I assume that AZ HB 2363, introduced yesterday, is being driven by ethanol producers and retailers. It appears to strike a bargain that many industries make: provide broad rule-making authority to a regulatory agency (knowing that industry can often influence that agency to create friendly regulations), and get some favorable legal rules (e.g., liability limitations) in exchange for compliance with the regulations. Sometimes these sorts of arrangements can be shady, but this may be a sensible arrangement in this particular case: the industry may be better off with agency-level rather than legislative-level rulemaking (the agency will presumably be better informed and more flexible), and the liability limitation that is being granted seems reasonable.
The bill does create a risk for biodiesel producers and retailers: the regulatory agency (the Dept. of Weights and Measures) is being empowered to create rules for "biofuels" -- not just ethanol -- so biodiesel folks will have to live with these rules too. The homebrew, co-op and small-scale producer community may have to put some energy into ensuring that the rules don't advantage a "big agribusiness" model of biofuels over the local biofuel vision (locally-produced, locally used, non-food-crop-based biofuels).
The bill may also be, so far, a missed opportunity for biodiesel. The bill solves a problem for E85 retailers: it ensures they won't be liable if a consumer misfuels their non-flex-fuel car. Perhaps biodiesel producers and retailers could have a similar "ask" -- e.g., ask for a similar risk allocation rule around a situation where a consumer claims that their warranty was voided because of the consumer's choice to use biodiesel. I'm not sure what the right "ask" is, but it strikes me that there is a window of opportunity for the biodiesel community to get some benefit from the legislative bargain it is getting pulled in to.