RFA to US treasury department: 45Z tax-credit regulation needs ‘clarity, certainty and stability’

In detailed comments submitted April 10 to the U.S. Department of the Treasury, the Renewable Fuels Association urged the department to clarify and improve several key provisions in its upcoming proposed regulations for the clean fuel production credit, also known as 45Z.

The comments were submitted in response to the treasury department’s Jan. 10 “notice of intent to propose regulations” for 45Z.

“If properly implemented, the 45Z tax credit has the potential to advance U.S. energy security, prioritize domestic energy resources, strengthen rural economies and create a transformative incentive for the adoption of new technologies in the renewable fuels and agriculture sectors,” wrote Geoff Cooper, RFA president and CEO, to Scott Bessent, secretary of the treasury department.

“The technology-neutral intent of 45Z represents the most economically efficient and environmentally responsible approach to boosting U.S. energy production,” Cooper added.

“However, for the 45Z program to truly drive innovation and value creation in the marketplace, treasury must move expeditiously to propose, finalize and promulgate implementing regulations,” he said. “Clean-fuel producers, including RFA’s members, are in desperate need of clarity, certainty and stability in the regulatory framework supporting the 45Z tax credit.”

Cooper added that RFA believes the final 45Z regulations must recognize the realities of today’s biorefining and agriculture sectors and the complexities of our nation’s transportation-fuels marketplace.

At the same time, final regulations must maintain an intuitive and manageable approach to registration, reporting and recordkeeping that creates the kind of dependable value that empowers businesses to invest.

Among RFA’s comments:

• The treasury department needs to clarify its intentions and definitions around “qualifying sale,” an “unrelated person,” a “member of a consolidated group,” and the applicability of safe-harbor provisions.

• The treasury department’s approach to rounding of emissions factors should be reconsidered.

• The department should formally integrate climate-smart agriculture (CSA) practices into the 45Z program.

• The treasury department should modify prevailing wage and apprenticeship (PWA) requirements.

• The department should expeditiously implement the provisional emissions-rate (PER) process and allow a more flexible approach.

• The short duration of 45Z, and the treasury department’s delay in promulgating rules, is discouraging innovation and investment and undermines the objectives of the program.

• The proposed structure for 45Z creates an unintended disincentive for the production of alcohol-to-jet (ATJ) sustainable aviation fuel (SAF).

In response to specific questions from the department, RFA commented that the 45ZCF-GREET model offers a far more current and thorough understanding of lifecycle emissions than either CORSIA or the approved pathways under the RFS program.

Also, the treasury department should include emissions-rate pathways for biofuel derived from corn-kernel fiber and sorghum-kernel fiber and provide the option to segregate those gallons for 45Z credit-generation purposes.