Biden Signs New SAF, Hydrogen, Clean Fuel Tax Credits into Law

August 17, 2022

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by Erin Voegele (Ethanol Producer Magazine) President Joe Biden on Aug. 16 signed the Inflation Reduction Act into law, calling the legislation the “biggest step forward in climate—ever” and stressing it will allow the U.S. to boldly take addition steps towards meeting its climate goals.

The expansive legislative package addresses a wide range of issues, including inflation reduction, domestic energy production and manufacturing, carbon emissions reductions, Medicare and health care costs, and tax loopholes.

Of interest to the biofuel and bioenergy industries, the newly signed law establishes new tax credits for sustainable aviation fuel (SAF), clean transportation fuels and clean hydrogen. It also extends several existing tax credits that benefit transportation biofuels, such as renewable diesel and biodiesel, and includes funding for biofuel infrastructure development. Other provisions of the bill support the production of biogas- and biomass-based electricity and offer tax incentives for homeowners to install biomass-fired residential heating appliances. The bill also extends and expands the Section 45Q tax credit for carbon capture and storage (CCS).

The new SAF tax credit starts at $1.25 per gallon for SAF that achieves a 50 percent greenhouse gas (GHG) reduction when compared to a baseline fossil fuel. An additional 1 cent per gallon is available for each percentage point by which the lifecycle GHG emission reduction of the fuel exceeds 50 percent. The tax credit is capped at $1.75 per gallon. The new also establishes a competitive grant program in support of alternative aviation fuels and low-emission aviation technologies. In part, the program would provide grants to eligible entities to carry out projects located in the U.S. that produce, transport, blend or store SAF. Nearly $250 million in funding would be available to support SAF projects under the program.

The newly established Clean Fuel Production Tax Credit is a technology-neutral tax credit that aims to support the production of low-emissions transportation fuel. It will apply to transportation fuel produced and sold in 2025, 2026 and 2027. To qualify, the fuel will have to achieve a GHG reduction of approximately 40 percent when compared to diesel and meet other requirements.

The new law also establishes a Section 45V production tax credit (PTC) for clean hydrogen produced at qualified facilities that begin construction before the end of 2032. The credit will apply to hydrogen produced after the end of 2022. Depending on the specific project, the credit could range from 12 cents per kilogram to $3 per kilogram, according to the bill text.

The Inflation Reduction Act also extends several existing bioenergy and biofuel tax credits. The $1 per gallon blends tax credit for biodiesel and renewable diesel is extended through the end of 2024. It also extends the 50-cent per gallon alternative fuels tax credit, the second-generation biofuel income tax credit, and the alternative fuel vehicle refueling property credit.

In addition, it appropriates $500 million to support the development of biofuel infrastructure, including infrastructure improvements for blending, storing, supplying or distributing biofuels; installing, retrofitting or upgrading fuel dispensers to supply higher blends of biofuels; and for building and retrofitting home heating oil distribution centers to supply biofuels. The new law also includes an estimated $18 billion in support of climate-smart agriculture, which will benefit biofuel producers through the production of lower-carbon feedstocks.

For renewable electricity, the Inflation Reduction At extends the Section 45 production tax credit (PTC), which benefits qualified biogas, open-loop biomass and closed-loop biomass facilities, to qualified facilities that begin construction before Jan. 1, 2025. For home heating, the it extends and modifies of the Section 25 tax credit, which, in part, supports the installation residential biomass-fired stove and boilers. The tax credit for these residential appliances is capped at $2,000.

The Inflation Reduction Act supports CCS projects through an extension and modification of the Section 45Q tax credit. READ MORE

For list of articles and more details of the law: Manchin, Schumer Cut Deal on Climate Spending, Including Farm Bill Funds

H.R.5376 - Inflation Reduction Act of 2022 (Congress.gov)

Climate, Healthcare Package Becomes Law: Corn Growers, Others Praise Ag Investments as Biden Signs Inflation Reduction Act (DTN Progressive Farmer)

Biofuels get boost from tax credits, infrastructure funding in surprise US Senate budget proposal (S&P Global)

Analysis: Biden debt relief plan disappoints Black farmers for avoiding race (Reuters)

Black farmers say Inflation Reduction Act reneges on promises for debt relief (CBS News)

Climate and Tax Bill Rewrites Embattled Black Farmer Relief Program -- To circumvent legal objections, the new law will provide aid to farmers who have faced discrimination, regardless of their race. (New York Times)

New Inflation Reduction Act alters Black farmer relief (Farm Futures)

Black and brown farmers say Inflation Reduction Act breaks promise of relief for 'past wrongs' (NPR)

Bill Includes Farms and Biofuels for Climate Action (Energy.AgWired.com; includes AUDIO)

BALDWIN: INFLATION REDUCTION ACT NOT THE END FOR DEFEND THE BLEND ACT (Brownfield Ag News)

The Inflation Reduction Act Includes Significant Benefits for the Carbon Capture Industry (Gibson Dunn)

Carbon Removal Takes Major Step Forward: Statement (Carbon Business Council)

RFA Thanks President For Signing IRA into Law (Renewable Fuels Association)

Growth Energy Thanks President Biden for Signing Key Climate Priorities into Law (Growth Energy)

Bolen: ‘Genuine Progress’ on Sustainable Fuels With Signing of Inflation Reduction Act Into Law (National Business Aviation Association)

ACE: Climate Bill Confirms Role Farmers, Biofuel Producers Can Play in Reducing Greenhouse Gas Emissions (GrainNet)

Climate Smart Solutions from America’s Farms, Ranches and Forests (Solutions from the Land)

The unintended consequences of the Inflation Reduction Act (The Hill)

INFLATION REDUCTION ACT PASSAGE “GAME CHANGER” FOR BIOFUELS (Brownfield Ag News; includes VIDEO)

New climate bill energizes ethanol: ‘This is monumental (WFXR TV)

ACE: Climate Bill Confirms Role Farmers, Biofuel Producers Can Play in Reducing Greenhouse Gas Emissions (American Coalition for Ethanol/GrainNet)

Ethanol could get boost from carbon capture credits in Biden climate law (Reuters)

USDA Secretary Vilsack Hits Road to Promote ‘Inflation Reduction Act’ (Hoosier Ag Today)

Climate Bill May Not Be Enough for Low-Carbon Jet Fuel to Take Off -- Subsidies are for a limited duration and don’t cover enough costs of refining, producers and analysts say (Wall Street Journal)

Climate bill’s unlikely beneficiary: US oil and gas industry (AP)

National Black Farmers President Boyd Disappointed Biden Reneged on Debt Relief for Black Farmers (National Black Farmers Association)

US Climate Bill’s Subsidy Bonanza Gives New Allure to Carbon Capture: Startups building small-scale plants could also qualify for subsidies under the Inflation Reduction Act passed this month. (Bloomberg)

ETHANOL INDUSTRY MAY GET HELP FROM CLIMATE LAW (News Dakota)

‘It’s now law’: Biden signs bill extending biodiesel tax credit, enacting new SAF incentive (Biobased Diesel Daily)

Mine, baby, mine — for the climate ... Add the mining industry to the business interests set to receive benefits from the $369 billion climate law (Politico's Power Switch)

The IRA Revolutionizes AD Tax Credits -- The Inflation Reduction Act of 2022 is a game-changer for anaerobic digester and other renewable energy projects, on multiple levels. (BioCycle Magazine)

Podcast: The Landmark Inflation Reduction Act: What’s in it for Biodiesel, Renewable Diesel and SAF? (Biodiesel Magazine)

The IRA funding that’s boosting carbon removal: It’s a big federal (climate) deal (Carbon 180)

The carbon removal industry sees the Inflation Reduction Act as a big win for DAC -- Here’s what you need to know about the changes to the 45Q tax credit in the IRA. (Emerging Tech Brew)

Treasury, IRS issue guidance on the Alternative Fuel Vehicle Refueling Property Credit (Internal Revenue Service)

Excerpt from DTN Progressive Farmer: The legislation faced unanimous opposition from congressional Republicans. Among the complaints, GOP lawmakers said the spending on USDA programs will make it harder to negotiate a farm bill next year.

The $19.5 billion for USDA conservation programs will incentivize more farmers to adopt cropping and livestock practices that reduce greenhouse emissions, reduce nitrogen loss or sequester carbon in the soil.

"Through this legislation, Congress and the administration recognize that farmers' voluntary climate-smart agricultural practices are an important part of addressing climate change," said Brooke Appleton, vice president of public policy for the National Corn Growers Association (NCGA). "We are also particularly pleased to see Congress and the administration acknowledge that low-carbon biofuels like ethanol are needed to help decarbonize transportation and improve energy security."

Some of the harshest criticism of the law, though, came from the Center for Food Safety, which lashed out at climate-smart agricultural investment as only a small portion of funding, though the funds give Agriculture Secretary Tom Vilsack "a blank check." The law boosts spending on biofuels, which the CFS noted are mainly produced from genetically engineered corn. "So, in reality, this provision is just more subsidies for GMO technology."

With all of that, CFS said it "is profoundly disappointed in the IRA's failure to seriously address urgently needed reform of the U.S. industrial agriculture system. No solution to the climate crisis will be sufficient without such reform."

CLIMATE-SMART AG

Among the top spending items for USDA:

-- Environmental Quality Incentives Program (EQIP), $8.45 billion.

-- Regional Conservation Partnership Program (RCPP), $4.95 billion.

-- Conservation Stewardship Program (CSP), $3.25 billion.

-- Agricultural Conservation Easement Program (ACEP), $1.4 billion.

Another $1 billion will go to the Natural Resources Conservation Service (NRCS) for technical assistance to producers. USDA will also receive $300 million to quantify carbon sequestration and emissions on farms.

Another $5 billion will be used for forest management, including about $2.15 billion for funding to reduce dead wood and other vegetation that would be fuel for forest fires. Another $2.75 billion will go toward urban areas and other non-federal forests to develop incentives such as carbon sequestration in those areas.

The Chesapeake Bay Foundation called on USDA to use its climate-smart funds to help further restore the bay and meet nutrient pollution reductions in those states.

...

RENEWABLE ENERGY

Renewable energy programs through USDA overall will receive $13.3 billion. Rural electric cooperatives will receive $9.7 billion for loans to build out renewable energy infrastructure with specific language on "zero-emission systems" and carbon capture programs.

The Renewable Energy for America Program will receive $1.7 billion to boost small-scale renewable energy projects in rural areas.

Biofuels will see another $500 million to develop blender pumps and other infrastructure to increase the blends of biofuels above 10% blend levels for ethanol and 20% for biodiesel blends.

The law also extends the $1-per-gallon biodiesel and renewable diesel tax credit through 2024. The $1.01-per-gallon second-generation biofuel tax credit also is extended through 2024.

A major boost for airlines transitioning aviation fuels will come from a $1.25-a-gallon sustainable aviation fuel (SAF) tax credit for 2023 and 2024. The SAF tax credit also gets bumped up for fuels that reduce emissions by more than 50%.

"This bill puts ethanol on a sustainable path for growth and investment," said Geoff Cooper, president of the Renewable Fuels Association. "Several provisions within this bill are very important to the U.S. biofuels industry and will result in American families having greater access to low-carbon, more affordable, domestically made renewable fuels."

Another $1 billion goes for loans for electric generation from renewable energy resources for rural and nonrural power companies. This includes solar, wind, hydropower, biomass, or geothermal. The federal government would cover up to 50% of the loans for such projects.

The production tax credit also is extended with adjustments in the tax credit for the technology used and when construction of the project began. The tax credit includes bonuses for projects that use certain levels of domestic materials as well.

The legislation also includes several residential and energy-efficiency tax credits for buying products such as heat pumps or installing solar panels on homes.

Tax credits for carbon sequestration are also boosted and extended for projects that begin construction before 2033. The tax credits, known as 45Q, will likely lead to greater expansion of carbon pipeline projects in rural areas as well.

AT-RISK FARMERS LOAN AID

The law provides USDA with $3.1 billion in funding for USDA to provide relief for at-risk agricultural operations. All distressed borrowers of direct or guaranteed loans administered by USDA are potentially eligible for assistance under this provision, which is designed to keep these farmers in production.

The law provides $2.2 billion for a program to provide financial assistance to farmers, ranchers or forest landowners who have experienced discrimination in USDA lending programs.

...

As written, the law does not prioritize the 17,000 farmers and ranchers who received letters promising debt relief.

The law also includes $250 million that would go toward research, education and extension, as well as scholarships for 1890 Institutions -- land-grant, historically Black colleges and universities (HBCUs). READ MORE

Excerpt from Brownfield Ag News: (Wisconsin Senator) Tammy Baldwin tells Brownfield some tax incentive provisions from the Defend the Blend Act were moved to the Inflation Reduction Act signed by President Biden Tuesday. “(There are) tax incentives for biodiesel and renewable diesel and ethanol. Also, there’s some focus on renewable aviation fuels. That’s a smaller piece but it’s also important. And, also biofuel infrastructure investments.”

Baldwin says the biofuel infrastructure investments are important because many fueling stations don’t have the ability to sell biodiesel blends and higher ethanol blends.

Baldwin tells Brownfield this new law does not mean an end to the Defend the Blend bill introduced last December. “It’s still out there, but we have gotten some of the provisions from that incorporated in the Inflation Reduction Act, but there’s some more to do and we won’t stop Defending the Blend.” READ MORE

Tags

White House Transportation Fuels Policy tax incentives tax credits Sustainability second-generation biofuel income tax credit Rural Energy for America Program (REAP) retail renewable diesel tax credit pumps/fueling station Production tax credit loans loan guarantees Legislation-Federal Jetfuel (Sustainable Aviation Fuel (SAF)) Hydrogen/Renewable Hydrogen heating oil/fuel grants government investment GHG (Greenhouse Gas Emissions) Fuel Retailers Environmental Quality Incentive Program (EQIP) environmental policy energy policy economic policy Department of Agriculture (USDA) Conservation Stewardship Program (CSP) climate smart/conservation agriculture carbon/CO2 sequestration carbon capture and storage (CCS) Biogas biodiesel tax credit Aviation Fuel/Sustainable Aviation Fuel (SAF) Alternative Fuels Tax Credit (AFTC) Alternative Fuels Credit Agricultural Policy 45Q Carbon Oxide Sequestration Tax Credit

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