Senate passes Inflation Reduction Act with biodiesel, SAF incentives intact

The U.S. Senate passed the Inflation Reduction Act of 2022 on a straight party-line vote Aug. 7, with Vice President Kamala Harris providing the tie-breaking vote.

As part of the budget-reconciliation process, only 51 votes were needed to approve the bill.

“Now that the Senate has taken action, the House will return to pass the Inflation Reduction Act,” said House Majority Leader Steny Hoyer, D-Maryland, in an Aug. 7 statement.

The House of Representatives originally passed the measure last year as the Build Back Better Act, the multitrillion-dollar agenda put forth by President Joe Biden, which was subsequently slimmed down in the Senate in order to get the approval of more moderate Democrats like Sen. Joe Manchin of West Virginia.

“For years, I have worked across the aisle to determine the most effective way to increase domestic energy production, lower energy and healthcare costs, and pay down our national debt without raising costs for working Americans,” Manchin said in an Aug. 7 statement. “The Inflation Reduction Act is the product of that work, and I am proud the Senate passed this bill that will lower the inflation taxes that have been so hurtful for West Virginian and American families. By investing in American energy production and innovative technologies the U.S. is on a path toward energy security, lower gas and home energy prices and we are leading the fight on global climate.”

The bill includes $369 billion in spending and tax policies over the 10 ten years to reduce greenhouse-gas (GHG) emissions and incentivize expanded production and use of domestic clean energy.

Some of the measures included in the legislation are an extension of the $1 per gallon biodiesel and renewable diesel blenders tax credit, which was set to expire at the end of this year, through 2024; a tax credit for sustainable aviation fuel (SAF) ranging from $1.25 to $1.75 per gallon through 2024; and clean-fuel production credits starting in 2025 through 2027, which offer incentives based on GHG reductions for clean on-road and aviation fuels.

For more information on the tax incentives for biobased diesel fuels, click here.

Clean Fuels Alliance America, the organization formerly known as the National Biodiesel Board, welcomed the Senate’s passage of the Inflation Reduction Act.

“If enacted, the legislation will extend the existing biodiesel and renewable diesel tax incentive through 2024, increase the value of the existing sustainable aviation fuel tax incentive through 2024, and create a new Clean Fuel Production Credit for 2025, 2026 and 2027,” Clean Fuels stated Aug. 8. “The legislation also creates a new Biofuel Infrastructure and Agriculture Product Market Expansion, with authorized funding through September 2031.”

Kurt Kovarik, Clean Fuels’ vice president of federal affairs, said, “The clean fuels industry grew and increased production over the past several years, making an essential contribution to the nation’s fuel supply that lowers fuel prices, supports good-paying jobs, adds value for America’s farmers, and cuts carbon emissions. Long-term certainty in tax policy helped our industry meet America’s transportation needs, and we appreciate the further extension of the biodiesel and renewable diesel tax incentive. Our members are among the first to bring sustainable aviation fuel to market and we are grateful for the increased support for the industry’s growth included in this legislation. We applaud the new Biofuel Infrastructure and Agriculture Product Market Expansion, which will build on the success of USDA’s current infrastructure-grant program. The grants will help our industry deliver cleaner, better fuels for transportation and heating directly to consumers across the country.”

The Advanced Biofuels Association also applauded the bill’s approval in the Senate. “This comprehensive bill offers a suite of meaningful policy directives that will enable the advanced biofuels industry to better reach its fullest potential, including long-term tax policy, new financing and grant resources at DOE, USDA, and DOT, and increased federal resources for EPA to administer the Renewable Fuel Standard,” said Michael McAdams, president of the Advanced Biofuels Association. “This vote of confidence and real investment from our federal government will have positive ripple effects throughout our industry and across the U.S.’s carbon footprint.”

McAdams added that the Advanced Biofuels Association “fought hard for extensions for the biodiesel, renewable diesel, alternative fuel mixture, and second-generation tax credits and commends the Senate for its extensions of these credits through 2024. [We] will work with Congress and the treasury department to gather more clarity as we better understand the new tax credits created by this legislation that will support sustainable aviation fuel and provide an emissions-centric, technology-neutral tax credit for all renewable fuels.”

Gene Gebolys, CEO of World Energy, said, “This legislation will go a long way in helping World Energy meet its commitment to produce a billion gallons of SAF by 2030 and make an increasingly important contribution to the advancement of green hydrogen. The United States’ leadership now stands to be a catalyst for a global acceleration for energy transition through the scaling of SAF, low-carbon hydrogen, renewable natural gas, biomass-based diesel fuels, and important new processes including carbon capture for sequestration or reuse. This is a huge step forward in the race to transition to a low-carbon energy future.”

While many industry trade groups such as Clean Fuels and the Advanced Biofuels Association, and biobased diesel companies like World Energy, support the Inflation Reduction Act, the bill is not without opposition in this sector.

In late July, before the full Senate vote but after Senate Majority Leader Chuck Schumer and Manchin came to terms on the bill, U.S. fuel-retailer groups NATSO and SIGMA urged lawmakers not to pass the measure because the higher tax incentive for SAF compared to biodiesel and renewable diesel “will undercut and eventually eliminate America’s biodiesel and renewable diesel market as disproportionate pressure is placed on feedstock,” the groups stated.

Once the bill is passed by the House, Biden is expected to sign it into law.

To read the full text of the legislation, click here.