Ethanol Blog
Agriculture, Energy Groups Weigh Next Steps on 45Z Clean Fuels Production Tax Credit
LINCOLN, Neb. (DTN) -- Though the Biden administration's much-anticipated release of guidance for the 45Z Clean Fuels Production tax credit came last week, the vast majority of industry groups focused more closely on what they still don't know about 45Z.
Probably no industry faces as immediate of a need for answers quite like biomass-based diesel producers, who needed 45Z guidance months ago or face continued slowdown and/or shutdown.
Companies that have relied on the biodiesel blenders tax credit, which expired at the end of 2024, were expecting to replace the blenders credit with 45Z.
Now, there will continue to be a push to renew the blenders credit at least temporarily while the incoming Trump administration finishes work on 45Z.
In the hours following the announcement on Friday, industry groups raised questions about what's next.
NATSO, representing truck stops and travel plazas, along with SIGMA: America's Leading Fuel Marketers, the National Association of Convenience Stores, and American Trucking Associations the Truckload Carriers Association, immediately began asking about the blenders credit.
"The associations, which represent fuel retailers and consumers of biofuels, urge Congress to extend the $1 per-gallon biodiesel blenders tax credit as quickly as possible," the groups said in a press statement.
David Fialkov, executive vice president of government affairs for NATSO and SIGMA, said the 45Z announcement was a "classic case of 'too little, too late' for a supply chain that needed clear, unambiguous direction months ago."
Fialkov said the guidance "fails to provide the market with the certainty needed to mobilize new capital, and as a result we expect that potential investments in clean fuel will be sidelined."
Fialkov said he questioned how useful the 45Z would be for current biofuels producers.
"Very few ethanol producers will be able to access the 45Z credit, eliminating any potential for this policy to lower retail gasoline prices," he said.
"Even worse, the new 45Z credit will result in a materially diminished incentive for renewable diesel fuels and biodiesel. It appears that the preliminary proposal would allow imported used cooking oil from China to claim the credit if it is making renewable jet fuel but not renewable diesel. This is environmentally and economically unjustifiable. Diesel prices will go up and fuel emissions will go up. This policy needs to be fixed as soon as possible."
LeeAnn Goheen, senior director of government affairs for NATSO and SIGMA, said it was time for Congress to extend the blenders credit to "help insure market stability."
Clean Fuels Alliance America said in a statement last week that "many domestic producers have been stymied over the past year in negotiating feedstock and fuel offtake contracts for 2025" while waiting for 45Z guidance.
Kurt Kovarik, Clean Fuels vice president of federal affairs, said his group is hopeful the 45Z announcement "provides the necessary certainty" that producers can rely on ahead of the final rules.
"Clean fuel producers still need the carbon intensity scores from the GREET model to calculate their credit values," he said.
"This missing information is key to enabling them to negotiate feedstock and fuel offtake agreements for the year and get back to business."
Kovarik said domestic production of biomass-based diesel has doubled since 2020, benefitting from multi-year certainty in federal tax policy.
Biodiesel and renewable diesel combined now meet 9% of U.S. demand for distillate fuel for heavy-duty transportation needs, he said.
OTHER REACTION
Two members of the Iowa delegation in Congress expressed frustration with the Biden administration announcement.
U.S. Sen. Joni Ernst, R-Iowa, said in a statement last week that the Biden administration did not provide "meaningful guidance" on 45Z.
"After dragging its feet, the Biden administration has once again let our biofuel producers down on its way out the door," Ernst said.
"By ignoring my demands to meet necessary deadlines, Biden's Treasury Department has shown again its misplaced priorities. Instead of supporting our clean, homegrown biofuels, it has shamelessly promoted radical, out-of-touch Green New Deal priorities."
Sen. Charles Grassley, R-Iowa, said, "Once again, the Biden administration has left farmers with more questions than answers. I'm disappointed the Biden Treasury failed to clarify whether 45Z will fully credit farmers for doing their part to reduce carbon emissions. I stressed in my meetings with President Trump's Treasury and EPA nominees that they will need to act fast to bring farmers certainty on 45Z and I intend to hold them to that promise."
On a positive note, Grassley said he was "pleased" about the Biden administration's decision to not allow foreign importers of used cooking oil to claim the 45Z just yet.
American Farm Bureau Federation President Zippy Duvall said in a statement that AFBF "appreciates the prioritization" of America's farmers over foreign importers.
"In addition, we're pleased the guidance unbundles conservation practices from the sustainable aviation fuel guidance, which would potentially enable more farmers to participate," Duvall said.
"Unfortunately, Treasury's announcement comes at the 11th hour and leaves uncertain whether and how the 45Z tax credit would ultimately be implemented to help America's farmers assist fuel producers in the goal of increasing homegrown fuels."
Iowa Corn Growers Association President and Farmer Stu Swanson said in a statement the news was "disappointing" for farmers.
"We have continually advocated for clear guidelines from Treasury officials, working to provide them with the necessary information they need to get this done," Swanson said.
"Unfortunately, it feels like our input has gone unrecognized and this issue will now be passed to the new administration."
National Sorghum Producers Chair Amy France, a sorghum farmer from Scott City, Kansas, said in a statement last week that the guidance "falls short of delivering the clarity and comprehensive framework" needed to fully realize the potential of the 45Z Clean Fuel Production tax credit.
"NSP appreciates the inclusion of sorghum as a recognized feedstock in this program, reflecting its value as the resource-conserving crop," France said.
"However, critical gaps remain, particularly regarding the specifics of the Greenhouse gases, Regulated Emissions, and Energy Use in Technologies (GREET) model and USDA's guidance on climate-smart agricultural practices."
American Coalition for Ethanol CEO Brian Jennings said he was encouraged by Treasury's inclusion of climate-smart agriculture practices and the use of the GREET model.
"Despite this step in the right direction, the job is unfinished because the preliminary guidance doesn't provide the clarity our industry has been awaiting," he said.
"The guidance omits key details essential for biofuel producers to capitalize on 45Z, including how climate-smart agriculture practices will be incorporated. Our focus will be to engage the incoming Trump administration to make the final regulations for the 45Z credit beneficial for our members."
National Farmers Union President Rob Larew said the guidance was the "right step forward" in bolstering renewable fuel production and providing new markets for farmers.
"While this guidance reflects meaningful progress, much remains to be accomplished," he said in a statement.
"We hope this process will be finalized quickly to ensure the tax credit delivers optimal benefits for farmers and rural communities."
American Carbon Alliance CEO Tom Buis said on Friday that the guidance "falls short of expectations" and is a "missed opportunity" to provide the clarity rural America was hoping for.
"The 45Z program holds immense potential to drive new demand in the agriculture sector, expand market opportunities, strengthen rural economies, and provide much-needed stability for farm incomes," Buis said in a statement.
"However, the lack of critical details released today undermines the certainty the agriculture industry needs to fully capitalize on this opportunity."
Read more on DTN:
"Biden Admin Releases 45Z Tax Guidance," https://www.dtnpf.com/…
Todd Neeley can be reached at todd.neeley@dtn.com
Follow him on social platform X @DTNeeley
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