Iowa farmers' conservation practices to be a factor in renewable aviation fuel tax credits

For the first time, Iowa and other U.S. farmers' conservation practices will be a factor in determining whether renewable aviation fuels made from their corn, soybeans and other crops qualify for low-carbon-fuel tax incentives, the Biden administration said Tuesday.

The U.S. Treasury Department’s announcement focused on an updated model that will be used to determine whether greenhouse gas emissions created when producing the sustainable aviation fuel are low enough to allow producers to qualify for a federal tax credit known as 40B.

U.S. Agriculture Secretary Tom Vilsack said the model is an "important steppingstone" that acknowledges "the important role farmers can play in lowering greenhouse gas emissions and begins to reward them through that contribution in the production of new fuels.”

Iowa and U.S. renewable fuel groups say the model is a good starting point but needs work to incorporate a wider variety of conservation practices as well as improvements in biofuels production. But Iowa U.S. Sens. Chuck Grassley and Joni Ernst, both Republicans, criticized the model, saying it penalizes corn and soybean growers.

In a video, Grassley said the updated model is "a stupid approach" that restricts grain producers’ ability to contribute to sustainable aviation fuel.

"Widespread use of sustainable aviation fuel will help fight global warming," he said. "But rejecting grain feedstocks will impede efforts to produce that fuel on a commercial scale."

Renewable fuels group head: Not all the required methods work in all locations

The model is expected to guide how farmers and renewable fuel will be treated in determining qualifications for a more lucrative clean fuel production tax credit, referred to as 45Z, that will become available next year.

With billions of dollars in incentives hanging in the balance, ethanol’s role in the next generation of low-carbon fuel is important to Iowa. The state is the nation’s largest producer of corn and ethanol and uses about half the annual crop to make the renewable fuel.

More: Iowa's legendary soil, the bedrock of its economy, is losing its richness, new research shows

“This is a great beginning as we develop new markets for sustainable aviation fuel that use home grown agricultural crops produced using climate smart agricultural practices," Vilsack, a former Iowa governor, said in a statement.

Connecting farmers' growing practices to low-carbon fuel markets also can accelerate the adoption of conservation methods that environmentalists have urged farmers adopt to help improve Iowa’s water quality, experts said.

“This will be yet another important incentive that will help persuade farmers in Iowa and throughout the U.S. to adopt these practices that are so important to improving soil health and water quality, in addition to sequestering carbon,” said Sean McMahon, executive director of the Iowa Agriculture Water Alliance, which is supported by Iowa pork, soybean and corn groups.

Monte Shaw, the Iowa Renewable Fuels Association’s executive director, said he’s concerned that the sustainable aviation fuel model only recognizes three practices: use of cover crops, no-till agriculture and efficiency in the use of nitrogen fertilizer.

Farmers must adopt all three for their crops to count toward reducing carbon emissions. But not all of them are effective in every location, Shaw said. Growers in northern Iowa can struggle to get cover crops started in the fall, given their shorter growing season, and the new model fails to acknowledge many other practices that can cut greenhouse gas emissions, he said.

“What they’ve rolled out isn’t real practical,” he said. But he added he is “optimistic that they intend to get many more farm-level practices recognized and not have them all tied up into bundles” as the federal government develops the clean fuel tax credit model.

Controversial use of carbon capture also part of tax incentive requirements

The announcement comes as the ethanol industry faces uncertainty. President Joe Biden’s push to cut greenhouse gas emissions in half by 2030 and achieve a carbon-free economy by 2050 includes moving from gas-powered vehicles to electric cars and trucks, which could lower demand for biofuels.

More: Can push for carbon capture pipelines also mean billions for conservation-minded farming?

Geoff Cooper, the Renewable Fuels Association, said converting ethanol to jet fuel is "one of the most promising forms" of sustainable aviation fuel.

"Low-carbon ethanol ... is cost-competitive with petroleum-based fuels, has established production and transportation infrastructure, and is by far the largest-volume biofuel produced in the United States, with output of nearly 16 billion gallons per year," he said.

The administration seeks to expand domestic sustainable aviation fuel production to 3 billion gallons in 2030 and 35 billion gallons in 2050. Producers must cut emissions 50% or more compared to petroleum jet fuel to qualify for tax incentives. Producers can receive a tax credit of $1.25 to $1.75 per gallon.

Shaw said it's unclear how much money would flow to farmers.

"Fuel producers are going to be looking at all different types of ways to lower their carbon score and to keep lowering it," he said. "If farmers are getting credit for their carbon score, there's an economic incentive to buy their corn and give them a premium."

The model also wraps in the controversial use of carbon capture and sequestration. Summit Carbon Solutions and Wolf Carbon Solutions propose building pipelines across Iowa and other Midwestern states that would be used to capture carbon at ethanol production facilities, liquefy it under pressure and pipe it to either North Dakota or Illinois to be sequestered deep underground.

Carbon capture advocates say the pipelines are needed to lower ethanol’s carbon emissions so the renewable fuel can remain viable under climate change goals. But critics oppose Ames-based Summit's request to use of eminent domain to force unwilling landowners to sell access for pipelines. They're also concerned about safety and the risk of damage during construction to farmland and underground drainage tiles.

Wolf hasn't requested eminent domain powers.

Donnelle Eller covers agriculture, the environment and energy for the Register. Reach her at deller@registermedia.com or 515-284-8457. 

This article originally appeared on Des Moines Register: New model factors farming practices in low-carbon jet fuel incentives