House passes spending bill ensuring extension of biodiesel tax credit, creation of new SAF incentive

The U.S. House of Representatives passed the Inflation Reduction Act of 2022 in a straight party-line vote Aug. 12, with 220 Democrats in favor and 207 Republicans opposed. Just like in the Senate, which passed via the budget-reconciliation process Aug. 7, the bill passed the House without a single Republican vote.

The spending bill—a slimmed-down version of President Joe Biden’s multitrillion-dollar Build Back Better agenda that originally was approved by the House late last year but stalled in the Senate over concerns by moderate Republicans like Sen. Joe Manchin, D-West Virginia—includes an extension of the $1 per gallon biodiesel and renewable diesel blenders tax credit through 2024. The incentive was set to expire at the end of this year.

It also includes a sustainable aviation fuel (SAF) tax credit from 2023-’24 that ranges from $1.25 to $1.75 based on greenhouse-gas (GHG) emissions reductions.

From 2025-’27, a clean fuel production credit is established, replacing the biodiesel and SAF credits, which is billed a “technology-neutral” approach but still lacks parity in value. For instance, SAF that reduces GHG emissions by 57 percent would be eligible for a tax credit of 35 cents per gallon while a biodiesel or renewable diesel fuel with the same carbon-reduction profile would receive 20 cents per gallon.

The disparity in value for the SAF and biodiesel tax credits has drawn opposition from some fuel-retailer groups about redirecting feedstock to SAF from the on-road biobased diesel market and undercutting biodiesel and renewable diesel.

“This legislation purports to create a ‘technology neutral’ clean fuels tax scheme, which fuel retailers have long supported,” said David Fialkov, NATSO executive vice president of government affairs, in a July 29 statement after Senate Democrats struck a deal to move forward with the bill. “Favorable treatment for SAF flies in the face of this approach.”

The bill features a number of other provisions for clean energy, including hydrogen, carbon sequestration and biofuel-infrastructure funding. For more information, click here.

Clean Fuels Alliance America and the Advanced Biofuels Association were both thankful for the House and Senate passing the bill. Clean Fuels was particularly pleased with the notion of tax certainty as well as ongoing infrastructure funding.

“Cleaner, better fuels like biodiesel and renewable diesel are essential to America’s economy and environment,” said Kurt Kovarik, vice president of federal affairs for Clean Fuels. “They support good-paying jobs, reduce fuel prices and the cost of transporting consumer goods, and cut carbon emissions by an average 74 percent. We appreciate Congress providing our industry long-term certainty in tax policy, and we thank Reps. Cindy Axne and Angie Craig for their tireless advocacy of the biodiesel tax credit, as well as Chairman Richard Neal and Rep. Mike Thompson for supporting its inclusion in today’s 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. As our industry looks to continue growing and sustainably meeting America’s need for affordable, clean energy, these grants will help our industry deliver cleaner, better fuels directly to consumers.”

Mike McAdams, president of the Advanced Biofuels Association, said, “Congress passing the Inflation Reduction Act is a significant step toward achieving President Biden’s national climate ambitions. It is undoubtedly the single largest law Congress has ever enacted to combat climate change. 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. We support all of these provisions. Together, they comprise the integrated strategy necessary to achieve meaningful carbon reductions in the United States.”

Despite the victory, McAdams said there is still much work to be done.

“We look forward to engaging with the EPA about upcoming renewable volume obligations rulings and related issues, such as feedstock supply and emerging technologies, to ensure a cleaner, more sustainable future for all,” he said.

Biden is expected to sign the bill next week.