Vilsack Touts Biofuels as Policy Choice

OMAHA (DTN) -- In a speech that highlighted policy differences with Republicans, U.S. Agriculture Secretary Tom Vilsack on Thursday detailed the potential of jet fuel from ethanol even if the process to make it work is cumbersome at best.

On Friday, Vilsack will be in Minnesota to announce more USDA funding for E15 pumps and other infrastructure.

Vilsack spoke Thursday to members of the American Coalition for Ethanol, holding its annual meeting in Omaha. He credited biofuel producers for helping support farmers and the rural economy.

"Certainly today, corn prices are not where we would like them to be, but they are better because of this industry," he said.

Biofuel producers will need to increasingly turn to new markets such as Sustainable Aviation Fuel, however, to capture the incentives and help the airline industry lower its emissions.

"The world needs this industry to help it create a low-carbon-intensity marine and jet sustainable aviation fuel," Vilsack said.

While the Biden administration has drawn fire from biofuel producers over spending and rules to support electric vehicles, Vilsack said EPA has blocked the oil industry from taking advantage of small-refinery exemptions (SREs) that were frequently granted under the Trump administration. That's a choice the EPA is making, and it's the right choice," Vilsack said.

The secretary also said more E15 is being sold, as EPA has granted summer waivers, and starting in 2025, eight states will be able to sell E15 without a summer waiver requirement. All of that has led to record sales of E15 in the process.

BLENDER PUMP FUNDS

USDA has $500 million from the Inflation Reduction Act to expand infrastructure for E15 and other higher blends. So far, USDA has spent $131 million of those funds on 193 projects. Vilsack will be in Minnesota on Friday to announce more funding for blender pumps and other infrastructure for higher blends. Vilsack didn't want to say how much funding would be rolled out. "But I'm going to tell you those numbers are going to significantly increase tomorrow." He added, "We're making the case for expanded utilization of higher blends, and it's worked."

Vilsack repeatedly said increased investment and policies supporting biofuels come down to choices made by policymakers.

GEARING UP FOR 45Z

The secretary noted that few people were happy with the Treasury announcement in May for the on-farm requirements on the 40B Sustainable Aviation Fuel (SAF) tax credit. The Treasury guidance requires the bundling of no-till planting, nutrient management and cover crops. Still, the secretary said it was the first time climate-smart practices were recognized as reducing greenhouse gas emissions.

"It was an effort to introduce to the world that agriculture can make a difference, that ethanol can make a difference. That was a really important thing to do."

He added, "It was really designed to begin the conversation and to get agriculture at the table and included in the conversation, which we were able to do now."

The 45Z Clean Fuels Production Tax Credit, which is supposed to go into effect on Jan. 1, 2025, will require biofuels to have a carbon intensity (CI) score of at least 50% lower than petroleum. Every point below that 50% level generates 2 cents a gallon. A 60% reduction, for instance, would generate 20 cents a gallon.

But USDA, EPA and other agencies are still weighing in with Treasury on how that tax credit should work. USDA had a comment period this summer that generated 260 comments from farmers and biofuel groups.

Farm groups, however, also wrote Treasury Secretary Janet Yellen last month, calling on Treasury to ditch the bundling of climate-smart practices on farms, stating that requirement "adds layers of complexity and costs that many farmers simply cannot bear and will not pursue if not paid a premium."

The groups added, "The implementation of no-till farming, cover cropping and enhanced-efficiency fertilizers requires significant upfront investments in both time and resources. Without a greater incentive, many farmers may simply be unable to implement these bundled practices based on economic limitations alone."

Vilsack said USDA is pushing for a 45Z verification that will give farmers "flexibility and choice to choose from a menu of actions." That's going to require making the case to Treasury and the federal agency process exploring how the GREET model will incorporate these emission projections.

"We understand very well the significance and importance of the next several months of this process," Vilsack said.

Vilsack said USDA and the biofuels industry will need to identify farm practices that lower emissions "with enough specificity and verification that they know they're real." He added, "I don't think there's any question we can do that, and I'm very hopeful that we are able to make the case for more crops to be included, and for more practices and more combinations of practices, but not necessarily only a single set of practices."

PILOT PROJECTS TESTING GHG REDUCTIONS

Vilsack also credited ACE for starting a Regional Conservation Partnership Program pilot project back in 2021 that has since been expanded to 14 ethanol plants in 10 states. That project looks to measure and verify the value of conservation tillage, nutrient management, cover crops and other practices in sequestering carbon and reducing greenhouse gas emissions from crop production.

Brian Jennings, CEO of ACE, said the project is expanding from 18,000 acres to 100,000 acres, but already meetings with farmers in seven states have led to potentially 250,000 acres of interest.

"Meaning farmer interest is approaching five times the available funding," Jennings said. "Farmers are optimistic about selling low-carbon corn to ethanol producers who can benefit from that in the future."

USDA also is spending $300 million to develop a more national look at measuring, monitoring, verifying and reporting agricultural sequestration and emissions.

While the 45Z credit starts in January, there are also questions about whether Treasury will get the rule and guidance out before the end of the year.

"The hope is that it would be," Vilsack said. "You know, things can change, and timelines can slip, as they have from time to time. But I think the goal here, I think everybody's working towards that goal of end of the year -- beginning of next year."

TRADE AND BANNING FOREIGN FEEDSTOCKS

Farm groups and a bipartisan group of 15 U.S. senators also have called on Treasury to mandate the use of domestic feedstocks for the 45Z, which would block situations such as an SAF plant in Georgia importing sugarcane-based ethanol from Brazil. Speaking to reporters, Vilsack said there are trade implications on U.S. products if feedstocks from other countries were blocked.

"When you start essentially creating walls around your products and protecting your products, it sounds good from a political perspective, but that's not how it's interpreted in the rest of the world," Vilsack said. "And since 20 to 25 to 30% of what we grow and raise in this country has to be sold to somebody else, you have to be conscious of the impact and effect that that might have on all of those other opportunities."

BIOFUEL INVESTMENTS "A CHOICE"

Vilsack also delved into politics, saying administration support for E15 infrastructure, efforts at EPA to reject small-refinery exemptions, incentives for sustainable aviation fuel and tax credits to lower emissions are policy choices.

"There are some who would like us to make different choices," Vilsack said. He pointed to the controversial Heritage Foundation Project 2025 plan, which calls for dropping climate-smart agriculture incentives, as well as not enforcing the Renewable Fuel Standard and eliminating most of the Inflation Reduction Act incentives.

"You need to pay attention to this because they are proposing a very different set of choices," he said.

Vilsack said the House version of the farm bill also has provisions that are "very consistent with the (Project) 2025."

During his time in office, former President Donald Trump also supported ethanol and signed an executive order allowing year-round E15, but it was blocked in federal court. Trump, in an economic speech this week, brought back calls to "drill, baby drill" as a solution to spur the economy.

The House farm bill includes language that would strip the agriculture secretary's authority to use the Commodity Credit Corp. (CCC) fund. Vilsack used that fund for $3.1 billion to create the Partnership for Climate-Smart Commodities. He also used $1 billion to boost trade through the Regional Agricultural Promotion Program.

"These are all choices," Vilsack said.

The secretary also told ACE members, "The vice president will continue to be a strong supporter of this industry."

Asked about actions Vice President Kamala Harris has taken to support biofuel producers, Vilsack said cabinet members such as himself work at the discretion of the president and vice president. If they are displeased about a policy move, they let department heads know about it.

"So, I'm quite confident, given everything that has been done, of the support of the president and vice president," he said.

Chris Clayton can be reached at Chris.Clayton@dtn.com

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