White House Is Seen Missing Deadline Tied to Jet Fuel Tax Credit

Agriculture (USDA)Aviation Fuel/Sustainable Aviation Fuel (SAF)Energy (DOE)Environmental Protection Agency Federal Agency/Executive Branch Federal Regulation Internal Revenue Service Opinions Policy Transportation (DOT)Treasury Department White House

March 01, 2024

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by Kim Chipman and Jennifer A. Dlouhy (Bloomberg News) Administration had set March 1 deadline for carbon model; Ethanol industry hopes to benefit from green jet fuel credits -- The Biden administration is missing a self-imposed deadline for updating a government tool used to calculate greenhouse gases from the transportation and energy industries, forcing ethanol producers to wait longer to verify that they can qualify for sustainable aviation fuel tax credits.

Federal agencies teaming up to determine how emissions-reduction efforts are valued had previously set a deadline of March 1. The administration won’t meet that deadline, according to people familiar with the matter who asked not to be named because the information isn’t public.

An update to the US Energy Department’s so-called GREET model will determine if US corn ... READ MORE

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Growth Energy To Administration: Don’t Put Politics Before Science (Growth Energy/Ethanol Producer Magazine)
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Excerpt from AgWeb: He emphasized USDA’s role in advocating for a rule that permits various feedstocks, including traditional ones used for biofuels, to qualify for tax credits and incentives, making it financially feasible to use ethanol, for example. Additionally, USDA aims to provide scientific data on feedstock availability, supply chain logistics and strategies for accelerating adoption and commercialization. Vilsack mentioned the agency’s advocacy for using the GREET model developed by the Department of Energy to enable ethanol to qualify for credits as an SAF feedstock.

Regarding another ethanol issue, Vilsack assured lawmakers EPA would issue emergency waivers for year-round sales of E15 ethanol fuel, as it did in 2022 and 2023. READ MORE

Excerpt from DTN Progressive Farmer: A lot of questions arose Friday at Commodity Classic after Agriculture Secretary Tom Vilsack announced the Biden administration had missed its deadline for issuing guidance on the tax credits for Sustainable Aviation Fuel.

The potential 30-billion-gallon aviation market for biofuel producers -- and lucrative tax credits that go with that market -- will likely depend heavily on demonstrating that farmers are using "climate-smart practices" for the corn, soybeans or other feedstocks going into making that aviation fuel.

Vilsack and EPA Administrator Michael Regan spoke at the Classic general session on Friday morning. Vilsack told the crowd the White House had delayed the results of an inter-agency task force looking into changes to the Argonne Greenhouse Gases, Regulated Emissions, and Energy Use in Technologies (GREET) model to allow for SAF tax. The GREET model adjustments are going to be key for driving feedstocks to use for SAF.

"We're going to take a couple more weeks to get the guidance right," Vilsack told the Commodity Classic crowd.

Vilsack indicated the interagency task force wasn't aware of the extent of "climate-smart practices" farmers use such as no-till farming, cover crops, energy efficiency or reduced rates of nitrogen application. Such factors, plugged into the GREET model, would demonstrate biofuels are more environmentally friendly than current aviation fuel.

The GREET modeling will eventually determine which SAF facilities qualify for the 45Z Clean Fuel Production Tax Credit, which runs through the end of 2027. SAF producers that qualify could receive up to $1.75 a gallon for the 45Z credit.

Vilsack made it clear that SAF credits will have some linkages to the "climate-smart" practices farmers are using such as no-till farming, cover crops, energy efficiency or reduced fertilizer usage. He pointed to the 205 practices USDA has designated as climate-smart under the Partnership for Climate-Smart Commodities, but it's going to take measuring and verification down the line to validate those practices.

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Vilsack and biofuel supporters are intent on making the case that on-the-farm practices help lower the carbon footprint for aviation fuels rather than increase the lifecycle carbon emissions for those fuels.

WHAT WILL ON-FARM VERIFICATION LOOK LIKE?

A major question following Vilsack's announcement is just how much biofuel or SAF facilities will need to model or verify farming practices to qualify for the potentially lucrative tax credits.

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If the IRS demands highly detailed identity preservation systems to track the feedstocks and farm practices, then it's going to take more time for biofuel plants to get those kinds of programs in place, Cooper said. A higher level, more aggregate approach to calculating on-farm practices will move things significantly quicker.

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Growth Energy CEO Emily Skor said in a statement Friday the delay is frustrating, "but we're optimistic that it's happening for a productive reason. Ultimately, what's most important is getting it right and making sure that the resulting updates provide real opportunities for American farmers to contribute to the SAF market. Officials should follow the science behind Argonne-GREET, the most accurate model and the only one that accounts for all of the climate-smart innovations happening on farms across America's heartland."

Skor said American ethanol producers "must be allowed to compete" in the SAF marketplace.

"The alternative is making SAF from Brazilian sugar cane, or used cooking oil imported from China, instead of renewable crop-based feedstocks grown on American farms," she said.

Brian Jennings, CEO of the American Coalition for Ethanol, said in a statement it is important to get the modeling right: "Since 40B and 45Z are based on lifecycle greenhouse gas emissions, every single point of carbon intensity has value, which makes it essential to get the details around any modifications to the GREET model right. That's why we wrote the interagency working group earlier this week to emphasize the importance of a GREET model for 40B and 45Z which includes meaningful carbon credits for climate-smart agriculture practices. We also cautioned the interagency working group against a final model approach which arbitrarily inflates land-use change penalties that have been disproven by real-world observations of what is actually occurring." READ MORE

Excerpt form Energy.AgWired.com: The model is critically important for determining eligibility for the Inflation Reduction Act’s “40B” SAF tax credit and the administration agencies involved – EPA, DOT, USDA, and DOE – had been adamant they would meet the March 1 deadline and the expectation was it would be announced by Vilsack and EPA Administrator Michael Regan at Commodity Classic.

Secretary of Agriculture Tom Vilsack remarks
Play Classic24 Vilsack remarks 22:48
EPA Administrator Michael Regan remarks
Play Classic24 Regan remarks 8:43
Sec. Vilsack and Admin. Regan press conference
Play Classic24 Vilsack-Regan presser 17:40

“While we are pleased to hear progress is being made on the modified GREET model, we are disappointed by this additional delay,” said Renewable Fuels Association President and CEO Geoff Cooper. “Getting the modeling right could open the door for America’s farmers and ethanol producers to participate in an enormous decarbonization opportunity. But getting it wrong will strand investments and assure the failure of the Biden administration’s climate objectives.”

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Play Classic24 RFA CEO Cooper on GREET delay 6:35

American Coalition for Ethanol (ACE) CEO Brian Jennings added that since the credits are to be based on lifecycle greenhouse gas (GHG) emissions, every single point of carbon intensity has value, which makes it essential to get the details around any modifications to the GREET model right. “That’s why we wrote the Interagency Working Group earlier this week to emphasize the importance of a GREET model for 40B and 45Z which includes meaningful carbon credits for climate-smart agriculture practices as illustrated by ACE’s multi-year project supported by USDA’s NRCS RCPP program. We also cautioned the Interagency Working Group against a final model approach which arbitrarily inflates land use change penalties that have been disproven by real-world observations of what is actually occurring.” READ MORE

Excerpt from DTN Progressive Farmer: While groups are clamoring for certainty on how the Department of Treasury calculates tax credits for sustainable aviation fuel, Agriculture Secretary Tom Vilsack said the adjustments to the greenhouse gas model, or "GREET" model, won't be completed until next month but will "send the right signal" to both farmers and biofuel producers.

Yet, the farm practices eventually recognized by the Treasury Department for the Sustainable Aviation Fuel "40B" tax credit may need to be broadened to help provide more benefits to biofuel producers and farmers under the Clean Fuel Production "45Z" tax credits, Vilsack said.

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A group of 26 farm and biofuel organizations from 13 states on Thursday wrote Biden administration officials, expressing disappointment that federal agencies missed their own self-imposed deadline to update the GREET model, "but we appreciate the importance of getting the modeling right." Cosigners of the statement included Growth Energy, Clean Fuels Alliance America, National Corn Growers Association, National Farmers Union, National Oilseed Processors Association, and the Renewable Fuels Association.

The various groups warned officials against changing the GREET model "that would stack unwarranted penalties on agricultural feedstocks, cut rural America out of a promising green energy market and undermine any realistic path to achieving U.S. SAF goals."

At a House agricultural appropriations hearing, Rep. Ashley Hinson, R-Iowa, asked Vilsack about the status of GREET model changes. Talking about biofuel production in Iowa, Hinson noted the tax credits will be "absolutely critical for our industry" and it is important that the GREET model recognizes farmers' conservation practices. Hinson asked Vilsack for an update on the status of the GREET and to "ensure that the scientists are driving that review."

To garner the 40B and 45Z tax credits, an aviation fuel must show at least a 50% reduction in greenhouse gas emissions compared to traditional aviation fuels. A key for biofuels such as ethanol will be to consider farm practices and get credit for practices that lower greenhouse emissions of the feedstocks going into biofuel plants as part of that lifecycle modeling.

Along with using the GREET model, Vilsack said right now it's important to make sure the Treasury Department and others "are fully aware of what steps farmers do, in fact, take to be more sustainable in the production of corn and soybeans as a feedstock for sustainability."

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Vilsack added, "I'm confident there's a recognition that no-till, cover crops and energy-efficient fertilizer are the kinds of things that ought to be included as factors to calculate whether a particular sustainable aviation fuel meets a threshold of ... 50% improvement. So, I think I'm confident we're going to send the right signal."

There will need to be a broader conversation on the 45Z tax credit to see whether "other aspects of climate-smart agriculture -- sustainable agriculture -- ought to be considered" in the GREET calculations. "I think there's a recognition that farmers are going to play an integral role in the development of SAF here," Vilsack said.

Lanza Jet, which built a 10-million-gallon SAF plant in Georgia, is importing ethanol made from Brazilian sugar cane so the aviation fuel can qualify for an EPA renewable identification number (RINs) credit.

HINSON: FARMERS NEED TO BE RECOGNIZED

DTN asked Hinson about whether groups are raking issues over ensuring domestic SAF also qualifies for an EPA biofuel credit under the Renewable Fuels Standard. Hinson said she had just met Thursday morning with corn farmers on that issue.

"Certainly, it's about being able to be competitive with Brazil," Hinson said. "And the last thing I want to see us do no matter what model we're using or the tax credit specifically, is ceding any ground to allow for the importation of ethanol from or those products from Brazil is cutting into our markets."

Hinson added it also is important that farmers are recognized for their conservation practices.

The 40B tax credit sunsets at the end of 2024 and the 45Z tax credit sunsets at the end of 2027. Hinson also was asked about extending those tax credits. She said she is putting together a coalition specifically to look at extending those SAF tax credits and others.

Vilsack, acknowledging the 40B tax credit won't provide as much benefit long-term, said recognizing climate practices provides the right "messaging" for the 45Z tax credits down the line. Vilsack told reporters it's important that the GREET outcome provides incentives for biofuel producers and farmers when it comes to conservation practices.

"So, you want to send the right message that climate-smart, sustainable agriculture, that folks understand it is a significant factor in producing the feedstocks necessary to produce this sustainable aviation fuel."

EDUCATION PROCESS RECOMMENDED

While some practices are well-known, other farm practices that reduce emissions or sequester carbon on the farm may not be as understood, so there will need to be an education process, as well as some verification to prove those emission benefits are there to get below that 50% emission reduction for the fuel.

"So, whatever comes out on 40B, I don't think you want to say, 'Well, that's the universe.' It's not. It's a signal that climate-smart sustainability is in," Vilsack added. "There is more work to see how expansive the 45Z, -- which is the real, that's the real deal -- how expensive that can be, and that may take a little more work."

Asked if the changes made to GREET for the tax credits will apply to the Renewable Fuels Standard overseen by EPA, Vilsack said, "I don't know if I can answer that question today. I'm just trying to make sure we get the messaging right."

Biofuel groups and others are already developing different partnerships to help calculate farm practices. On Thursday, Siouxland Energy Cooperative of Sioux Center, Iowa, and Continuum Ag of Washington, Iowa, announced an agreement to "provide farmers a path to receive potential premiums associated with Carbon Intensity (CI) Certified Grain. Continuum Ag will provide farmers with the certification to participate while Siouxland intends to be a buyer for the certified bushels. The goal is to offer premiums for certified grain and capitalize on the pending 45Z Clean Fuel Production tax credits," the companies stated. READ MORE