US biofuel, farmer groups celebrate passing of Trump's budget bill

Agriculture and biofuel associations uniformly voiced support for the new US budget for extending incentives on crop-based biofuels and excluding foreign feedstocks from tax breaks after it was passed by the Senate on July 3.

The budget, which is popularly known as the "One Big Beautiful Bill," is expected to be signed into effect by US President Donald Trump on July 4.

The bill extends 45Z credits by two years, restricts the eligibility of these credits to fuels made from feedstocks grown in the US, Canada or Mexico, retains full transferability throughout the term without large tax liabilities and excludes indirect land use change in calculating lifecycle GHG emissions, which would result in no land use change penalty for corn ethanol.

"From the very beginning of the budget reconciliation process, our goal was to advocate for the inclusion of tax policies that provide certainty, growth opportunities, and market stability for US ethanol producers," Geoff Cooper, president and CEO of the Renewable Fuels Association, said.

Cooper highlighted that the extension and modifications to the 45Z clean fuel production credit, alongside the reinstatement of immediate expensing provisions for research and development, will create a favorable tax policy environment for ethanol producers.

The Section 45Z tax credit, also known as the Clean Fuel Production Credit, is a federal tax incentive established by the Inflation Reduction Act of 2022. The final version extends the 45Z credit through the end of 2029 -- two years beyond its current expiration date of Dec. 31, 2027.

Brian Jennings, CEO of the American Coalition for Ethanol, also praised the bill's passage, noting that the survival of the 45Z credit was unexpected when Trump took office.

"We're grateful to our Congressional champions for their steadfast leadership to support and strengthen the 45Z credit, which is remarkable considering the fact most other IRA-era tax credits were limited or phased out in the final package," Jennings said.

The legislation excludes emissions from indirect land use change from the calculation of a biofuel's credit value. That change would make it easier for corn-based ethanol to qualify for the credits, according to S&P Global Commodity Insights.

While there were other improvements we had hoped to achieve in the final 45Z language, restoring transferability of the credit, removing indirect land use change (ILUC) penalties, and restricting feedstock eligibility to USMCA countries will strengthen the credit from its original version, Jennings added.

"In terms of the credit term, we preferred the House language which would have extended 45Z through 2031, and we also urged Congress to specifically allow low-carbon farming practices to be monetized through 45Z with the feedstock calculator and guidelines USDA has released, but nevertheless ACE remains committed to working with federal agencies to implement the credit in ways that reward on-farm conservation practices and accelerate the use of homegrown, low-carbon biofuels."

ACE has been working to help monetize low-carbon farming practices in 45Z through their 10-State USDA Regional Conservation Partnership Program (RCPP).

Once farmers participating in the project have implemented reduced-till, 4R nutrient management, or cover crops, land-grant university scientists will collect soil samples and other field-level data about the resulting carbon benefits to better calibrate the GREET model and the USDA FDCIC to generate more reliable carbon scores for farming practices.

The 45Z credit, originally enacted under the Inflation Reduction Act, provides technology-neutral incentives for clean fuels based on lifecycle greenhouse gas emissions.

The final version extends the 45Z credit through the end of 2029—two years beyond its current expiration date of Dec. 31, 2027.

"The president wants to go big on American energy dominance, and this legislation delivers," said Emily Skor, CEO of Growth Energy, a trade association that represents US ethanol producers.

The National Oilseed Processors Association and American Soybean Association, which represent US soybean, canola, flaxseed, safflower seed and sunflower seed crushing industries, praised the final passage of the bill, saying the reforms in the legislation represent a major win for the US oilseed processing industry and American farmers.

The new legislation caps 45Z credits at $1/gal (including for sustainable aviation fuel) except in the case of fuel produced from animal manure.

The new bill has delivered "generational wins," the Iowa Soybean Association said on July 3, citing the extension of 45Z credits and increased Small Biodiesel Producer Credit to 20 cents/gal.

These changes provide some additional stability for the renewable fuels market generally but will cause some disruption in the sustainable aviation fuel and imported feedstock markets, analysts say.

The loss of tax credits for this feedstock will push UCO trade flows towards the EU, according to a Commodity Insights report on advanced biofuels in June.

According to the report, the new regime will tighten supplies and drive up costs as it will not be possible to sustain demand with domestic feedstocks alone.

Platts, part of S&P Global Commodity Insights assessed Chicago Argo ethanol at 1.7230/gal on July 3, at the level of a trade done in the Market on Close assessment process. Platts considered an outstanding bid at $1.7140/gal and an outstanding offer at $1.7250/gal.

Platts assessed New York Harbor any-July barges at $1.8175/gal, at an unchanged 9.50-cent premium over July Chicago paper and assessed New York Harbor any-August barges at $1.8225/gal, at an unchanged 0.50-cent premium over any-July barges.