Treasury Eyes 45Z Guidance before Biden Exit

December 04, 2024

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by Cole Martin (Argus Media) The US Department of Treasury said it still plans to issue guidance before president Joe Biden leaves office next year clarifying how refiners can qualify for a new tax credit for clean fuels.

The agency "anticipates issuing guidance" around the Inflation Reduction Act's 45Z credit before 20 January to "enable producers to claim the 45Z credit for 2025", disputing a report today that the Biden administration planned on punting implementation to president-elect Donald Trump. The credit, set to kick off regardless on 1 January, will differ from some prior federal incentives by offering greater subsidies to fuels that produce fewer greenhouse gas emissions.

Treasury did not commit to any definitive timeline for releasing guidance, and it did not immediately clarify how thorough any eventual rule would be.

Companies in the biofuel supply chain say the current lack of clarity from Treasury — particularly on how it will calculate carbon intensities for various fuels and feedstocks — has slowed first quarter dealmaking. Government guidance could make or break the economics of certain plants, particularly for relatively higher-carbon fuels like soy biodiesel or jet fuel derived from corn ethanol.

The US Department of Agriculture's timing for releasing a complementary rule to quantify the climate benefits of certain agricultural practices, envisioned as a way to reward refineries sourcing feedstocks from farms taking steps to reduce their emissions, is unclear. The agency said today that a "rulemaking process" in response to its request for information on climate-smart farm practices is "under consideration" but did not elaborate. Agriculture secretary Tom Vilsack had insisted earlier this year that his department would release some package before the end of Biden's term.

Some industry groups remain pessimistic that the Biden administration will answer all of the thorny questions still lingering around the 45Z credit, especially given signals earlier this year that other Inflation Reduction Act programs would take priority. The Renewable Fuels Association, which represents ethanol producers, says final regulations around 45Z "seem highly unlikely" before the end of Biden's term but that it hopes Treasury releases at least some "basic information" or safe harbor provisions.

Delays getting credit guidance could prod Congress to extend expiring biofuel incentives for another year, including a $1/USG credit for blenders of biomass-based diesel. Some formerly skeptical lobbying groups have recently come on board in support of an extension, fearing that biofuel production could slump next year given the lack of 45Z guidance and uncertainty about how Trump will implement clean energy tax credits.

But four lobbyists speaking on background told Argus today that the proposal still faces long odds. Congress has various other priorities for its relatively brief lame duck session, including government funding and disaster aid, that take precedence over biofuels. A staffer with the Democratic-controlled US Senate Finance Committee said last month that Republicans have been reluctant to negotiate tax policy in a divided Congress this year when they are planning a far-reaching tax package under unified Republican control next year. READ MORE

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Biden admin punts biofuel tax credit guidance: In response, groups are urging Congress to extend the credit, which they say helped the industry reduce carbon emissions. (E&E News PM)
Biden Admin to Finalize 45Z Credit: Long-Awaited Guidance Release on 45Z Credit Expected Before Biden Leaves (DTN Progressive Farmer)
Exclusive: Biden administration will not finalize clean fuel tax credit guidance (Reuters)
Biodiesel groups warn of slowing production absent 45Z guidance (Agri-Pulse)

Excerpt from E&E News PM: Transportation industry groups pressed Congress on Tuesday to quickly extend a key biofuel tax credit, following reports that the Biden administration probably won’t finalize the details of a new clean energy tax credit before leaving office.

Groups representing trucking interests and fuel marketers said lawmakers should extend a $1-per-gallon biodiesel blenders’ tax credit, which they credited with helping the industry reduce carbon emissions.

The biodiesel blenders’ credit, first implemented two decades ago, is set to be replaced by the new tax credit — a clean energy incentive in Section 45Z of the tax code — that takes effect in January.

But the Biden administration has yet to issue guidance on how the tax credit will be implemented, including how to account for greenhouse gas impacts from agricultural practices used to produce feedstocks. READ MORE

Excerpt from DTN Progressive Farmer: "Treasury anticipates issuing guidance before the end of the administration that will enable eligible producers to claim the 45Z credit for 2025," Treasury spokesperson Mike Martinez told DTN on Tuesday (December 3, 2924).

Biofuels companies, and in particular renewable diesel and biodiesel, have planned to not claim the blender's tax credit that expires at the end of December, because they planned to instead claim the 45Z credit.

The Biden administration delay has led to biodiesel producers cutting back production and/or shutting down plants.

Paul Winters, director of public affairs and federal communications at the Clean Fuels Alliance America, told DTN his group has done all it can to impart on the Biden administration the importance of having the 45Z guidance.

"We spent the entire year urging Treasury to issue guidance by September, because the biodiesel and renewable diesel industry is trying to navigate the change from the blender excise tax credit to the producer income tax credit," Winters told DTN.

"Our industry is already feeling the impact of the delays and uncertainty. It's not just a delay in the guidelines for calculating the credit. Many producers are reporting that Treasury has not completed the necessary registrations for them to be eligible for the credit."

Biofuels producers are eligible to claim the credit only as of the date of their registration letter.

"This isn't a revelation," Winters said.

"There are a number of stakeholders in 45Z that don't currently have a tax credit, so they can tolerate this delay and try to negotiate a better deal in the next Congress. We knew this would be more complicated for our industry than others."

Geoff Cooper, president and CEO of the Renewable Fuels Association, said his group is holding out hope the Biden administration will take some kind of action soon.

"While we agree that final regulations for 45Z seem highly unlikely before Jan. 20, we remain hopeful that the Biden administration will at least issue some sort of guidance or safe harbor before Jan. 1," he told DTN, "that gives renewable fuel producers the basic information they need to demonstrate eligibility for, and ultimately claim, the 45Z tax credit."

Growth Energy CEO Emily Skor said if the media report is true, farmers and biofuels producers would see their efforts thus far go to waste.

"We appreciate (agriculture) Secretary (Tom) Vilsack's efforts to include climate-smart agriculture practices in any forthcoming 45Z guidance," Skor said in a statement to DTN.

"If this report is true, however, it would be extremely disappointing for the Treasury Department to leave biofuel producers without clarity on this credit. Many producers and their farm partners have already responded to the enactment of these incentives by investing in technologies to reduce their carbon intensity. To leave the credit unfinished would jeopardize the economic benefits this credit could deliver to America's rural communities."

Sen. Charles Grassley, R-Iowa, said in a post on social platform X today that such a delay would hurt the biofuels industry.

"Delaying 45Z guidance will b disruptive to biofuels industry," he said on the post.

"The Biden admin's climate agenda has prioritized pet projects for coastal elites & left middle America behind at every turn That ends when Republicans take power next yr." READ MORE

Excerpt from Reuters: Biden administration officials will not finalize highly anticipated guidelines on new clean fuel production tax credits aimed at the airline and biofuel industries before they leave in January, three sources told Reuters, casting doubt on the future of a key piece of the U.S. president’s climate agenda.

The tax credit, the engine behind President Joe Biden’s ambitious plan to generate 3 billion gallons in production of sustainable aviation fuels by 2030, was due to become effective Jan. 1, but a lack of detailed guidance from the U.S. Treasury would render the program dormant.

...

Ethanol producers in particular are hoping sustainable aviation fuels will provide market growth, amid stagnant demand for the corn-based fuel as a gasoline additive.

...

The biofuel industry is now pushing lawmakers to extend existing blender tax credits that were set to expire at the end of the year to deal with the uncertainty, according to multiple interviews with industry executives.

The White House, which is overseeing a broad effort to finalize a list of unfinished climate rules, did not respond to requests for comment.

The delay in establishing guidelines for sustainable aviation fuels is due to policy debates between agriculture lobbyists and environmentalists over how to ensure the program can achieve its climate targets, Reuters has previously reported.

...

The Department of Agriculture is expected to issue guidance on what farming techniques qualify for the credit, but other key items such as a life cycle analysis that are necessary to determine the value of the credit will remain unfinished, the sources said. READ MORE