The biofuel tax incentives in President Joe Biden’s Build Back Better bill could ensure a growing market for soybean oil and other farm commodities, but the trucking industry worries the subsidies will kick off a war with the airlines over feedstocks.

The biodiesel industry, while welcoming key aspects of the bill, also is lobbying for a last-minute change that would restrict the ability of oil refiners to get into the renewable diesel business and create still more competition for soybean oil and other feedstocks.

In an effort to decarbonize the trucking and airline industries, the House-passed legislation now pending in the Senate includes provisions intended to accelerate the development of sustainable aviation fuel while expanding the use of both biodiesel and renewable diesel.

The $1-a-gallon tax credit for biodiesel and renewable diesel would be extended through 2026 and then replaced by a low-carbon fuel credit that would be available to sustainable aviation fuel (SAF) as well as advanced biofuels such as ethanol produced with carbon-capture technology. The value of the credit would vary according to the carbon intensity of the fuel.

As a bridge to 2027 for the airline industry, a temporary tax credit for SAF worth $1.25 a gallon would be created to run through 2026. The SAF credit is higher because renewable jet fuel is more expensive to manufacture. SAF requires nine pounds of soybean oil, for example, versus the 7.5 pounds needed to make biodiesel or eight pounds to produce renewable diesel. 

Joe BidenPresident Joe BidenThe prospect of new tax incentives for airlines has set off alarm bells in the trucking industry, which is depending on renewable diesel to drive down its greenhouse gas emissions.

“In effect, they’re forcing taxpayers to pay more money to get fewer gallons of biofuel. I don’t know how you justify that on either a cost or climate perspective,” said David Fialkov, executive vice president of government affairs for NATSO, formerly known as the National Association of Truck Stop Operators.

The new SAF incentives are written in a way that soybean oil could potentially be eligible as a feedstock, along with oil from crops that aren’t yet at commercial scale, including cover crops such as pennycress and camelina.

The Biden administration has made SAF a top priority in its climate policy. The White House and the airline industry jointly announced a goal in September for U.S. carriers to use 3 billion gallons of renewable jet fuel by 2030, or about 10% of the industry’s fuel needs.

To highlight the goal and keep the pressure on Congress to create new SAF incentives, United Airlines recently flew a 737 from Chicago to Washington with one of the two engines running on 100% SAF. It was not a regularly scheduled flight, but the plane was filled with officials from United, Boeing and other industry leaders as well as media representatives and a pair of lawmakers.

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“We can't do this alone. Just getting to 10% sustainable aviation fuel we estimate is going to take about $250 billion of investment for the whole industry,” United CEO Scott Kirby said at a post-flight reception in a Reagan National Airport hangar.

Gene Geboyls, president and CEO of World Energy, which produced the SAF for the United flight, acknowledged to reporters that the aviation fuel will be produced initially with the same feedstocks used for renewable diesel: animal fats, vegetable oils and restaurant grease. But he insisted that additional feedstocks, including biomass, kelp, algae and cover crops, will be needed.

"The Build Back Better bill that's being considered does not give advantage to sustainable aviation fuel,” Geboyls said. “There’s a price differential in it. But that price differential just covers the incremental cost of making sustainable aviation fuel as opposed to renewable diesel.”

World Energy, a long-time biodiesel producer, now makes SAF from animal fats and used cooking oil at a refinery in California, where the product can qualify for incentives through the state’s low-carbon fuel standard, the main driver of current SAF use by airlines.

“We sell more on-road fuel than we do aviation fuel, so we're very sympathetic to our customers in that space as well, but we need to start now on the aviation side,” said Geboyls.

According to the Environmental Protection Agency, transportation accounts for 29% of U.S. greenhouse gas emissions. About 10% of transportation emissions come from aviation, compared to 58% from light-duty vehicles and 24% from trucking.

A version of the SAF tax incentives that was originally proposed in the House would have ruled out soybean oil because of a requirement that the eligible feedstocks reduce carbon emissions by as much as 50%, based on an analysis approved by the International Civil Aviation Organization.

ICAO gives soybean oil a relatively poor emissions score because of global land use concerns, but the legislation was rewritten before it passed the House and would allow for use of an alternative carbon-intensity analysis.

“We haven't obviously seen scoring from that yet, but there’s the potential there” for soy-based SAF to be eligible for the tax credits, said Scott Gerlt, an economist for the American Soybean Association.

However, even with the higher tax credit for SAF, the increased cost of making the aviation fuel could put the airlines at a disadvantage when competing with the diesel market for soybean oil, he said.

The National Biodiesel Board, meanwhile, is raising concerns with lawmakers about the ability of oil companies to claim the credit for co-processed SAF that is made by using renewable feedstocks such as animal fats or soybean oil directly in petroleum refining.

Scott GerltScott Gerlt, ASAThe clean fuel production credit that would take effect in 2027 would allow co-processed fuel to qualify, and NBB’s concern is that the Internal Revenue Service will do the same with the SAF credit that would be in effect through 2026, said NBB spokesman Paul Winters.

Co-processed fuels are ineligible for the existing $1-a-gallon credit for biodiesel and renewable diesel.

It remains unclear when the Build Back Better bill is going to come up for a Senate vote. Senate Majority Leader Charles Schumer, D-N.Y., insists he wants the measure passed by the end of the year, but he has yet to secure the support of Sens. Joe Manchin, D-W.Va., and Kyrsten Sinema, D-Ariz. The bill can’t pass the 50-50 Senate unless Democrats are united.

In a Dear Colleague letter Monday, Schumer said he wants all of the committee sections of the bill finalized by next week following meetings with the Senate parliamentarian over what provisions may have to be removed because they violate rules for the budget reconciliation process. The Senate Ag Committee's revisions to the House-passed text were distributed to the Senate leadership last weekend

Because of the Senate revisions, the House would have to vote on the bill again. 

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