Merkley, Colleagues Urge IRS to Properly Implement IRA Sustainable Aviation Fuel Tax Credits, with No Giveaways to the Petroleum Industry

October 30, 2023

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(Office of Senator Jeff Merkley (D-OR) Senators: "Companies are proposing to manufacture aviatin fuel from sources that include significant amounts of plastic waste, and are claiming that it is sustainable. That is incorrect.”

Today (October 27, 2023), Oregon’s U.S. Senator Jeff Merkley, along with U.S. Senators Edward J. Markey (D-MA), Elizabeth Warren (D-MA), Cory Booker (D-NJ), Sheldon Whitehouse (D-RI), and Bernie Sanders (I-VT), sent a letter to the U.S. Commissioner of the Internal Revenue Service (IRS), Daniel Werfel, urging the IRS to ensure that fuels derived from petroleum products will not qualify for the Sustainable Aviation Fuel (SAF) tax credit available through the Inflation Reduction Act (IRA).

The Senators point out that the plain language of the IRA is clear: petroleum products do not qualify for the SAF tax incentives, and because plastics are derived from petroleum products, plastic-based fuels should not qualify. In addition, they highlight the public health and environmental dangers if these lucrative tax credits are not implemented correctly.

“Plastics are harmful from cradle to grave, including facilities that take plastic-based waste and refine it into chemicals used to make fuel, including aviation fuel. These facilities emit toxic air pollution, and produce chemicals that raise significant concerns from the communities that are exposed. The petrochemical industry is increasing development of such facilities, and is poised to accelerate those efforts in the United States,” the Senators write.

In their letter, the Senators call to light the truth about aviation fuels that are manufactured from significant amounts of plastic waste. The companies who stand to profit from this technology claim this process is sustainable, but they are incorrect.

“These proposals involve gasification or pyrolysis refineries that process plastic waste into either synthetic gas or pyrolysis oils, and then turn those products into synthetic crude oil, which can then be used to make jet fuel. These energy-intensive processes produce significant greenhouse gas (GHG) emissions, and raise questions about the resultant chemicals found in the petroleum-derived fuels,” the Senators highlight.

The language of the IRA clearly states that petroleum products do not qualify for the SAF tax incentives, and that alone should disqualify plastic-based fuels. Plastics are a petroleum product, and in both the Section 40B and Section 45Z of the IRA there are credit restrictions on the type of aviation fuel that is eligible for these incentives, stating that fuel must not be “derived from … petroleum.” Just because petroleum may have gone through additional layers of processing, at the end of the day aviation fuel processed from plastic-derived waste is still a petroleum-based product.

“In closing, we want to emphasize how important it is to get IRA implementation right, including these SAF tax incentives. Thanks to the clean energy investments made in the IRA, we have the opportunity to combat climate chaos through, in part, transitioning to sustainable fuels. However, we can’t get there if the petroleum industry is allowed to obfuscate their products and take advantage of the generous SAF tax incentives available in the IRA,” they conclude.

Today’s letter follows a Thursday hearing chaired by Senator Merkley in his Environment and Public Works subcommittee, which explored the environmental damages of processes that are used to turn plastic waste into products like fuel and exposed the difficult truths about so-called advanced recycling. Video of that hearing is available on the Environment and Public Works Committee’s Website and YouTube.

Full text of the letter can be found here and follows below:

Dear Commissioner Werfel,

Plastics, throughout their lifecycle, pose significant risks to human health and especially the communities that are on the frontline of production. If the lucrative tax credits available in the Inflation Reduction Act (IRA) are not implemented correctly, they have the potential to subsidize the plastics industry, including plastic-to-fuel facilities, and worsen the environmental harms caused by the industry. We are writing to urge the Internal Revenue Service to not allow fuels derived through petroleum products, especially plastic feedstocks, to qualify for the sustainable aviation fuel (SAF) tax credits available under IRA Section 40B Sustainable Aviation Fuel Credit (Section 40B credit) and IRA Section 45Z Clean Fuel Production Credit (Section 45Z credit).

Plastics are harmful from cradle to grave, including facilities that take plastic-based waste and refine it into chemicals used to make fuel, including aviation fuel. These facilities emit toxic air pollution, and produce chemicals that raise significant concerns from the communities that are exposed. The petrochemical industry is increasing development of such facilities, and is poised to accelerate those efforts in the United States. There have been numerous studies of the health of communities located near petrochemical facilities which have demonstrated the heightened risk of toxic chemical exposure and increased levels of health issues.[1] [2] [3]

Companies are proposing to manufacture aviation fuel from sources that include significant amounts of plastic waste, and are claiming that it is sustainable. That is incorrect. These proposals involve gasification or pyrolysis refineries that process plastic waste into either synthetic gas or pyrolysis oils, and then turn those products into synthetic crude oil, which can then be used to make jet fuel. These energy-intensive processes produce significant greenhouse gas (GHG) emissions, and raise questions about the resultant chemicals found in the petroleum-derived fuels.

The plain language of the IRA is clear that petroleum products do not qualify for the SAF tax incentives, and that should disqualify plastic-based fuels. Both the Section 40B and Section 45Z credits include restrictions on the type of aviation fuel that is eligible to qualify for the tax incentives, and state that the fuel must not be “derived from … petroleum.” These fuels made from plastic concentrated feedstocks are derived from petroleum, because plastic is a petroleum product. Raw feedstocks most commonly derived from fossil fuels are a basic building block in the plastics manufacturing process. If plastic-derived waste is processed to create aviation fuel, it is still a petroleum-based product being used to create the fuel. Just because the petroleum has gone through additional layers of processing does not change the reality that the end product is a petroleum-derived product.

In closing, we want to emphasize how important it is to get IRA implementation right, including these SAF tax incentives. Thanks to the clean energy investments made in the IRA, we have the opportunity to combat climate chaos through, in part, transitioning to sustainable fuels. However, we can’t get there if the petroleum industry is allowed to obfuscate their products and take advantage of the generous SAF tax incentives available in the IRA.

[1] https://sph.lsuhsc.edu/wp-content/uploads/2021/10/Fenceline-communities-and-AIr-Pollution.pdf

[2] https://www.sciencedirect.com/science/article/pii/S2542519622000900?via%3Dihub#bib1

[3] https://academic.oup.com/jncics/article/4/6/pkaa088/5919078?login=true

Senators To IRS: Block Plastic-Based Fuels From IRA Tax Credits (Ethanol Producer Magazine)