10-yr Multiple Entry - Passport expiring in less than 1 year

My husband and I will be traveling forms the US to China in October 2016 and are about ready to submit our applications. His passport expires next July 2017. If he applies for a 10 year multiple entry permit on the L form, what happens if they won't issue it because of his passport expiration date? Will they issue a shorter term or will the application be rejected? And if it's rejected, will the fee be refunded or will we have to pay again?

Thanks,
Liz