The USDA is arguing for broader farmer eligibility for a share of tax credits of up to $1.25 a gallon for sustainable aviation fuel (SAF), said Agriculture Secretary Tom Viilsack on Thursday. Farm groups have called for a broader array of crops and farming practices to be included in the 45Z tax credit regulations now being formulated by the Biden administration.
SAF credits are available for fuels that reduce greenhouse gas emissions by at least 50 percent compared to petroleum-based jet fuel. The 45Z credits will apply to crops grown in 2025 and later years. The Treasury issued regulations in April for 40B credits, for crops grown from 2022-24. Only a sliver of U.S corn and soybeans would meet the 40B requirements of being grown on farms that employ no-till and cover crops, with the additional limitation of using high-efficiency fertilizer on corn.
“The real game here is 45Z, we recognize that,” said Vilsack at an ethanol trade group meeting in Omaha. “We understand very, very well the significance and importance of the next several months in this process” of interagency discussions that will lead to the 45Z regulation.
“Our goal is to…make the case that there are a number of crops — corn and soybeans obviously two of them, but not necessarily the only two — that can be beneficial and that there are specific actions that are being taken on farms and that can make a difference and ought to be included,” said Vilsack.
“In other words, not simply requiring a bundling of actions, but giving farmers flexibility and choice to choose from a menu of activities and actions, all of this designed to create the greatest amount of flexibility, the greatest opportunity for choice on the farm, and then make the case to the Treasury Department and the interagency process of the importance of including that model…into the [IRS] guidance.”
Farm groups say the “bundling” approach made the 40B regulation unworkable. “Additional options for compliance must be considered,” said the American Farm Bureau, National Farmers Union, National Corn Growers Association, and American Soybean Association in a letter to Treasury Secretary Janet Yellen on July 17. They asked for “more tailored and accessible guidelines that account for the varying capabilities and conditions of farmers across the country.”
Farmers could reap a portion of the tax credits if SAF regulations recognize their role in reducing the carbon intensity of their crops and the biofuels made from them, said Vilsack.
The 45Z credits should be available only to fuels produced from domestic feedstocks, said 16 Farm Belt senators in a letter to Yellen two weeks ago. Otherwise, they said, “renewable fuel producers will take the path of least resistance and import foreign feedstocks,” such as tallow, Brazilian sugar ethanol, and used cooking oil from China. Farm groups also want to limit the credits to domestic feedstocks.
Only a trickle of SAF is produced at present. The administration has a goal of increasing production to 3 billion gallons a year by 2030.
Also during the speech to the American Coalition for Ethanol, Vilsack said a new round of grants would be made on Friday through USDA’s Higher Blends Infrastructure Incentive Program. The grants help fuel distributors and retailers install pumps, tanks, and infrastructure to sell higher blends of biofuels, such as E15, a 15 percent blend of ethanol into gasoline, and B20, a 20 percent blend of biodiesel into petroleum-based diesel.
To listen to a recording of Vilsack’s remarks, click here.