More concerns expressed over Biden administration’s SAF tax-credit guidance, GREET-model update
Another U.S. senator in addition to his state’s soybean association as well as the National Oilseed Processors Association are expressing frustration and dismay with the Biden administration’s guidance on eligibility for the sustainable aviation fuel (SAF) tax credit passed in the Inflation Reduction Act, and the resulting update to the GREET model.
Following Republican Sen. Chuck Grassley saying it was “a stupid approach” requiring corn and soybean farmers to implement so-called “climate-smart agriculture” practices like no till, cover crops and—in the case of ethanol feedstock from corn—special fertilizer to be eligible for higher-valued tax credits based on greenhouse-gas reductions, U.S. Sen. Sherrod Brown, a Democrat from Ohio, said the rule “misses the mark.”
“Ohio farmers are the best in the world and they’re ready to produce the renewable fuel of the future—and that’s why I fought to ensure that the Inflation Reduction Act helped sustainable biofuel production get off the ground,” Brown said. “Unfortunately, the guidance released by the treasury department this week misses the mark and falls well short of the goal of jumpstarting this new homegrown industry. The treasury department must move quickly to release a robust and flexible rule for the 45Z clean-fuels production credit that fixes the problems with the guidance released this week and lives up to the goals of the Inflation Reduction Act. I’ll keep pushing treasury to get this done—and fix this issue.”
Brown noted that he fought to include his Sustainable Skies Act in the Inflation Reduction Act—and is fighting to ensure that the Biden administration implements it correctly, his office noted.
In Ohio, where Brown serves, the state soybean association said it has concerns about the mandated farming practices for feedstocks to qualify.
The 40B tax credit is only valid for 2023 and 2024 before transitioning to the 45Z credit.
Preliminary guidance in December from the treasury department already recognized soybean oil as an eligible feedstock for the 40B credit through the Renewable Fuel Standard pathway, resulting in a $1.25 credit for soybean oil-based SAF.
An additional pathway allows for a higher credit, but the criteria for soy eligibility are stringent, posing challenges for many farming regions, the Ohio Soybean Association noted.
For soybean oil to qualify through the new pathway, production of soybeans will be required to employ both no till and cover cropping.
OSA said it is concerned that the new pathway has missed an opportunity for the SAF industry to reach its full potential by imposing these strict requirements.
“While OSA acknowledges the importance of maintaining high standards for environmental stewardship, we must also ensure that these standards are attainable for farmers,” the organization stated.
“Soybean oil is a feedstock that already reduces greenhouse-gas emissions over traditional petroleum jet fuel by 50 percent today, even before factoring in on-farm practices like no till and cover crops,” said OSA President Rusty Goebel. “Our nation’s transition to SAF has to start somewhere—let that start include all soybean oil regardless of farming practices.”
OSA said it is concerned that making these practices a requirement for the 40B tax credit will limit the very feedstocks that can help the aviation industry reduce emissions dramatically, “now and for many years to come.”
The National Oilseed Processors Association also has concerns.
“Acknowledging for the first time the carbon benefits that climate-smart agriculture practices can deliver is a significant step to ramping up SAF production and NOPA is pleased to see the updated GREET model recognize the positive environmental impact of U.S.-produced biofuels,” said NOPA President and CEO Kailee Tkacz Buller. “However, we are concerned the requirement to implement climate-smart ag practices simultaneously will limit this opportunity, particularly in parts of the country where it may not be possible to plant a cover crop or the cost to implement new practices is too steep. We look forward to further reviewing today’s announcement and having a continued dialogue with the administration to better understand what this and other provisions, including indirect land-use change impact, mean for the industry and how we can competitively and efficiently meet the needs of the SAF market.”
Buller added that, since 2021, NOPA members have made over $6 billion in investments supporting a 1-billion-gallon increase in capacity while reducing the carbon footprint of the soybean supply chain by 19 percent.
“This was made possible through improved soil health and water quality, decreased chemical application, implementation of no till practices, expansion of cover crops, and transitions from coal to natural-gas fuel sources—all while improving yields,” Buller said. “These direct examples reiterate that the oilseed industry stands ready to work alongside the Biden administration and the airline industry on the expanded use and production of U.S. farmer-grown biofuels to drive innovation, cut aviation emissions and create U.S. jobs.”
