‘It’s now law’: Biden signs bill extending biodiesel tax credit, enacting new SAF incentive
President Joe Biden signed the Inflation Reduction Act into law Aug. 16. Immediately after signing the historic, partisan climate legislation, Senate Majority Leader Chuck Schumer, D-New York, said, “It’s now law.”
Biden then handed the pen he used to sign the bill to Sen. Joe Manchin, D-West Virginia, who blocked the president’s original multitrillion-dollar Build Back Better agenda in the Senate.
The Inflation Reduction Act is a scaled back version of Build Back Better and Manchin’s support was critical in the evenly divided Senate.
The bill passed the Senate through the budget-reconciliation process, meaning only 51 senators needed to approve it. With Manchin’s vote, Vice President Kamala Harris broke the tie.
The act passed the House and Senate without a single Republican vote.
Among the myriad climate-change provisions in the law are key biofuel incentives, including extension of the $1 per gallon biodiesel blenders tax credit through 2024, which was set to expire at the end of this year; a new sustainable aviation fuel (SAF) tax credit, ranging in value from $1.25 to $1.75 per gallon based on greenhouse-gas (GHG) reductions, through 2024; and a clean fuel production tax credit from 2025-’27, which is billed as “technology-neutral” even though SAF and on-road biobased diesels that achieve the same GHG-emissions reductions do not receive the same value from the incentive.
The new law also includes a number of other important measures for the biofuels industries, including carbon capture and storage, green hydrogen and renewable natural gas.
“We appreciate the additional certainty in tax policy and infrastructure funding that will help our industry continue to grow and meet demand for better, cleaner fuels,” said Kurt Kovarik, vice president of federal affairs for Clean Fuels Alliance America, the organization formerly known as the National Biodiesel Board. “We look forward to working with the administration to get the RFS back on track to support that growth.”
For the next two years, while certainty of the extended blenders credit exists, Clean Fuels will be focused on the regulatory rules implementing the producer’s credit—and making sure all its members have fair access to it.
Companies like World Energy and LanzaJet, to name a few, stand to benefit greatly from several of the incentives and provisions included in the Inflation Reduction Act.
World Energy is a leading biodiesel manufacturer and the first U.S. producer of SAF. The company is significantly expanding its SAF production capacity in Paramount, California.
After the Senate passed the legislation earlier this month, Gene Gebolys, CEO of World Energy, said, “This legislation will go a long way in helping World Energy meet its commitment to produce a billion gallons of SAF by 2030 and make an increasingly important contribution to the advancement of green hydrogen. The United States’ leadership now stands to be a catalyst for a global acceleration for energy transition through the scaling of SAF, low-carbon hydrogen, renewable natural gas, biomass-based diesel fuels, and important new processes including carbon capture for sequestration or reuse. This is a huge step forward in the race to transition to a low-carbon energy future.”
LanzaJet is building a facility to produce SAF in Georgia scaled at 10 million gallons per year, which is scheduled to come online later this year. It also plans to build a 120 mgy SAF facility in Illinois with partner Marquis.
“The U.S. is poised to lead the world in the energy transition, and this legislation is a leap forward in advancing energy security, economic development, and climate action,” said Jimmy Samartzis, CEO of LanzaJet. “We’ve been at an inflection point in building this new industry. The passage of the Inflation Reduction Act allows U.S. manufacturing, agriculture, biofuel, oil and gas, aviation, and financial industries to double-down, work together, and advance the development of the sustainable fuels industry.”
LanzaJet said it “recognizes the critical role this legislation will play in enabling aggressive scale-up of SAF, supporting an ecosystem of innovation and transformation in aviation. The aviation industry and the administration share a joint goal under the SAF Grand Challenge of achieving 3 billion gallons of domestic SAF production by 2030 and 100 percent SAF by 2050. The Inflation Reduction Act provides critical policy tools to scale domestic SAF production to achieve these ambitious goals rapidly.”
Last year, LanzaJet committed to fulfilling one-third of the U.S. target by enabling the production of 1 billion gallons of SAF by 2030 using its alcohol-to-jet (ATJ) technology, which converts ethanol into SAF and renewable diesel.
“LanzaJet has been a strong advocate and industry leader on the SAF provisions in the [new law], which includes a new performance-based SAF tax credit,” the company stated. “This innovative feedstock- and technology-neutral credit provides an incentive of up to $1.75 per gallon for SAF to achieve a 100 percent lifecycle GHG reduction that will drive investment in the high-performing SAF technologies like ATJ our nation will need to decarbonize the aviation sector.”
Access to low-cost capital is also “one of the most significant barriers to the rapid deployment of SAF technologies that have been proven but not yet deployed at a commercial scale,” LanzaJet added. The Inflation Reduction Act’s $245 million in complementary grant funding for SAF projects will further de-risk investment and speed the deployment of next-generation SAF technologies.”
LanzaJet’s investors, partners and funders include LanzaTech, Mitsui & Co, Ltd., Suncor Energy, British Airways, Shell, Microsoft and All Nippon Airways.
Although many industry associations and companies are applauding the biofuel provisions in the Inflation Reduction Act, the law is not without its detractors. Fuel-retailer groups like NATSO and SIGMA urged lawmakers not to pass it, although to no avail. They cited the disparity in tax-credit value for SAF versus on-road biobased diesels and warned that this would “undercut” and “eliminate” the U.S. market for biodiesel and renewable diesel because finite feedstocks would be diverted to SAF production instead.