Palestinian leadership broke off high-level political contacts to protest President Trump's December 2017 recognition of Jerusalem as Israel's capital. After Congress passed the Anti-Terrorism Clarification Act of 2018 (ATCA, P.L. 115-253 ), the Palestinian Authority (PA) ceased accepting any U.S. aid in January 2019, including security assistance and legacy economic assistance from prior fiscal years. Amidst the COVID-19 outbreak, some Members of Congress are concerned that, due to the uncertainty surrounding the status of U.S. aid to the Palestinians, humanitarian aid to combat the disease may not reach the Palestinian population. In April, the Administration announced that it would provide $5 million in International Disaster Assistance (IDA) to the West Bank as part of its global COVID-19 response.

Summary: The foreign aid data in this report is based on a combination of resources, including the U.S. Agency for International Development's (USAID) U.S. Overseas Loans and Grants (also known as the "Greenbook"), appropriations data collected by the Congressional Research Service from the State Department and USAID, data extrapolated from executive branch agencies' notifications to Congress, and information published annually in the State Department and USAID Congressional Budget Justifications. For foreign aid terminology and acronyms, see the glossary appended to the report.

Summary: In order to more accurately compare the Administration's FY2021 foreign assistance request to previous years' appropriations, aid figures in this report (except where otherwise indicated) refer only to funding that is administered by the State Department or USAID and requested for individual countries or regional programs. While this represents the majority of U.S. assistance to the Middle East, it is important to note that there are several other sources of U.S. aid to the region, such as International Disaster Assistance (IDA), Migration and Refugee Assistance (MRA), and Transition Initiatives (TI). Likewise, other U.S. federal entitiesâsuch as the Departments of Defense, Commerce, and the Treasury, and the Millennium Challenge Corporationâadminister additional types of assistance. Funding for such activities is generally not requested for individual countries and regions, and it is largely excluded here.

Summary: Much of the data presented in this report pre-dates the global spread of the Coronavirus Disease 2019, or COVID-19. All MENA countries, particularly poorer nations that receive foreign assistance, are expected to be affected by the outbreak; however, the extent and scale of the damage to public health and economies across the region is unknown, as is the pandemic's full impact on U.S. aid programs.

Summary: As of mid-April 2020, the Administration had allocated some emergency humanitarian assistance to the region as a first response to the COVID-19 pandemic. On April 16, the State Department announced that it would provide an estimated $79 million in health assistance to various MENA countries to help prepare laboratory systems, implement a public-health emergency plan for points of entry, and activate case-finding and event-based surveillance for influenza-like illnesses. To date, Congress has appropriated almost $1.8 billion in emergency foreign assistance funds through two supplemental appropriations bills to address the impact of COVID-19. See CRS In Focus IF11496, COVID-19 and Foreign Assistance: Issues for Congress , by Nick M. Brown, Marian L. Lawson, and Emily M. Morgenstern.

This report is an overview of U.S. foreign assistance to the Middle East and North Africa (MENA). It includes a brief historical review of foreign aid levels, a description of specific country programs, and analysis of current foreign aid issues. It also provides analysis of the Administration's FY2021 budget request for State Department and U.S. Agency for International Development (USAID) Foreign Operations and Related Programs (SFOPS) appropriations in the MENA region.

Congress authorizes and appropriates foreign assistance and conducts oversight of executive agencies' management of aid programs. As the largest regional recipient of U.S. economic and security assistance ( see Figure 1 below ), the Middle East is perennially a major focus of interest as Congress exercises these powers.

The foreign aid data in this report is based on a combination of resources, including USAID's U.S. Overseas Loans and Grants Database (also known as the "Greenbook"), appropriations data collected by the Congressional Research Service from the State Department and USAID, data extrapolated from executive branch agencies' notifications to Congress, and information published annually in the State Department and USAID Congressional Budget Justifications.

The release of this report has coincided with the global spread of the Coronavirus Disease 2019, or COVID-19 ( see text box below ). The COVID-19 pandemic is expected to affect all MENA countries, and may significantly affect poorer nations that benefit from U.S. and other international assistance. Much of the data presented in this report predates the COVID-19 pandemic.

Foreign Aid to Support Key U.S. Policy Goals

U.S. bilateral assistance to MENA countries is intended to support long-standing U.S. foreign policy goals for the region, such as containing Iranian influence, countering terrorism, preventing the proliferation of weapons of mass destruction, preserving the free-flow of maritime commerce and energy resources, promoting Israeli-Arab peace, and preserving the territorial integrity and stability of the region's states. U.S. foreign assistance (from global accounts/non-bilateral) also is devoted to ameliorating major humanitarian crises stemming from ongoing conflicts in Syria, Yemen, and elsewhere.

As in previous years, the bulk of U.S. foreign aid to the MENA region continues to be focused on assistance (mostly military) to three countries: Israel, Egypt, and Jordan. Israel is the largest cumulative recipient of U.S. foreign assistance since World War II. Almost all current U.S. aid to Israel is in the form of military assistance, and U.S. military aid for Israel has been designed to maintain Israel's "qualitative military edge" (QME) over neighboring militaries. U.S. military aid to Egypt and Jordan (which have been at peace with Israel since 1979 and 1994, respectively) is designed to encourage continued Israeli-Arab cooperation on security issues while also ensuring interoperability between the United States and its Arab partners in the U.S. Central Command (CENTCOM) area of responsibility.

The United States also has provided economic assistance to some MENA countries focusing on education, water, health, and economic growth initiatives. In part, U.S. bilateral economic assistance is premised on the idea that governments across the MENA region have had increasing difficulty meeting the expectations of their young citizens. Public dissatisfaction over quality of life issues and lack of economic opportunities persist in many MENA countries. According to the Arab Youth Survey , the rising cost of living and unemployment are the two main obstacles facing Middle East youth today. Arab Barometer , a U.S.-funded, nonpartisan research network that provides insight into Arab public attitudes, also notes that widespread youth discontent about their economic prospects translates into broad frustration with government efforts to create employment opportunities. In recent years, as popular protests have proliferated across the MENA region, governments have continued to grapple with systemic socioeconomic challenges, such as corruption, over-reliance on oil, inefficient public sectors, low rates of spending on health and education, and soaring public debt.

The Trump Administration's FY2021 Aid Budget Request for the MENA Region

Since 1946, the MENA region has received the most U.S. foreign assistance worldwide, reflecting significant support for U.S. partners in Israel, Egypt, Jordan, and Iraq ( see Figure 2 ). For FY2021, Israel, Egypt, and Jordan combined would account for nearly 13.5% of the total international affairs request.

Reducing MENA Aid. For FY2021, the Administration proposes to spend an estimated $6.6 billion on bilateral assistance to the MENA region, a figure that would be nearly equal to the 2020 request but 12% less than what Congress appropriated for 2019 ( see Figure 3 ). In order to achieve this 12% proposed reduction, the Administration's FY2021 request would reduce total military and economic assistance to Iraq, Lebanon, and Tunisia by a combined $544 million. It also seeks to reduce total aid to Jordan by $250 million and, as it did the previous year, does not request Economic Support Fund/Economic Support and Development Fund (ESF/ESDF) for stabilization programs in Syria. In its FY2021 request to Congress, the Administration reiterated from the previous year that it seeks to "share the burden" of economically aiding MENA countries with the international community while aiming to build countries' "capacities for self-reliance."

Stabilization Support for Iraq, Syria, and Beyond. For FY2021, the Administration is again requesting that Congress provide it flexibility in allowing up to $160 million in funding appropriated to various bilateral aid accounts to be used for the Relief and Recovery Fund (RRF). The RRF is designed to assist areas liberated or at risk from the Islamic State (IS, also known as ISIL, ISIS, or the Arabic acronym Da'esh ) and other terrorist organizations (see "Potential Foreign Aid Issues for Congress" below). According to the Congressional Budget Justification (CBJ), "ESDF funding in the RRF will allow the State Department and USAID to support efforts in places like Syria, Iraq, Libya, and Yemen, where the situation on the ground changes rapidly, and flexibility is required." Among other things, funds designated for RRF purposes have supported Iraqi communities through contributions to the United Nations Development Program's Funding Facility for Stabilization (UNDP-FFS). The Trump Administration had ended U.S. contributions to stabilization efforts in Syria, but notified Congress of an intended obligation in 2020 and indicates that it may use FY2021 funds for programs in Syria.

No Funds for the Palestinians. For the first time in over a decade, an Administration has not requested any U.S. bilateral economic or security assistance aid for the Palestinians (see "Potential Foreign Aid Issues for Congress" section below). The Trump Administration, having clashed repeatedly with Palestinian Authority President Mahmoud Abbas, has significantly reduced bilateral funding to the West Bank and Gaza, and has discontinued contributions to U.N. Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) for Palestinian refugees. Moreover, as a result of provisions in the Anti-Terrorism Clarification Act of 2018 (ATCA, P.L. 115-253 ), no bilateral assistance has been delivered to the Palestinians since January 2019. The Administration did suggest that funds from its re-proposed "Diplomatic Progress Fund" ($225 million) could be used to "resume security assistance in the West Bank" or support critical diplomatic efforts, such as "a plan for Middle East peace." In FY2020, the Administration requested $175 million in ESDF for the Diplomatic Progress Fund, though Congress did not fund it in the FY2020 Further Consolidated Appropriations Act, P.L. 116-94 (referred to herein as P.L. 116-94 ).

Israel is the largest cumulative recipient of U.S. foreign assistance since World War II. To date, the United States has provided Israel $142.3 billion (current, or noninflation-adjusted, dollars) in bilateral assistance and missile defense funding. Almost all U.S. bilateral aid to Israel is in the form of military assistance.

In 2016, the U.S. and Israeli governments signed a 10-year Memorandum of Understanding (MOU) on military aid, covering FY2019 to FY2028. Under the terms of the MOU, the United States pledges (pending congressional appropriation) to provide Israel $38 billion in military aid ($33 billion in Foreign Military Financing or FMF grants plus $5 billion in missile defense appropriations). This MOU replaced a previous $30 billion 10-year agreement, which ran through FY2018.

Israel is the largest recipient of FMF. For FY2021, the President's request for Israel would encompass approximately 59% of total requested FMF funding worldwide.

Israel uses most FMF to finance the procurement of advanced U.S. weapons systems. In March 2020, the Defense Security Cooperation Agency (DSCA) notified Congress of a planned sale to Israel of eight KC-46A Boeing "Pegasus" aircraft for an estimated $2.4 billion. According to Boeing, the KC-46A Pegasus is a multirole tanker (can carry passengers, fuel, and equipment) that can refuel all U.S. and allied military aircraft. The Israeli Air Force's current fleet of tankers was originally procured in the 1970s, and it is anticipated that Israel will be able to use the KC-46A to refuel its F-35 fighters. Israel is the first international operator of the F-35 Joint Strike Fighter, the Department of Defense's fifth-generation stealth aircraft considered to be the most technologically advanced fighter jet ever made. After Japan, Israel will become the second foreign user of the KC-46A.

Since the 1979 Israeli-Egyptian Peace Treaty, the United States has provided Egypt with large amounts of foreign assistance. U.S. policymakers have routinely justified this aid to Egypt as an investment in regional stability, built primarily on long-running military cooperation and the perceived need to sustain the treaty. Egypt has used FMF to purchase major U.S. defense systems, such as the F-16 fighter aircraft, the M1A1 Abrams battle tank, and the AH-64 Apache attack helicopter.

U.S. economic aid to Egypt (funded through ESF) is divided into two components: (1) USAID-managed programs (public health, education, economic development, democracy and governance); and (2) the U.S.-Egyptian Enterprise Fund (EAEF). Since its inception in FY2012, Congress has appropriated $300 million in ESF for the EAEF.

Egypt's governance and human rights record has sparked regular criticism from U.S. officials and some Members of Congress (see "Potential Foreign Aid Issues for Congress" section below). Since FY2012, Congress has passed appropriations legislation that withholds the obligation of FMF to Egypt until the Secretary of State certifies that Egypt is taking various steps toward supporting democracy and human rights. With the exception of FY2014, lawmakers have included a national security waiver to allow the Administration to waive these congressionally mandated certification requirements under certain conditions. For FY2019, the Trump Administration has obligated $1 billion in FMF for Egypt, of which $300 million in FY2019 FMF remains withheld until the Secretary issues a determination pursuant to Section 7041(a)(3)(B) of P.L. 116-6 , the FY2019 Consolidated Appropriations Act. The Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ) also withholds $300 million in FMF until a certification or waiver is issued.

For the past three fiscal years ( see Table 3 ), Congress has appropriated over $1.4 billion in total bilateral aid for Egypt and has added $30 million to $50 million in ESF above the president's request for USAID programs in Egypt.

The Hashemite Kingdom of Jordan is also one of the largest recipients of U.S. foreign aid globally. Like Israel, the United States and Jordan have signed an MOU on foreign assistance, most recently in 2018. The MOU, the third such agreement between the United States and Jordan, commits the United States (pending congressional appropriation) to provide $1.275 billion per year in bilateral foreign assistance over a five-year period for a total of $6.375 billion (FY2018-FY2022).

U.S. military assistance primarily enables the Jordanian military to procure and maintain U.S.-origin conventional weapons systems. FMF overseen by the State Department supports the Jordanian Armed Forces' multi-year (usually five-year) procurement plans, while DOD-administered security assistance supports ad hoc defense systems to respond to emerging threats.

The United States provides economic aid to Jordan for (1) budgetary support (cash transfer), (2) USAID programs in Jordan, and (3) loan guarantees. The cash transfer portion of U.S. economic assistance to Jordan is the largest amount of budget support given to any U.S. foreign aid recipient worldwide. U.S. cash assistance is provided to help the kingdom with foreign debt payments, Syrian refugee support, and fuel import costs (Jordan is almost entirely reliant on imports for its domestic energy needs). ESF cash transfer funds are deposited in a single tranche into a U.S.-domiciled interest-bearing account and are not commingled with other funds. The U.S. State Department estimates that, since large-scale U.S. aid to Syrian refugees began in FY2012, it has allocated more than $1.3 billion in humanitarian assistance from global accounts for programs in Jordan.

The United States funds military, economic, stabilization, and security programs in Iraq, with most assistance funding provided through the Defense Department Counter-ISIS Train and Equip Fund (CTEF). From FY2015 through FY2020, Congress authorized and appropriated more than $6.5 billion in Defense Department funding for train and equip assistance in Iraq.

Iraq began purchasing U.S.-origin weapons systems using its own national funds through the Foreign Military Sales program in 2005, and the United States began providing FMF to Iraq in 2012 in order to help Iraq sustain U.S.-origin systems. Between 2014 and 2015, as Iraq and the United States battled the Islamic State throughout northern and western Iraq, FMF funds were "redirected to urgent counterterrorism requirements" including ammunition and equipment." A $250 million FY2016 FMF allocation subsidized the costs of a $2.7 billion FMF loan to support acquisition, training, and continued sustainment of U.S.-origin defense systems.

U.S. economic assistance to Iraq has supported public financial management reform, United Nations-coordinated stabilization programs, and loan guarantees. The Obama Administration and Congress provided a U.S. loan guarantee in 2017 to encourage other lenders to purchase bonds issued by Iraq to cover budget shortfalls. The Trump Administration has directed U.S. stabilization support since 2017 to prioritize programs benefitting persecuted Iraqi religious minority groups. P.L. 116-94 directs stabilization assistance to Anbar province and appropriates bilateral economic assistance, international security assistance, and humanitarian assistance for the Kurdistan Region of Iraq. The act also directs funds to support transitional justice and accountability programs for genocide, crimes against humanity, and war crimes in Iraq.

As of early 2020, Tunisia remained the sole MENA country to have made a durable transition to democracy since the 2011 wave of Arab uprisings. U.S. bilateral aid has increased significantly since then, supporting economic growth initiatives, good governance, and security assistance.

U.S.-Tunisia security cooperation has expanded since 2011, as Tunisia has sought to maintain its U.S.-origin defense materiel, reform its security institutions, and respond to evolving terrorist threats. The United States has supported Tunisia's security sector reform efforts with $12 million to $13 million per year in State Department-administered funding for law enforcement strengthening and reform. Over the last five years, Congress has appropriated $65 million to $95 million per year in bilateral FMF for Tunisia ( see Table 6 ). DOD has provided substantial additional counterterrorism and border security assistance for Tunisia under its "global train and equip" authority (currently, 10 U.S.C. 333) and separate nonproliferation authorities.

Since the Trump Administration issued its first aid budget request (for FY2018), Congress has appropriated, on average, $104 million more in bilateral aid to Tunisia each year than the President requested. As part of its justification for requesting global FMF loan authority in FY2021, the Administration cited a "request from the Government of Tunisia for a $500 million FMF loan to procure U.S.-manufactured light attack aircraft for the Tunisian Armed Forces." Congress did not enact FMF loan authority in prior years in response to previous Trump Administration requests.

The United States has sought to bolster forces that could help counter Syrian and Iranian influence in Lebanon through a variety of military and economic assistance programs. U.S. security assistance priorities reflect increased concern about the potential for Sunni jihadist groups such as the Islamic State to target Lebanon, as well as long-standing U.S. concerns about Hezbollah and preserving Israel's qualitative military edge (QME). U.S. economic aid to Lebanon seeks to promote democracy, stability, and economic growth, particularly in light of the challenges posed by the ongoing conflict in neighboring Syria. Congress places several certification requirements on U.S. assistance funds for Lebanon annually in an effort to prevent their misuse or the transfer of U.S. equipment to Hezbollah or other designated terrorists. Hezbollah's participation in the Syria conflict on behalf of the Asad government is presumed to have strengthened the group's military capabilities and has increased concern among some in Congress over the continuation of U.S. assistance to the Lebanese Armed Forces (LAF).

FMF has been one of the primary sources of U.S. funding for the LAF, along with the Counter-ISIL Train and Equip Fund (CTEF). According to the State Department, between FY2015 and FY2019, security assistance has averaged $224 million annually in combined State Department and Department of Defense military grant assistance. These funds have been used to procure, among other things, light attack helicopters, unmanned aerial vehicles, and night vision devices.

The United States has long provided relatively modest amounts of ESF to Lebanon for scholarships and USAID programs. Since the start of the Syrian civil war, U.S. programs have been aimed at increasing the capacity of the public sector to provide basic services to both refugees and Lebanese host communities, including reliable access to potable water, sanitation, and health services. U.S. programs have also aimed to increase the capacity of the public education system to cope with the refugee influx.

For FY2021, the President is requesting $133 million in total bilateral aid to Lebanon, which is 46% less than what Congress provided for Lebanon in FY2020. For the past three fiscal years, Congress has appropriated, on average, $113.5 million per year above the President's request.

In addition to assistance provided directly to certain countries, the United States provides aid to Middle Eastern countries through regional programs, including the following.

Middle East Regional Partnership Initiative (MEPI) . MEPI is an office within the Bureau for Near Eastern Affairs at the State Department that specifically supports political reform, women's and youth empowerment, quality education, and promoting economic opportunity in the Arab world. Since MEPI's inception in 2002, Congress has allocated it an estimated $1.1 billion in ESF. One of MEPI's contributions to U.S. democracy promotion in the Arab world has been to directly fund indigenous nongovernmental organizations (NGOs). MEPI's Local Grants Program awards grants to NGOs throughout the Middle East in order to build capacity for small organizations. However, in countries with legal restrictions prohibiting foreign funding of local NGOs, U.S. officials and grant recipients may weigh the potential risks of cooperation. Between 2011 and 2013, Egypt arrested and convicted local and foreign NGO specialists on election monitoring, political party training, and government transparency in Egypt. Middle East Regional (MER) . A USAID-managed program funded by ESF, MER supports programs that work in multiple countries on issues such as women's rights, public health, water scarcity, and education. For FY2021, the Administration is requesting $50 million in ESF funding for MER. In recent years, USAID has allocated $10 million to $15 million annually for MER. Near East Regional Democracy (NERD) . A State Department-managed program funded through ESF, NERD promotes democracy and human rights in Iran (though there is no legal requirement to focus exclusively on Iran). NERD-funded training (e.g., internet freedom, legal aid) for Iranian activists takes place outside the country due to the clerical regime's resistance to opposition activities supported by foreign donors. For FY2021, the Administration has bundled its NERD request together with MEPI as part of an $84.5 million ESF request for what it calls "State NEA Regional." For FY2020, Appropriators specified $70 million in ESF for NERD ($55 million base allocation plus $15 million to the State Department's Bureau of Democracy, Human Rights, and Labor or DRL) in Division G of the Joint Explanatory Statement accompanying P.L. 116-94 . Middle East Regional Cooperation (MERC). A USAID-managed program funded through ESF, MERC supports scientific cooperation between Israelis and Arabs. First established in an amendment to the Foreign Operations bill in 1979, MERC was designed to encourage cooperation between Egyptian and Israeli scientists. Today, MERC is an open-topic, peer-reviewed competitive grants program that funds joint Arab-Israeli research covering the water, agriculture, environment, and health sectors. For FY2021, the Administration is not requesting any ESF for MERC. Appropriators specified $5 million for MERC in FY2020 appropriations (Division G of the Joint Explanatory Statement accompanying P.L. 116-94 ). Middle East Multilaterals (MEM) . A small State Department-managed program funded through ESF, MEM supports initiatives aimed at promoting greater technical cooperation between Arab and Israeli parties, such as water scarcity, environmental protection, and renewable energy. For FY2021, the Administration is not requesting any ESF for MEM, and the last time the program was allocated funding was in FY2018 ($400,000). Trans-Sahara Counter-Terrorism Partnership (TSCTP) . A State Department-led, interagency initiative funded through multiple foreign assistance accounts (PKO, NADR, INCLE, DA, and ESF), TSCTP supports programs aimed at improving the capacity of countries in North and West Africa to counter terrorism and prevent Islamist radicalization. Three North African countries âTunisia, Algeria, and Moroccoâparticipate in TSCTP; Libya is also formally part of the partnership, but the majority of funding has been implemented in West Africa's Sahel region to date.

For nearly a decade, the United States has continued to devote significant amounts of foreign assistance resources toward several major humanitarian crises stemming from ongoing conflicts in Syria, Yemen, and elsewhere ( see Figure 4 ). Since 2010, the United States has provided about $16.4 billion in humanitarian response funding to the Middle East.

The United States is the largest donor of humanitarian assistance to the Syria crisis and since FY2012 has allocated more than $10.6 billion to meet humanitarian needs using existing funding from global humanitarian accounts and some reprogrammed funding. According to the United Nations, Yemen's humanitarian crisis is the worst in the world, with close to 80% of Yemen's population of nearly 30 million needing some form of assistance. The United States, Saudi Arabia, the United Arab Emirates, and Kuwait are the largest donors to annual U.N. appeals for aid. Since 2011, the United States has provided over $3 billion in emergency humanitarian aid for Yemen. Most of these funds are provided through USAID's Office of Food for Peace to support the World Food Programme in Yemen. During the government of Iraq's confrontation with the Islamic State , the United States was also one of the largest donors of humanitarian assistance. Since 2014, it has provided more than $2.6 billion in humanitarian assistance for food, improved sanitation and hygiene, and assistance for displaced and vulnerable communities to rebuild their livelihoods.

The State Department and USAID provide this humanitarian assistance through implementing partners, including international aid organizations and nongovernmental organizations Humanitarian assistance is primarily managed by USAID's Office of Foreign Disaster Assistance (OFDA), USAID's Office of Food for Peace (FFP), and the U.S. Department of State's Bureau of Population, Refugees, and Migration (State/PRM) using "global accounts" (rather than bilateral), such as IDA, FFP, and MRA.

Foreign Aid Issues for Potential Consideration

Major Changes in U.S. Aid to the Palestinians36

Policy changes during the Trump Administration ( see Chronology below ), coupled with legislation passed by Congress, have halted various types of U.S. aid ( see "U.S. Aid to the Palestinians Since 1950" Text Box ) to the Palestinians. The Administration withheld FY2017 bilateral economic assistance, reprogramming it elsewhere, and ceased requesting bilateral economic assistance after Palestinian leadership broke off high-level political contacts to protest President Trump's December 2017 recognition of Jerusalem as Israel's capital. In January 2019, after Congress passed the Anti-Terrorism Clarification Act of 2018 (ATCA, P.L. 115-253 ), the Palestinian Authority (PA) ceased accepting any U.S. aid, including security assistance and legacy economic assistance from prior fiscal years. ATCA provided for a defendant's consent to U.S. federal court jurisdiction over the defendant for lawsuits related to international terrorism if the defendant accepted U.S. foreign aid from any of the three accounts from which U.S. bilateral aid to the Palestinians has traditionally flowed (ESF, INCLE, and NADR). The PA made the decision not to accept bilateral aid, most likely to avoid being subjected to U.S. jurisdiction in lawsuits filed by U.S. victims of Palestinian terrorism.

Some sources suggested that the Administration and Congress belatedly realized ATCA's possible impact, and began considering how to resume security assistance to the PAâand perhaps other types of aid to the Palestinian peopleâafter the PA stopped accepting bilateral aid in 2019. In December 2019, Congress passed the Promoting Security and Justice for Victims of Terrorism Act of 2019, or PSJVTA as Â§ 903 of the Further Consolidated Appropriations Act, 2020, P.L. 116-94 . PSJVTA changes the legal framework applicable to terrorism-related offenses by replacing the provisions in ATCA that triggered Palestinian consent to personal jurisdiction for accepting U.S. aid. However, because PSJVTA did include other possible triggers of consent to personal jurisdictionâbased on actions that Palestinian entities might find difficult to stop for domestic political reasonsâit is unclear whether the Palestinians will accept this "legislative fix" and resume accepting U.S. bilateral aid.

Congress also appropriated $75 million in PA security assistance for the West Bank and $75 million in economic assistance in FY2020 ( P.L. 116-94 ), with appropriators noting in the joint explanatory statement that "such funds shall be made available if the Anti-Terrorism Clarification Act of 2018 is amended to allow for their obligation." It is unclear whether the executive branch will implement the aid provisions. The Trump Administration had previously suggested that restarting U.S. aid for Palestinians could depend on a resumption of PA/PLO diplomatic contacts with the Administration. Such a resumption of diplomacy may be unlikely in the current U.S.-Israel-Palestinian political climate, particularly following the January 2020 release of a U.S. peace plan that the PA/PLO strongly opposes and possible discussion of Israeli annexation of parts of the West Bank.

The Administration's omission of any bilateral assistanceâsecurity or economicâfor the West Bank and Gaza in its FY2021 budget request, along with its proposal in the request for a $200 million "Diplomatic Progress Fund" ($25 million in security assistance and $175 million in economic) to support future diplomatic efforts, may potentially convey some intent by the Administration to condition aid to Palestinians on PA/PLO political engagement with the U.S. peace plan. The Administration also had requested funds for a Diplomatic Progress Fund in FY2020, but Congress instead provided the $150 million in bilateral aid in P.L. 116-94 .

Amidst the COVID-19 outbreak, some Members of Congress are concerned that the uncertainty surrounding the status of U.S. aid to the Palestinians may prevent humanitarian aid to combat the disease from reaching the Palestinian population. In late March 2020, several Senators sent a letter to Secretary of State Pompeo urging the Administration "to take every reasonable step to provide medicine, medical equipment and other necessary assistance to the West Bank and Gaza Strip (Palestinian territories) to prevent a humanitarian disaster." In April, the Administration announced that it would provide $5 million in International Disaster Assistance (IDA) to the West Bank as part of its global COVID-19 response. One media report stated that the $5 million in health assistance for hospitals in the West Bank does not "represent a change of policy regarding aid to the Palestinians, but is rather part of a larger decision to fight the spread of the pandemic across the Middle East, according to sources within the administration."

Since the United States began providing military assistance to the Lebanese Armed Forces (LAF) following the 2006 summer war between Israel and Hezbollah, policymakers and foreign policy experts have debated the efficacy of such aid. U.S. military commanders have repeatedly testified before Congress that assistance to the LAF helps foster U.S.-Lebanese cooperation and strengthens the Lebanese government's capacity to counter terrorism. On the other hand, critics of such support have charged that U.S. aid to the LAF risks U.S. equipment falling into the hands of Hezbollah or other designated terrorists. They also contend that the LAF, even with U.S. aid, is unable or unwilling to enforce United Nations Security Council Resolution 1701 (passed after the 2006 war), which calls for the "disarmament of all armed groups in Lebanon." More recently, as Hezbollah has played a key role in supporting the Asad regime in Syria, opponents of U.S. aid to Lebanon assert that Hezbollah and the LAF have more closely coordinated militarily and politically along the Lebanese-Syrian border.

In 2019, the Trump Administration withheld $105 million in FMF to the LAF as part of a policy review over the efficacy of its military assistance program to Lebanon. In 2019, lawmakers in the House and Senate also introduced the "Countering Hezbollah in Lebanon's Military Act of 2019," ( S. 1886 and H.R. 3331 ) which would withhold 20% of U.S. military assistance to the LAF unless the President can certify that the LAF is taking measurable steps to limit Hezbollah's influence over the force.

According to various reports, both the State and Defense Departments opposed the hold on FMF, calling the LAF a stabilizing institution in Lebanon that has served as a U.S. partner in countering Sunni Muslim extremist groups there. On November 8, 2019, Chairman of the House Foreign Affairs Committee Eliot Engel and Chairman of its Subcommittee on the Middle East, North Africa, and International Terrorism Ted Deutch wrote a letter to the Office of Management and Budget agreeing with previous expert testimony by former U.S. officials who praised the LAF's capabilities.

In December 2019, the Administration lifted its hold on FMF to Lebanon (DOD aid to Lebanon had not been withheld). The policy debate coincided with mass protests throughout Lebanon, which forced the LAF to deploy in the streets to maintain order. In December 2019, the Government Accountability Office (GAO) issued its review on U.S. security assistance to Lebanon concluding that "The Departments of State and Defense reported progress in meeting security objectives in Lebanon, but gaps in performance information limit their ability to fully assess the results of security-related activities."

In January 2020, Lebanon formed a new government, which drew international scrutiny for being composed entirely of parties allied with the March 8 political bloc (headed by the Christian Free Patriotic Movement, Hezbollah, and the Amal Movement). Nevertheless, U.S. Secretary of Defense Mark Esper remarked in February 2020 that "In terms of security assistance, we've committed a lot to the Lebanese Armed Forces and we will continue that commitment."

Years of war, corruption, and economic mismanagement have strained Iraq's economy and state finances, leading to widespread popular frustration toward the political system, and culminating in popular protests across central and southern Iraq. The 2019 national budget ran its largest ever one-year deficit, and in 2020, the COVID-19 pandemic and steep declines in world oil prices delivered two additional shocks to Iraq's already stretched fiscal position. Iraqi authorities have expressed confidence in their ability to withstand low oil prices for the short term. However, with approximately 30% of all Iraqi workers employed by the government, some observers express concern that sustained pressure on state finances and economic activity could lead to more intense street violence and unrest, and/or contribute to an Islamic State resurgence.

Iraq's draft 2020 budget assumed an oil export price of $56 per barrel. According to one projection from mid-March 2020âwhen prices were less than half that levelâIraq would have been "likely to earn less than $3 billion per month, given its recent rate of exportsâleaving a monthly deficit of more than $2 billion just to pay current expenditures." As of May 2020, it appears that without outside assistance, Iraq will need to draw on reserves (around $65 billion as of early 2020), cut salaries, and/or limit social spending to meet budget needs.

International financial institutions (IFIs), such as the International Monetary Fund (IMF), could be one source of external financing for Iraq, but Iraq has not met reform targets set under its last round of agreements with the IMF. From 2016 to 2019, the IMF provided over $5 billion in loans to Iraq to help the country cope with lower oil prices and ensure debt sustainability. Iraq would likely face higher borrowing costs for new sovereign debt offerings, and obtaining commitments from Iraqi authorities as preconditions on further U.S. or IFI support may be complicated by Iraq's contested domestic politics and uncertainty over the future of U.S.-Iraq ties.

Secretary of State Michael Pompeo announced on April 7 that U.S. officials would engage Iraqi counterparts in a high-level strategic dialogue in June to address the future of the bilateral partnership, including U.S. assistance and the presence of U.S. forces. U.S. forces consolidated their presence to a reduced number of Iraqi facilities in March and April 2020, and the Administration has informed Congress of reductions in U.S. civilian personnel since 2019.

Stabilization in Areas Liberated from the Islamic State

As Congress considers the President's FY2021 budget request for MENA, Members have continued to discuss what the appropriate level of U.S. assistance should be to stabilize and reconstruct areas recaptured from the Islamic State group (IS, aka ISIS/ISIL). Recent U.S. intelligence estimates warn that an IS-fueled insurgent campaign has begun in Syria and Iraq, foresee billions of dollars in reconstruction costs in liberated areas, and suggest that a host of complex, interconnected political, social, and economic challenges may rise from the Islamic State's ashes. According to the International Crisis Group,

In the two years since defeating ISIS, the Iraqi government has made only minimal progress rebuilding post-ISIS areas and reviving their local economiesâ¦. There is no reason to assume local resentment will lead residents directly back to ISIS, particularly given their bitter recent experience with the group's rule. Still, both Iraqis and Iraq's foreign partners worry about what might happen if these areas remain ruined and economically depressed.

Since FY2017, Congress has appropriated over $1 billion in aid from various accounts (ESF, INCLE, NADR, PKO, and FMF ) as part of a "Relief and Recovery Fund (RRF)" to help areas liberated or at risk from the Islamic State and other terrorist organizations. Among several conditions on RRF spending, lawmakers have repeatedly mandated in appropriations language that funds designated for the RRF "shall be made available to the maximum extent practicable on a cost-matching basis from sources other than the United States."

Over time, lawmakers have adjusted the RRF's authorities to ensure that assistance be made available for "vulnerable ethnic and religious minority communities affected by conflict." In addition, lawmakers have removed the geographic limitation (Iraq and Syria) on funds appropriated for RRF, and have specified either in bill text or accompanying explanatory statements that RRF funding be made available for Jordan, Tunisia, Yemen, Libya, Lebanon, for countries in East and West Africa, the Sahel, and the Lake Chad Basin region. Congress also has appropriated funding specifically to address war crimes, genocide, and crimes against humanity in Iraq and Syria in recent years, including through the designation of RRF-eligible funds.

For stabilization efforts in Iraq, USAID has used ESF and ESF-OCO (Overseas Contingency Operations) funds to contribute to the United Nations Development Program's Funding Facility for Stabilization (FFS). To date, more than $396 million in U.S. stabilization aid has flowed to liberated areas of Iraq, largely through the FFSâwhich remains the main international conduit for post-IS stabilization assistance in liberated areas of Iraq. The Trump Administration also has directed U.S. contributions to the FFS to address the needs of vulnerable religious and ethnic minority communities in Ninewa Plain, western Ninewa, and communities displaced from those areas to other parts of northern Iraq.

As U.S. officials continue to seek greater Iraqi and international contributions to stabilization efforts in Iraq, the scale of what is needed to rebuild Iraq has far exceeded international efforts to date. In 2018, experts from the World Bank and the Iraqi government concluded that the country would need $45 billion to repair civilian infrastructure that had been damaged or destroyed since 2014. At the 2018 Kuwait International Conference for Reconstruction of Iraq, the Iraqi government requested $88 billion from the international community for rebuilding efforts â it received pledges of $30 billion. According to one United Nations official, as of late 2019, just over $1 billion in reconstruction pledges have been delivered from donors.

Stabilization needs in Syria also are extensiveâthe conflict has entered its tenth year and analysts have estimated that the cost of conflict damage and lost economic activity could exceed $388 billion. The Trump Administration generally has supported stabilization programming in areas of Syria controlled by U.S.-backed Kurdish forces and liberated from the Islamic State, while seeking to prevent such aid from flowing to areas of Syria controlled by the government of Syrian President Bashar al Asad. However, in 2018 and 2019, the Administration sought to shift responsibility for the funding of stabilization activities to other coalition partners. In contrast to prior years, the Administration's FY2020 and FY2021 foreign assistance budget requests have sought no Syria-specific funding, but as noted above, the FY2021 request states that "ESDF funding in the RRF will allow the State Department and USAID to support efforts in places like Syria" and other countries. In late 2019, USAID reported that donor funds for stabilization activities in Syria were nearly depleted. In October 2019, the Trump Administration announced that it was releasing $50 million in stabilization funding for Syria to support civil society groups, ethnic and religious minorities affected by the conflict, the removal of explosive remnants, and the documentation of human rights abuses. These funds were notified to Congress in early 2020, and consist primarily of FY2019 ESF-OCO funds, with $14 million in RRF-designated funds from various accounts.

The Trump Administration has stated its intent not to contribute to the reconstruction of Asad-controlled areas of Syria absent a political settlement to the country's civil conflict, and to use U.S. diplomatic influence to discourage other international assistance to Asad-controlled Syria. Congress also has acted to restrict the availability of U.S. funds for assistance projects in Asad-held areas. In the absence of U.S. engagement, other actors such as Russia or China could conceivably provide additional assistance for reconstruction purposes, but may be unlikely to mobilize sufficient resources or adequately coordinate investments with other members of the international community to meet Syria's considerable needs. Predatory conditional assistance could also further indebt the Syrian government to these or other international actors and might strengthen strategic ties between Syria and third parties in ways inimical to U.S. interests. A lack of reconstruction, particularly of critical infrastructure, could delay the country's recovery and exacerbate the legacy effects of the conflict on the Syrian population, with negative implications for the country's security and stability.

In conducting diplomacy in the Middle East and providing foreign aid to friendly states, it has been an ongoing challenge for the United States to balance short-term national security interests with the promotion of democratic principles. At times, executive branch officials and some Members of Congress have judged that cooperation necessary to ensure stability and facilitate counterterrorism cooperation requires partnerships with governments that do not meet basic standards of democracy, good governance, or respect for human rights.

Nevertheless, successive Administrations and Congress also at times have used policy levers, such as conditional foreign aid, to demand changes in behavior from partner governments accused of either suppressing their own populations or committing human rights abuses in military operations. In some instances, policymakers have taken action intended to reinforce democratic principles in U.S.-MENA diplomacy and to comply with U.S. and international law, while preserving basic security cooperation.

Examples of provisions of U.S. law that limit the provision of U.S. foreign assistance in instances when a possible gross violation of human rights has occurred include, among others:

The Foreign Assistance Act (FAA) of 1961, as amended, contains general provisions on the use of U.S.-supplied military equipment (e.g., Section 502B, Human Rights - 22 U.S.C. 2304). Section 502B(a)(2) of the FAA stipulates that, absent the exercise of a presidential waiver, "no security assistance may be provided to any country the government of which engages in a consistent pattern of gross violations of internationally recognized human rights." The Arms Export Control Act (AECA), as amended, contains several general provisions and conditions for the export of U.S.-origin defense articles that may indirectly address human rights concerns. For example, Section 4 of the AECA (22 U.S.C. 2754) states that defense articles may be sold or leased for specific purposes only, including internal security, legitimate self-defense, and participation in collective measures requested by the United Nations or comparable organizations. Section 3(c)(1)(B) of the AECA (22 U.S.C. 2753(c)(1)(B)) prohibits the sale or delivery of U.S.-origin defense articles when either the President or Congress find that a recipient country has used such articles in substantial violation of an agreement with the United States governing their provision or "for a purpose not authorized" by Section 4 of the AECA or Section 502 of the FAA. The "Leahy Laws" Section 620M of the FAA (22 U.S.C. 2378d) and 10 U.S.C. 362 prohibit U.S. security assistance to a foreign security force unit when there is credible information that such unit has committed a gross violation of human rights.

In addition to the U.S. Code, annual appropriations legislation contains several general and MENA-specific provisions that restrict aid to human rights violators. Recent annual appropriations legislation conditioning U.S. aid to Egypt is one of the more prominent examples of how policymakers have attempted to leverage foreign aid as a tool to promote U.S. values abroad.

Section 7041(a) of P.L. 116-94 contains the most recent legislative language conditioning aid to Egypt. The Act includes a provision that withholds $300 million of FMF funds until the Secretary of State certifies that the Government of Egypt is taking effective steps to advance, among other things, democracy and human rights in Egypt. The Secretary of State may waive this certification requirement, though any waiver must be accompanied by a justification to the appropriations committees.

Members of Congress and the broader foreign policy community continue to debate the efficacy of using foreign aid as leverage to promote greater respect for human rights in the Middle East and elsewhere. After the January 2020 death of an American citizen incarcerated in Egypt, one report suggests that the State Department's Bureau of Near Eastern Affairs has raised the option of possibly cutting up to $300 million in foreign aid to Egypt. In 2017, the Trump Administration reduced FMF aid to Egypt by $65.7 million, citing "Egyptian inaction on a number of critical requests by the United States, including Egypt's ongoing relationship with the Democratic People's Republic of Korea, lack of progress on the 2013 convictions of U.S. and Egyptian nongovernmental organization (NGO) workers, and the enactment of a restrictive NGO law that will likely complicate ongoing and future U.S. assistance to the country."

FY2020 MENA Legislative Summary in P.L. 116-94

Appendix A. Common Foreign Assistance Acronyms and Abbreviations


The Renewable Fuel Standard (RFS): Frequently Asked Questions About Small Refinery Exemptions (SREs)

Summary: In the Energy Policy Act of 2005 ( P.L. 109-58 ; EPAct05), Congress required the U.S. Environmental Protection Agency (EPA) to implement the Renewable Fuel Standard (RFS)âa mandate that requires U.S. transportation fuel to contain a minimum volume of renewable fuel. Since expansion of the RFS in 2007 under the Energy Independence and Security Act ( P.L. 110-140 ; EISA), Congress has had interest in the RFS for various reasons (e.g., limited cellulosic biofuel production, EPA's use of programmatic waiver authority, and RFS compliance costs). Over the last several months, Congress has expressed repeated interest in small refinery exemptions (SRE) from the RFS.

Summary: The RFS allows small refineries to receive an exemption from the RFS, if they can prove compliance would subject them to disproportionate economic hardship. There is no statutory definition for disproportionate economic hardship, and a small refinery may apply for an exemption at any time. When deciding whether to grant an exemption, EPA is to consult with the Secretary of Energy. This consultation comes in the form of a recommendation from the Department of Energy (DOE) to EPA. The EPA Administrator has 90 days to act on (i.e., grant or deny) an exemption. A small refinery must apply each year for an exemption from compliance for that year.

Summary: EPA categorizes the majority of small refinery exemption information as confidential business information (CBI). EPA does make publicly available some exemption information, but only in aggregate (e.g., total number of exemptions granted, total exempted volume of gasoline and diesel); there are no publicly available data on individual SREs.

Summary: There have been legal challenges about small refinery exemptions. Small refineries can and have challenged EPA's denials of their petitions for SREs in court. Various stakeholders have also challenged EPA's methodology for evaluating small refinery exemption petitions. In 2020, the Tenth Circuit vacated EPA's decision to grant three small refinery exemption petitions. It is unclear how this court decision will affect how EPA evaluates SRE petitions in the future.

Summary: Congress may be interested in small refinery exemptions for multiple reasons. Foremost, Congress may seek clarification on how EPA is currently evaluating SRE petitions, and whether that has changed over time. Some in Congress have raised concerns over transparency in EPA's decision process on SREs, as there is limited public information on the process.

Summary: Congress may also value additional information about how SREs are being accounted for in annual rulemakings for the RFS. Each year, EPA issues a final rule for the RFS with the coming year's volume requirements (e.g., EPA is to issue the 2021 volume requirements by November 30, 2020). This final rule contains percentage standards thatâonce obligated parties (e.g., refiners and importers) apply them to their gasoline and diesel salesâare intended to ensure the volumes required are met. The formula for calculating the annual percentage standard includes a variable that accounts for small refinery exemptions granted by the time of the rulemaking. Depending on when the small refinery exemption is grantedâprior to the release of a final rule or afterâthat exemption may or may not be accounted for in the annual percentage standard (to date, most SREs have been granted afterward). In December 2019, EPA announced that it will change how it calculates the annual percentage standard in order to account for volumes of gasoline and diesel that will be exempted from the renewable volume obligations. The impact small refinery exemptions have on the RFS depends on the number of SREs granted, when they are granted, and the amount of gasoline and diesel exempted. Congress may consider several items as it seeks to understand the impact of SREs on the RFS, including transparency, agency discretion, a potential RFS reset, and U.S. gasoline consumption.

Congress directs the U.S. Environmental Protection Agency (EPA) to implement the Renewable Fuel Standard (RFS)âa mandate that requires U.S. transportation fuel to contain a minimum volume of renewable fuel. Every year obligated parties (including small refiners) demonstrate to EPA their compliance with the mandate. The EPA may grant small refineries an exemption from the RFS for a compliance period, if they can prove compliance would subject them to disproportionate economic hardship. Over the last few years, this programmatic action, once routine, has come under increasing scrutiny from some Members of Congress and stakeholders. The debate regarding small refinery exemptions (SREs) for the RFS has intensified, as both the number of SREs granted and the total exempted volume of gasoline and diesel has increased in recent years. At the core of the SRE policy discussion are three factors: (1) the SRE statutory requirements, (2) the EPA's SRE issuance process, and (3) the impact of SREs on meeting the statutory RFS volume requirements.

There are various perspectives about SREs. Some Members of Congress and stakeholders have expressed their dissatisfaction with the SREs granted under the Trump Administration. For example, some biofuel organizations argue that the method used to grant SREs, the number of SREs issued in recent years, and the accounting for the exempted fuel in recent annual rulemakings, have undercut demand for biofuel, created market uncertainty, and violated the statute, among other things. Other Members of Congress and stakeholders contend that SREs alleviate the economic burden of complying with the mandate for some refineries, that SREs do not directly impact biofuel demand, and that SREs are a symptom of a larger policy problem, among other things.

This reportâin a question and answer formatâprovides information about SREs for the RFS and discusses related congressional and Executive Branch actions. More specifically, the report provides an overview of small refineries, the small refinery exemption process, challenges to EPA decisions on petitions and to its methodology for evaluating petitions, and gives a synopsis of recent RFS activity, including the new SRE projection methodology finalized by EPA. As discussed later in this report, much of the information about how EPA manages the SRE process is not publicly available because it involves confidential business information (CBI). The information provided in this report is based on a review of the statute and agency materials, as well as general knowledge about the program gleaned from various sources. The report also summarizes congressional bills that address small refinery exemptions and presents other items to consider when discussing small refinery exemptions. The report does not analyze the opportunities and challenges stakeholders may encounter from potential action taken by Congress or the Executive Branch.

The following sections respond to 17 frequently asked questions about the RFS and small refinery exemptions.

The RFS requires U.S. transportation fuel to contain a minimum volume of renewable fuel. The RFS statute specifies minimum annual volume targets (in billions of gallons)ârequiring 12.95 billion gallons of renewable fuel in 2010 and ascending to 36 billion gallons in 2022 ( Figure 1 ). The EPA Administrator has statutory authority to determine the volume amounts after 2022. The statute outlines the volume requirements in tables for four categories: total renewable fuel, total advanced biofuel, cellulosic biofuel, and biomass-based diesel. Both cellulosic biofuel and biomass-based diesel are a subset of advanced biofuel. Thus, the total renewable fuel statutory volume required for any given year equates to the sum of conventional biofuel (i.e., corn starch-based ethanol, which is unspecified in statute) and advanced biofuel (which is specified in statute). For each year, EPA converts the total volume requirement into a percentage standard that each obligated party must meet (based on projected gasoline and diesel consumption in that year).

The statute requires that EPA regulate RFS compliance using a tradable credit system. Obligated parties (generally, refiners and importers) submit creditsâcalled renewable identification numbers (RINs)âto EPA for each gallon in their annual obligation. In short, this annual obligation, referred to as the renewable volume obligation (RVO), is the obligated party's total gasoline and diesel sales multiplied by the annual renewable fuel percentage standards announced by EPA for each category of renewable fuel.

The statute gives the EPA Administrator the authority to waive the RFS requirements, in whole or in part, if certain conditions outlined in statute prevail. More specifically, the statute provides a general waiver authority for the overall RFS and waivers for two types of advanced biofuel: cellulosic biofuel and biomass-based diesel. Also, the statute requires that the EPA Administrator modify the applicable volumes of the RFS in 2016 and the years thereafter if certain conditions are met (this action is referred to by some as the RFS "reset").

A refinery is a facility that converts raw materials (e.g., crude oil) into finished products (e.g., gasoline). The statute defines a "small" refinery as "a refinery for which the average aggregate daily crude oil throughput for a calendar year (as determined by dividing the aggregate throughput for the calendar year by the number of days in the calendar year) does not exceed 75,000 barrels." The statutory definition does not mention ownership.

Based on the above definition, a small refinery for the RFS is any refinery that processes no more than about 3.2 million gallons of crude oil each day, or no more than about 1 billion gallons of crude oil per year. An analysis of U.S. Energy Information Administration (EIA) data for refineries based on calendar day operation appears to indicate that there were 53 small refineriesâas defined in the RFS statuteâoperating as of January 1, 2019 ( Figure 2 ). Further, EIA data appears to indicate there is a total of 132 operating refineries overall. Thus, small refineries consist of about 40% of the nation's total number of operating refineries. Additionally, the small refineries comprise about 12% of total crude oil distillation capacity in the United States.

A small refinery exemption releases a small refinery from having to comply with the RFS mandate for a given compliance period. The exemption is only applicable to small refineries as defined in statute for the program. The statute mentions two instances whereby EPA may issue a small refinery exemption: (1) a temporary exemption and (2) an extension of the exemption based on disproportionate economic hardship. The latter instance is currently of concern to most stakeholders and is the exemption referred to in this report.

The statute required a temporary exemption for all small refineries up until calendar year 2011. EPA then proceeded with an exemption for 21 small refineries for an additional two years, 2011 and 2012, based on the results of a DOE study that these small refineries would suffer a disproportionate hardship if required to participate in the program.

For petitions based on disproportionate economic hardship, the small refinery itself must petition the EPA Administrator for an exemption. A small refinery may only petition for an exemption based on the reason of disproportionate economic hardship. The EPA Administrator is to consult with the Secretary of Energy when evaluating a petition. This consultation comes in the form of a DOE recommendation. EPA has the ultimate authority and may accept or reject the DOE recommendation.

4. What is "disproportionate economic hardship"?

The statute does not define disproportionate economic hardship, but requires DOE to complete a study to determine if RFS compliance would impose a disproportionate economic hardship on small refineries. DOE reports that

Disproportionate economic hardship must encompass two broad components: a high cost of compliance relative to the industry average, and an effect sufficient to cause a significant impairment of the refinery operations.

DOE developed a scoring matrix "to evaluate the full impact of disproportionate economic hardship on small refiners and used to assess the individual degree of potential impairment . " The matrix consists of disproportionate structural impact metrics (e.g., access to capital) , disproportionate economic impact metrics (e.g., relative refining margin measure) , and viability metrics (e.g., compliance cost eliminates efficiency gains) .

Congress addressed disproportionate economic hardship in the Joint Explanatory Statement accompanying the 2016 Consolidated Appropriations Act ( P.L. 114-113 ) by stating tha t "If the Secretary finds that either of these two components [from the DOE March 2011 Small Refinery Exemption Study] exists, the Secretary is directed to recommend to the EPA Administrator a 50 percent waiver of RFS requirements for the petitioner." In report language for the 2017 appropriations bill for EPA , C ongress direct ed EPA to follow DOE's recommendation, and to notify both Congress and DOE if the Administrator disagrees with DOE's waiver recommendation and to deliver such notification 10 days prior to issuing a decision .

5. What are the relevant sections in the statute that address small refinery exemption under the RFS?

There are three sections in the statute most relevant to small refinery exemptions: 42 U.S.C. 7545(o)(1)(K), 42 U.S.C. 7545(o)(3)(C), and 42 U.S.C. 7545(o)(9).

6. What information must be submitted to EPA to petition for a small refinery exemption?

EPA reports that a petition for a small refinery exemption

must specify the factors that demonstrate a disproportionate economic hardship and must provide a detailed discussion regarding the hardship the refinery would face in producing transportation fuel meeting the requirements of Â§80.1405 and the date the refiner anticipates that compliance with the requirements can reasonably be achieved at the small refinery.

EPA reports that to fulfill these requirements, companies would likely submit "company business plans, financial statements, tax filings, communications with potential suppliers or lenders, and other records that demonstrate the petitioner satisfies the underlying substantive requirements to be accorded relief." To qualify for an exemption, a refinery must meet the definition of a small refinery for both the calendar year before and during the year for which an exemption is sought. Submissions are not publicly available.

EPA addressed the financial and other information required for 2016 RFS small refinery exemption requests. In its memorandum, EPA reports it considers the findings of the DOE Small Refinery Study and a variety of economic factors when evaluating a petition. EPA reports the economic factors include, but are not limited to, profitability, net income, cash flow and cash balances, gross and net refining margins, ability to pay for small refinery improvement projects, corporate structure, debt and other financial obligations, RIN prices, and the cost of compliance through RIN purchases.

7. Is there a deadline to apply for an exemption?

No. A small refinery may submit a petition to the EPA Administrator for a small refinery exemption at any time.

8. Is there a date by which EPA is to act on an application for an exemption?

The EPA Administrator is required by statute to act on a petition for a small refinery exemption within 90 days of having received the petition. EPA reports it "will issue a decision within 90 days of receiving complete supporting information for the request from the small refinery." It is unclear what information must be submitted to EPA before the agency considers a petition "complete." There is no deadline as to when or whether EPA must publicly announce its decision.

9. How frequently may a small refiner apply for an exemption?

A small refiner must apply separately for an exemption for each compliance year. According to EPA, "[b]eginning with the 2013 compliance year, small refineries may petition EPA annually for an exemption from their RFS obligations."

10. How are the RFS Renewable Volume Obligations (RVOs) calculated?

The statute specifies annual renewable fuel volume amounts (in gallons) required for each category in the RFS through 2022. The EPA converts the statutory volumesâor the volumes EPA has finalized using its waiver authorityâinto annual percentage standards to ensure that obligated parties meet the volume amount. Obligated parties use this annual percentage to compute their RVOs. The RVO is the obligated party's total gasoline and diesel sales multiplied by the annual renewable fuel percentage standards announced by EPA plus any deficit of renewable fuel from the previous year. It is the RVO that informs an obligated party how many gallons of the particular renewable fuel type the party must account for in order to be in compliance. The obligated party is then responsible for submitting to EPA credits (i.e., renewable identification numbers or RINs) for each gallon in its RVO. Once all obligated parties have demonstrated compliance by meeting their RVOs, the volume of renewable fuel required to be blended into the nation's transportation fuel supply is met, minus any SREs.

The statute contains volume amounts for four fuel categories: total renewable fuel, advanced biofuel, cellulosic biofuel, and biomass-based diesel. Thus, there are four annual percentage standards, one for each renewable fuel category. Accordingly, there are also four RVO calculations.

There are six steps to understanding the relationship between an annual standard, an RVO, and RFS compliance:

1. The statute specifies a volume amount for a given year (e.g., 30 billion gallons for total renewable fuel for 2020); 2. EPA announces the final volume requirement which is either (a) the statutory volume amount or (b) a reduced volume requirement based on EPA's waiver authority (e.g., 20.09 billion gallons for total renewable fuel for 2020); 3. EPA issues an annual percentage standard (e.g., 11.56% for total renewable fuel for 2020); 4. The obligated party multiplies the annual percentage standard by its operational sales to compute its RVO for a particular fuel category; 5. The obligated party obtains the RINs needed to meet its RVO; and 6. The obligated party submits its RINs to EPA to demonstrate compliance.

Obligated partiesâgenerally, refiners and importersâmust prove compliance with the RFS each year. Obligated parties include small refineries. However, if a small refinery receives a small refinery exemption, it is exempt from complying with the mandate for a given year. EPA reports "[t]he exempted refinery is not subject to the requirements of an obligated party for fuel produced during the compliance year for which the exemption has been granted." The small refineries that receive a small refinery exemption continue their operations, which may include blending renewable fuel and possibly acquiring RINs (which they can bank for future use or trade with other parties).

11. How do small refinery exemptions impact annual RFS requirements (or RVOs)?

The impact of small refinery exemptions on annual RFS requirements, or RVOs, depends on how much fuel is exempted and when. In general, if a small refinery exemption is granted prior to a final rule setting the annual percentage standards being released, it may be accounted for in the annual percentage standard calculation for that year. If the exemption is granted after the final rule has been released, EPA reports that, under its prior approach, it did not revise its annual percentage standard calculation to account for the later-granted exemptions. The situation where the exemption is not included in the annual percentage calculation is of concern to some stakeholders (e.g., renewable fuel producers) as the renewable fuel volumes for which the small refineries were responsible for are not redistributed to the other obligated parties, and therefore those volumes are not accounted for by the RVOs.

For example, in December 2017, EPA set the 2018 total renewable fuel percentage standard at 10.67%. EPA did not include any small refinery exemptions in its percentage standard calculations for 2018. Further, EPA stated that any exemptions granted after 2018 would not be reflected in the 2018 percentage standards. In August 2019, EPA announced 31 small refinery exemptions for 2018. EPA estimates that the 31 exemptions will account for nearly 13.4 billion gallons of gasoline and diesel being exempted for the 2018 compliance period. If EPA were to account for the exempted 13.4 billion gallons, it would lead to a different annual percentage standard than the standard contained in the final rule. The non-exempt obligated parties would be required to meet this different standard. Some refer to this as "reallocating the waived gallons." However, as EPA has implemented the program for 2018, the remaining obligated parties will not have to meet this different standard.

12. How many small refinery exemptions have been issued?

Since 2013, the number of small refinery exemptions issued based on disproportionate economic hardship has varied, ranging from 7 to 31 in a given year ( Figure 3 ). EPA reports it has not yet received any SRE petitions for 2020.

13. Does the statute require EPA to account for small refinery exemptions in annual standards?

The statute requires that EPA adjust the annual percentage standard to "account for the use of renewable fuel during the previous calendar year by small refineries that are exempt under paragraph (9) [Small refineries]." In 2010, EPA reported that it considers the amount of renewable fuel used in such instance would be negligible and assigns it a value of zero.

CAA section 211(o) requires that the small refinery adjustment also account for renewable fuels used during the prior year by small refineries that are exempt and do not participate in the RFS2 program. Accounting for this volume of renewable fuel would reduce the total volume of renewable fuel use required of others, and thus directionally would reduce the percentage standards. However, as we discussed in RFS1, the amount of renewable fuel that would qualify, i.e., that was used by exempt small refineries and small refiners but not used as part of the RFS program, is expected to be very small. In fact, these volumes would not significantly change the resulting percentage standards. Whatever renewable fuels small refineries and small refiners blend will be reflected as RINs available in the market; thus there is no need for a separate accounting of their renewable fuel use in the equations used to determine the standards. We proposed and are finalizing this value as zero.

In 2018, EPA stated that, regarding Clean Air Act direction that the agency account for renewable fuel used by exempt small refineries, EPA complies through the RIN trading program. In 2019, EPA further explained that

the use of renewable fuel by exempt small refineries is accounted for by the RIN system. That is, since exempt small refineries have no obligation to comply with the applicable percentage standards, they can sell all the RINs associated with any renewable fuel they use. These RINs become part of the overall pool of RINs available to all obligated parties. Thus, no additional adjustment needs to be made to comply with this statutory provision.

Some stakeholders argue that the amounts exempted in recent years are not negligible, and that reallocating these exempted volumes (as opposed to accounting for them through the RIN trading program) would lead to total renewable fuel consumption closer to the amount finalized by EPA for that year. Others contend that reallocating small refinery exemptions "punishes complying parties and creates an unlevel playing field among competing refineries putting additional pressure on the blendwall and increasing the overall cost of the program."

14. How does EPA account for small refinery exemptions in the 2020 annual standards?

In recent years, the number of SREs granted and the total exempted volume of gasoline and diesel has changed, which could indicate the old methodology may no longer suffice. In December 2019, EPA issued a final rule that changes how it calculates the annual percentage standard to account for volumes of gasoline and diesel that will be exempted from the renewable volume obligations. In this final rule, EPA adopted the percentage standard calculation change it proposed in October 2019. In the final rule, EPA reports it is finalizing "a projection methodology based on a 2016â18 annual average of exempted volumes had EPA strictly followed DOE recommendations in those years.â¦" EPA is to do this by amending two factors in the annual percentage standard calculation from:

1. GE i = the amount of gasoline projected to be produced by exempt small refineries and small refiners, in year i and 2. DE i = the amount of diesel fuel projected to be produced by exempt small refineries and small refiners in year i.

1. GE i = the total amount of gasoline projected to be exempt in year i, in gallons, per Â§Â§80.1441 and 80.1442 and 2. DE i = the total amount of diesel projected to be exempt in year i, in gallons, per Â§Â§80.1441 and 80.1442.

EPA reports this calculation modification leads to higher percentage standards, which "would have the effect of ensuring that the required volumes of renewable fuel are met when small refineries are granted exemptions from their 2020 obligations after the issuance of the final rule, provided EPA's projection of the exempted volume is accurate." Further, EPA reports that "[b]y projecting exempted volumes in advance of issuing annual standards, we can issue a single set of standards for each year without the need for periodic revisions and the associated uncertainty for obligated parties." Lastly, EPA reports thatâfor petitions for 2019 and going forwardâit "intends to grant relief consistent with DOE's recommendations where appropriate" (e.g., grant 50% relief where DOE recommends 50% relief). In the past, EPA has granted full exemptions to small refinery petitions where DOE recommended 50% relief.

15. Have there been any legal challenges involving small refinery exemptions?81

Yes. The legal challenges have generally taken one of two forms: (1) refineries challenging the EPA's denial of an exemption petition or (2) parties challenging EPA's methodology for granting and accounting for small refinery exemptions. As discussed below, individual challenges to EPA's exemption denials have at times succeeded, but courts have generally dismissed methodological challenges on procedural grounds.

Challenges to Small Refinery Exemption Decisions

Several individual refineries have challenged EPA's denials of their exemption petitions. For example, in December 2019 Suncor Energy petitioned for review of its denied exemption petition with the U.S. Court of Appeals for the Tenth Circuit. Refineries have specifically challenged EPA's adoption of DOE's scoring index (as noted in question 4), its reliance on DOE's refinery-specific assessments, and EPA's independent analysis. DOE's scoring matrix assesses whether a small refinery would incur a "disproportionate economic hardship" from complying with the RFS standard using two sets of components: disproportionate impacts metrics and viability metrics. Challenges to exemption denials have generally focused on the viability metrics.

In general, courts have upheld as reasonable EPA's adoption of the DOE's scoring matrix, including its use of viability as a metric. The D.C. and the Eighth Circuits have each held that EPA reasonably interpreted the statutory phrase "disproportionate economic hardship" to require, as reflected in DOE's scoring matrix, that the refinery's viability be affected to demonstrate "hardship." However, the Tenth Circuit subsequently held that EPA cannot give such weight to viability, and particularly to the long-term threat of closure, that it effectively reads "disproportionate" out of "disproportionate economic hardship" in the statute.

Courts have allowed EPA to rely on DOE's assessments but invalidated exemption denials for errors in the refinery-specific analyses. For example, the D.C. Circuit vacated and remanded an exemption denial because EPA's independent analysis contained two miscalculations that could have affected its ultimate decision to deny the exemption petition. Similarly, the Fourth Circuit vacated and remanded an exemption denial after finding that EPA had relied on a DOE assessment that was facially deficient. The court held that while EPA could rely on DOE's assessment and need not conduct its own independent analysis of DOE's conclusions concerning a specific exemption request, EPA cannot "blindly adopt [those] conclusions" or rely on a report that is "facially-flawed."

Several biofuels associations challenged EPA's decision to grant three small refinery exemption petitions on a number of grounds. The Tenth Circuit vacated EPA's decisions for three reasons. First, the court interpreted the phrase " extension of the exemption," found in the statutory language authorizing small refinery exemption petitions, to require that the small refinery have received the exemption each year to be eligible. Second, the court concluded that EPA erred in its analysis by considering sources of economic hardship other than those associated with RFS compliance. The court held that the statute only allowed the exemption to be granted on the basis of disproportionate economic hardship from RFS compliance, not other economic factors such as a downturn in industry profit margins. Finally, the court held that when evaluating whether a small refinery incurs disproportionate economic hardship from RFS complianceâspecifically from having to purchase RINsâEPA must take into account its position that refineries are able to pass the cost of RINs on to consumers in the fuel's price. The court acknowledged that EPA could either depart from this position, which it has previously taken, with an adequate explanation or could explain why the theory did not apply to the small refinery at issue in the petition. But the court held that failing to address the theory at all or how it affected EPA's analysis was arbitrary and capricious.

Parties have raised multiple challenges to how EPA administers the small refinery exemptions. To date, each of these challenges has been dismissed or transferred to another court on procedural grounds without reaching the merits of the parties' arguments.

First, in 2018 the Producers of Renewables United for Integrity Truth and Transparency (PRUITT) challenged in the D.C. Circuit how EPA remedied small refinery exemptions it granted on remand after the relevant compliance year had ended. Specifically, PRUITT challenged EPA's decision to issue 2018 RINs to two Wyoming refineries whose 2014 and 2015 exemption petitions were granted after a court vacated and remanded EPA's initial denials in 2017. EPA issued the 2018 RINs to compensate for the 2014 and 2015 RINs that the refineries had retired for compliance before the exemptions were granted. EPA issued 2018 RINs because the 2014 and 2015 RINs the refineries used for compliance had since expired. The D.C. Circuit transferred this portion of the petition to the Tenth Circuit because EPA's issuance of the 2018 replacement RINs to the Wyoming refineries was regionally rather than nationally applicable. Litigation is ongoing.

PRUITT also challenged EPA's interpretation of the statutory provision that small refineries "may at any time petition [EPA] for an extension of the exemption." The agency had interpreted that provision to allow it to grant exemptions after it sets the annual standards. The petitioner alleged that EPA violated its statutory duty to ensure the required volumes of renewable fuels are met by granting "retroactive" exemptions. The court dismissed this claim for lack of jurisdiction and, accordingly, did not reach the merits of this argument.

Rather than challenging EPA's ability to grant exemptions after it sets the annual standards, the National Biodiesel Board (NBB) challenged how EPA accounts for these exemptions as part of the 2018 rulemaking setting the annual standards. EPA adjusts the annual standards for any exemptions granted before the standards are set, which by statute must occur by November 30 th the prior year. But EPA does not account for those exemptions granted later, either by adjusting the standards retroactively or by accounting for them prospectively using projections. NBB alleged that this approach violates the statute because it does not "ensure" that the volumes are met. The petitioner argued that EPA should project small refinery exemptions EPA was "reasonably likely to grant" after the standards are set, adjust the percentages accordingly, and then adjust for any deficiencies in EPA's projections by incorporating the shortfall into the following year's annual standards.

The D.C. Circuit held that NBB had not preserved this challenge to the 2018 rule because it had failed to raise the argument with "reasonable specificity" during the public comment period, as the Clean Air Act requires. Although other parties had submitted comments regarding how EPA accounts for small refinery exemption volumes, the court determined that those comments either requested that EPA "cease granting retroactive exemptions" or "adjust the applicable volumes for the same year in which the retroactive exemptions are later granted." The court concluded that these comments were sufficiently different from NBB's argument that EPA had not had an opportunity to address the argument in its final rule. Accordingly, the D.C. Circuit held that NBB had forfeited the issue.

Finally, based on media reports that EPA was increasing the number of exemptions granted, the American Biofuels Association challenged EPA's "decision to modify the criteria or lower the threshold by which [it] determines whether to grant small refineries an exemption." The number of filed and granted exemptions was not public when the lawsuit was filed. EPA subsequently created a small refinery exemption "dashboard" on its website and, in August 2019, issued a formal memorandum documenting its revised standards for granting small refinery exemptions. In the memorandum, EPA explains that it now only requires small refineries to experience either the disproportionate impacts or viability impairment to qualify for the exemption, whereas previously it required small refineries to demonstrate both criteria. In addition, EPA announced that it would grant full waivers when the Department of Energy recommended partial waivers, on the basis that this approach was more consistent with congressional intent.

The D.C. Circuit dismissed American Biofuels Association's petition for lack of jurisdiction because the petition was based on a general pattern in agency decisionmaking rather than challenging a particular final agency action as required by the Administrative Procedure Act. The court noted, however, that EPA had acknowledged in oral argument that the August 2019 Memorandum is a final agency action that could be challenged if timely filed.

16. What legislative proposals has Congress introduced that address small refinery exemptions?

Some members in the 116 th Congress have introduced bills that address small refinery exemptions. Table 1 provides a summary of each bill.

17. What other issues might one consider when discussing small refinery exemptions?

The statute gives the EPA Administrator the authority to grant small refinery exemptions, if a small refinery can prove that compliance would subject it to disproportionate economic hardship. Some Members of Congress contend this authority is being applied improperly and could harm rural economies (e.g., biofuel producers). Others contend that the use of the authority protects small refineries and employment in the oil industry. Below are items Congress may consider as it debates EPA's authority to issue small refinery exemptions.

Transparency. Information about certain parts of the small refinery exemption process is limited. For example, it is unclear who is applying for an exemption, what specific information is included in an SRE application, or how an application is evaluated. Further, it is not clear if the same criteria to evaluate an application are used consistently year-to-year. Lastly, EPA does not regularly announce when it has issued an SRE. The statute does not require EPA to share such information publicly. EPA considers an SRE application to contain confidential business information as it includes proprietary information which if disclosed could cause harm to the applicant. EPA states that it "treats both the names of individual petitioners and EPA's decisions on those individual petitions as Confidential Business Information (CBI) under FOIA Exemption 4 (5 U.S.C. Â§Â 522(b)(4)) pending a final CBI determination by the Office of General Counsel." With such transparency issues, it could be difficult for Congress to conduct oversight of EPA's authority to grant small refinery exemptions. Application and decision timeline. Small refinery exemptions are not applied for or granted on a schedule. A small refinery may petition the EPA for an exemption at any time. In theory, once an exemption is issued for a certain year, the small refinery is no longer obligated to meet its RVO for that year. In actuality, the small refinery may not be able to receive the benefit of the exemption for the year it was granted (e.g., if an SRE is granted after the end of a compliance period and the small refinery has already complied with its obligation). Instead, in some cases the small refinery has been credited the RINs it retired to demonstrate compliance with the year that was exempted, and it may use those RINs in a future year. Also, it is not clear what information must be submitted to EPA for the agency to consider a petition "complete"âwhich would start the 90-day timeline for EPA to make a decision. The current application and decision timeline for small refinery exemptions may contribute to an ultimate annual volume requirement that may not match what was announced in a final rule. Inclusion of SREs in annual standards. The statute requires the EPA Administrator to adjust the percentage standards (i.e., annual volume amounts) for a given year by accounting for renewable fuel from the previous calendar year by small refineries that received an exemption. EPA accounts for volumes attributable to exempt small refineries in its formula for calculating the annual percentage standards. EPA complies with this provision through the RIN trading program.

Because SRE petitions can be submitted at any time, EPA has two time periods during which it may address SREs in annual standard calculations: prior to a final rule being issued and after a final rule has been issued. EPA reports in its annual rulemaking if it has approved any SREs prior to issuing a final rule and adjusted its calculation accordingly. For instance, in the 2019 final rule, EPA states:

at this time no exemptions have been approved for 2019, and therefore we have calculated the percentage standards for 2019 without any adjustment for exempted volumes. We are maintaining our approach that any exemptions for 2019 that are granted after the final rule is released will not be reflected in the percentage standards that apply to all gasoline and diesel produced or imported in 2019.

Since 2011 it has been EPA's policy to not account for the SREs that it issues following the release of a final rule. EPA justifies its position based on the November 30 th statutory deadline for setting annual percentage standards and the need to provide the regulated community with certainty and advance notice of the standards. Based on a review of the RFS final rules from 2014 to the present, most or all SREs have been granted after the November 30 th deadline. In 2019, EPA changed how it calculates the annual percentage standard in order to account for volumes of gasoline and diesel that will be exempted from the renewable volume obligations (see question 14). This may be an issue for Congress if Congress intended small refinery exemptions to be accounted for prior to the release of a final rule.

Agency discretion. The statute gives the EPA Administrator certain discretion to evaluate an SRE petition. Data provided by EPA in its small refinery exemption dashboard ( Figure 3 ) suggests the Trump Administration has received more SRE petitions and approved more SREs than the Obama Administration on an annual basis. The extent to which discretion should be a factor in the granting of small refinery exemptions may be an issue for Congress. RFS reset. The statute requires that the EPA Administrator modify the applicable volumes of the RFS in future years starting in 2016 if certain conditions are met (the aforementioned RFS "reset"). According to the Office of Management and Budget (OMB), this "reset" has been triggered for total renewable fuel, advanced biofuel, and cellulosic biofuel. It is unclear when or how EPA will carry out such a reset. Congress may consider the impact a reset would have on many parts of the RFS, including small refinery exemptions. U.S. gasoline consumption. The RFS is a volume mandate, not a percentage mandate. The statutory renewable fuel volumes required to be blended are not tied to U.S. gasoline consumption rates. A general guideline is that most passenger vehicles in the U.S. are equipped to handle E10 (a fuel mixture comprised of 10% ethanol and 90% gasoline). Some might interpret this passenger vehicle acceptance rate as indicating that renewable fuel production should be about 10% of the conventional fuel market. Others might interpret this as an opportunity to push for more renewable fuel use (e.g., E15 year-round, flex-fuel vehicles). In any case, this means the statutory volumes could call for renewable fuel volume amounts that are out of alignment with actual gasoline consumption. It also means that EPA has the authorityâwhich it has used multiple timesâto reduce the RFS statutory volume amounts to more closely match actual conditions. Gasoline consumption has trended downwards for years for a variety of reasons (e.g., fuel economy standards, behavioral choices, economic conditions) and is currently steady, while the statutory renewable fuel portion trends upwards. In short, if the RFS cannot in real-time respond to gasoline consumption changes, it could be argued that the RFS renewable fuel targets become more difficult for some to achieve. If the targets are more difficult to achieve, RFS compliance may become a concern for some (e.g., an increase in compliance costs). This compliance burden may lead to more small refineries requesting an exemption. This may be an issue for Congress, if Congress wants market conditions, not projections, to play a role in renewable fuel use.