Debt Ceiling Debate Draws in Biofuels

April 21, 2023

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by Chris Clayton (DTN Progressive Farmer) Debt-Limit Bill Would Repeal Biofuel and Renewable Energy Tax Credits --The federal debt-limit bill dropped Wednesday by House Speaker Kevin McCarthy would repeal several tax credits for the biofuels industry, including tax credits for biodiesel, second-generation biofuels and sustainable aviation.

McCarthy, R-Calif., introduced a bill, the "Limit, Save and Grow Act," with a long list of GOP demands to raise the national debt limit by $1.5 trillion. Among the provisions, the bill lists a section to "repeal market distorting green tax credits." In that section, the bill would repeal several green-energy tax credits that were extended or created last year in the Inflation Reduction Act.

Beyond going after the tax provisions for electric vehicles, the bill also repeals an extension of the $1-per-gallon Biodiesel Tax Credit and Renewable Diesel Tax Credit. The $1.01-a-gallon Second Generation Biofuel Producer Tax Credit would also be repealed.

Another tax credit meant to help spark biofuel development in aviation fuel, the $1.25-a-gallon Sustainable Aviation Fuels Tax Credit would also be repealed under the bill.

The bill also would dramatically restrict the Clean Fuels Production Credit, which is set to start in 2025. Under the bill, the tax credit would only be available for fuel production started before the end of 2024. READ MORE

GOP targets clean energy laws despite boons back home (E&E News)

GOP’s debt-limit plan builds in partisan energy policies (Politico Energy Podcast)

ETHANOL SUPPORTER HOPES DEBT CEILING BILL RESTORES TAX INCENTIVES (Brownfield Ag News)

Washington Week Ahead: House GOP looks to move debt-ceiling plan with SNAP, biofuel cuts (Agri-Pulse)

Debt ceiling plan targets SAF, clean fuels, biofuel tax credits (Ethanol Producer Magazine)

McCarthy leans on undecideds ahead of debt ceiling vote (Washington Examiner)

House Republicans amend debt limit bill: The concessions came after 2 a.m., as the House Rules Committee teed up floor debate on the legislation. (Politico)

GOP leaders reverse course and change debt limit plan in push to pass bill on Wednesday (CNN)

Ag Republicans: Let's put IRA programs in farm bill: Republicans on the House and Senate Agriculture committees want to boost the farm bill by billions of dollars, if they can take it from last year's big Democratic spending bill. (Politico Pro)

Biofuels Complicate House Debt Bill -- In Late Move, Cuts to Some Biofuel Tax Credits Taken Out of House Debt Limit Bill (DTN Progressive Farmer)

HOUSE MAJORITY WHIP CONFIDENT BIOFUEL TAX CREDITS WILL BE RESTORED DURING DEBT CEILING NEGOTIATIONS (Brownfiels Ag News)

House GOP divided on energy spending (Politico's Power Switch)

Clean Fuels Welcomes Amendment to Limit, Save, Grow Act That Preserves Biodiesel Tax Credit Extension (Clean Fuels Alliance America)

Iowa Republicans vote for debt ceiling deal after GOP leaders relent on ethanol cuts (Des Moines Register)

House leadership caves on some biofuel incentives in debt limit bill (Agri-Pulse)

Iowa biofuels credits protected in new deal, presidential candidate wants to cut them (WHO13)

Ethanol, clean energy fuel drama over GOP debt limit deal (Washington Post)

Daily on Energy: How the Iowa delegation got custom changes to the GOP debt ceiling bill (Washington Examiner)

Debt ceiling package limits impact of SAF, clean fuel tax credits (Ethanol Producer Magazine)

Facing revolt, GOP spares ethanol in drive to cut spending (Washington Post/Associated Press)

The drama that almost scuttled Kevin McCarthy's debt ceiling bill: Republican Rep. Randy Feenstra tells DailyMail.com how Speaker managed to get plan over the finish line after tense talks and disagreements (Daily Mail)

Facing revolt, GOP spares ethanol in drive to cut spending (Associated Press/My Wabash Valley)

Ethanol dispute shows power of regional interests in narrow GOP majority (The Hill)

Debt ceiling package limits impact of SAF, clean fuel tax credits (SAF Magazine)

GOP runs unity playbook to win debt ceiling fight ( Washington Examiner)

Our lawmakers are only buying time for biofuels (Iowa Capital Dispatch/Storm Lake Times Pilot)

Excerpt from Brownfield Ag News: Economist Scott Richman from the Renewable Fuels Association tells Brownfield the bill as-written repeals several biofuel tax credits that are important for meeting climate goals. “What this is going to do is provide a way for biofuel producers to monetize that reduction in carbon to push toward net zero.”

Richman says the $1.25 Sustainable Aviation Fuels Tax Credit and the Clean Fuels Production Credit scheduled for 2025 are part of the Inflation Reduction Act. He says these credits will be vital for the developing sustainable aviation fuel sector. “That’s not something that’s available right now. The industry has to be built. There’s a tremendous amount of capital expenditures that have to happen to put the infrastructure in place to do that.”

Richman says for both decarbonization and extending fuel supplies, he hopes lawmakers reconsider the tax credits and some of the important pieces of the Inflation Reduction Act. READ MORE

Excerpt from Politico: House GOP leaders caved in the middle of the night to demands for changes to their debt limit measure, baking in three pages of tweaks as they scramble to whip the package.

The concessions came after 2 a.m., as the House Rules Committee teed up floor debate on the legislation Speaker Kevin McCarthy has vowed to pass this week to stake House Republicans’ opening offer for raising the nation’s borrowing cap to save the U.S. from defaulting on its $31.4 trillion in debt this summer.

After McCarthy and Majority Whip Tom Emmer (R-Minn.) insisted no changes would be made to appease holdouts threatening to oppose the bill, the Republican leaders ultimately acquiesced to major alterations to the text.

The changes would:

Rescind large swaths of the Inflation Reduction Act signed into law last summer, including:
— $1 billion to boost the adoption of building codes for energy-efficient construction.
— $5 billion for loans to back energy infrastructure projects.
— $1.9 billion in grants to improve transportation access to neighborhoods.
— $200 million for National Park System maintenance projects.
— $5 billion in grants for reducing climate pollution.
Tighten rules for social welfare programs a year earlier. Instead of starting those stricter guidelines in the fall of next year, constraints would kick in come October of this year for the TANF program that sends monthly payments to low-income families with children.
Beginning in September, bar states from saving up unused exemptions under the SNAP food assistance program.
Make an exception to allow some tax credits to continue for renewable energy. The bill would still repeal the credits going forward. But tax perks would be allowed for those who locked in binding contracts or made concrete investments for sustainable aviation fuel or for producing other “clean” fuel before April 19.
Nix changes the bill would make to incentives for carbon oxide sequestration, biodiesel, renewable diesel and second generation biofuel. READ MORE

Excerpt from CNN: Also, top Republicans agreed to remove a repeal of certain tax breaks for biofuels like ethanol — an issue that prompted furious opposition from the four Iowa Republicans and some other midwestern lawmakers.

Those changes could be enough to win the bill’s passage. READ MORE

Excerpt from Politico Pro: Congressional Republicans working on the 2023 farm bill say they're working on a proposal to strip as much as $37 billion from last year's Democratic initiative on climate and agriculture and redirect it in the five-year farm legislation.

Top Republicans on the House and Senate Agriculture committees told reporters they're looking to "rescind" funds from the Inflation Reduction Act, enacted in 2022. Instead, they are looking to steer that spending toward their own priorities in the farm bill to lessen the focus on climate-smart agriculture and put more emphasis on traditional farm programs and the farm safety net.

Those priorities aren't necessarily far removed from the programs Democrats support, since they would remain in farm programs and most likely in conservation programs specifically.

But Sen. John Boozman (R-Ark.), the top Republican on the Senate Agriculture, Nutrition and Forestry panel, said he wants to keep the focus on programs that directly benefit farmers, rather than undefined climate initiatives such as the so-called 30-by-30 effort, also known as America the Beautiful. READ MORE

Excerpt from Clean Fuels Alliance America: Eliminating retroactive tax expiration limits uncertainty for biodiesel and renewable diesel producers -- Today (April 26, 2023), Clean Fuels Alliance America welcomed an amendment from Rep. Jodey Arrington (R-TX) to the Limit, Save, Grow Act of 2023. The legislation would raise the nation’s debt limit and make substantial changes to clean energy tax credits. The amendment would preserve the biodiesel and renewable diesel blenders credit as it is in current law.

“The clean fuels industry thanks all of the House members who sought to preserve predictability and stability in tax policy,” stated Kurt Kovarik, Vice President of Federal Affairs with Clean Fuels. “The biodiesel, renewable diesel and sustainable aviation fuel industry and partners who provide feedstocks have made substantial investments in new capacity to meet demand for cleaner, better fuels. Stable policy is key to continued growth, job creation, and environmental benefits.”

Clean Fuels expressly thanks Reps. Mark Alford (R-MO), Angie Craig (D-MN), Randy Feenstra (R-IA), Brad Finstad (R-MN), Michelle Fischbach (R-MN), Ashley Hinson (R-IA), Marianette Miller-Meeks (R-IA), Zach Nunn (R-IA), Adrian Smith (R-NE), and Derrick Van Orden (R-WI) for sponsoring and supporting amendments to preserve the biodiesel and renewable diesel blender tax incentive. READ MORE

Excerpt from Ethanol Producer Magazine: The U.S. House of Representatives on April 26 narrowly approved a debt ceiling package that significantly reduces the application of—but does not completely repeal—the clean fuel and sustainable aviation fuel (SAF) tax credits established by the Inflation Reduction Act. It also allows the existing blenders tax credit (BTC) for biodiesel and renewable diesel to remain in place through 2024.

The original debt ceiling bill, titled the Limit, Save and Grow Act of 2023, aimed to completely repeal the existing biodiesel/renewable diesel tax credit and the newly established SAF and clean fuels tax credits. Several Midwest lawmakers worked to amend the legislative package and preserve various tax credits that support the growing U.S. biofuels industry.

The SAF tax credit, as established by the IRA, supports the production and use of SAF by creating a $1.25 per gallon credit 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 Clean Fuel Production Tax Credit, also established by the IRA, is a technology-neutral tax credit that aims to support the production of low-emissions transportation fuel. It currently applies transportation fuel produced and sold in 2025, 2026 and 2027. To qualify, the fuel must achieve a GHG reduction of approximately 40 percent when compared to diesel.

The amended version of the Limit, Save and Grow Act allows the $1 per gallon BTC for renewable diesel and biodiesel to remain in place through 2024, but significantly limits the impact of the SAF and clean fuel tax credits. Only taxpayers who entered into a binding written contract or made other concrete investment action in SAF or clean fuel projects between Aug. 26, 2022, and April 19, 2023, will be eligible to claim those credits.

Clean Fuels Alliance America issued a statement April 26 thanking Reps. Mark Alford, R-Mo.; Angie Craig, D-Minn.; Randy Feenstra, R-Iowa; Brad Finstad, R-Minn.; Michelle Fischbach, R-Minn.; Ashley Hinson, R-Iowa; Marianette Miller-Meeks, R-Iowa; Zach Nunn, R-Iowa; Adrian Smith, R-Neb.; and Derrick Van Orden, R-Wisc.; for sponsoring and supporting amendments to preserve the biodiesel and renewable diesel blender tax incentive.

“The clean fuels industry thanks all of the House members who sought to preserve predictability and stability in tax policy,” said Kurt Kovarik, vice president of federal affairs with Clean Fuels. “The biodiesel, renewable diesel and sustainable aviation fuel industry and partners who provide feedstocks have made substantial investments in new capacity to meet demand for cleaner, better fuels. Stable policy is key to continued growth, job creation, and environmental benefits.”

The U.S. Senate is not currently expected to take up the Limit, Save and Grow Act, and President Joe Biden has signaled he will veto the bill if the Senate does take action to pass it. READ MORE

Excerpt from Washington Post: The episode highlighted how, even as Republicans decry the massive spending packages passed under President Joe Biden, their opposition to federal spending often fades when it comes to money flowing to their communities. The dust-up also amounts to a warning of sorts for GOP leaders as they seek a debt-limit deal with Biden, showing that attempts to slash government programs could quickly face opposition in their own ranks.

“This bill is to get us to the negotiating table,” McCarthy said ahead of the vote this week. “It’s not the final provisions and there’s a number of members that will vote for it going forward and say there are some concerns they have.”

For the Republicans who adamantly defended the tax incentives, the political turnaround was especially stark. The Iowa Republicans railed against the $740 billion price tag of Democratic priorities like the Inflation Reduction Act last year, which extended tax breaks for clean energy projects.

But the federal assistance for energy is popular back home in the Corn Belt, where a boom in energy projects is underway.

“I’m thrilled everyone is talking about biofuels,” said Rep. Ashley Hinson, an Iowa Republican who fought to save the energy provisions.

The biofuel industry contributes over $6 billion to Iowa’s economy and uses 60% of the corn it produces, Iowa Gov. Kim Reynolds, a Republican who also lobbied for the carve-out, said in a statement this week.

Incentives in the Biden bill, which Democrats called the Inflation Reduction Act, have spurred growth in the production of ethanol and biofuels, said Tristan Brown, director of the Bioeconomy Development Institute at SUNY College of Environmental Science & Forestry. As auto manufacturers move towards electric cars, the next generation of the ethanol industry will revolve around manufacturing sustainable aviation fuel.

The impact of the spending is noticeable all across the region. A series of projects aimed at producing sustainable jet fuel have been announced, and plans are underway for a pair of carbon sequestration pipelines, which tap into tax credits by capturing carbon dioxide at ethanol refineries and pumping it to sites where it can be stored underground.

Geoff Cooper, president of ethanol lobbyist Renewable Fuels Association, pointed to investments in agriculture communities across the country as he warned against the repeal of the Inflation Reduction Act’s clean energy tax provisions this week.

“Repealing those incentives midstream would rip the rug out from underneath the U.S. bioenergy sector, leave a wake of stranded investments, and undermine the rural communities that are leading the low-carbon energy transition,” he said in a statement.

...

Repeal of the green energy tax credits was not part of McCarthy’s initial proposal to raise the debt ceiling. But as he tried to sell the package to the wider GOP conference, a group of hard-right Republicans had insisted that repeal of the green energy tax credits be included in the proposal.

Republicans from coastal states also objected to the repeal of tax incentives for green energy projects like wind power.

“These credits have been very beneficial to my constituents, attracting significant investment in new manufacturing jobs for businesses in southeast Virginia,” said Rep. Jen Kiggans in a floor speech.

The first-term Republican voted for the bill, even as she urged for the tax credit repeal to be taken out of any final legislation.

Members of Iowa congressional delegation, however, would not budge until the bill was changed to protect the ethanol and biofuel industry.

After the bill was revised, the four Iowa Republicans released their joint statement saying they were proud to deliver a “major victory” for the industry and state.

Looking ahead, they added, “As negotiations continue, we have made it crystal clear that we will not support any bill that eliminates any of these critical biofuels tax credits.” READ MORE