Sustainable Aviation Fuel Hits the Runway with Farm-to-Fly Bills

Brownstein Hyatt Farber Schreck

Brownstein Hyatt Farber Schreck

On Jan. 22, Sens. Jerry Moran (R-KS), Amy Klobuchar (D-MN), Joni Ernst (R-IA), Tammy Duckworth (D-IL) and Chuck Grassley (R-IA) introduced the Farm to Fly Act (S.3637) in the Senate. The purpose of the bill is to enable access to foster the development and widespread usage of biofuels in aviation to help expand fuel supply and promote clean energy sources and the U.S. agriculture industry. The bill is the companion legislation of the House bill (H.R. 6271) introduced by Rep. Max Miller (R-OH) on Nov. 7, 2023. The House version currently has 22 co-sponsors, including five Democrats and 17 Republicans.

Sustainable aviation fuel (SAF) has become a subject of political focus over the last few years as part of the Biden administration’s clean energy agenda as the president pushes to make the airline industry carbon-free by 2050. On the industry side, agricultural and energy producers are looking for other uses of biofuel with the increasing use of electric vehicles, and possible future decline of their products by road vehicles.

At the executive level, the Treasury Department and Internal Revenue Service (IRS) announced their much-anticipated SAF guidance on Dec. 15, 2023. The agencies decided on using a still-to-be-modified version of the Greenhouse gases, Regulated Emissions, and Energy use in Technologies (GREET) model of emissions measurement to decide which SAF producers would be eligible for tax credits under the Inflation Reduction Act (IRA). This decision was cheered by those in the ethanol industry who were worried that without GREET standards they would be excluded from federal subsidies. To qualify for the $1.25 credit for each gallon of SAF in a qualified mixture as established in the IRA, the SAF must have a minimum reduction of 50% in lifecycle greenhouse gas emissions. There is also a supplemental credit of one cent for each percent that the reduction exceeds 50%.

Still, the final rule on the credits has not been decided. While the guidance did include the GREET model, it also includes a carbon dioxide measuring approach that falls in line with United Nations standards that are considered more stringent. A final rule on the GREET model is expected in the spring of this year, possibly around March, but those in the corn-based biofuel industry are hopeful of guidelines in their favor.

Summary of Farm-to-Fly Act

The Farm-to-Fly Act is written to expedite the availability of SAF. The co-sponsors of the bill claim it will expand fuel options for the aviation sector, boost rural development and create new markets for farmers.

The legislation would codify and expand on the guidance released by the Treasury Department and IRS. It would make law the greenhouse gas measurements of lifetime emissions released in the agencies’ rulemaking. The bill also aims to promote biofuels use in the airline industry by expanding programs already in use by the U.S. Department of Agriculture (USDA). This includes compelling USDA to use existing programs to encourage inter-agency collaboration and advance private-sector partnerships. It also looks to head off potential confusion in the SAF policy by clarifying definitions of biofuels in the Farm Security and Rural Investment Act of 2002 to reinforce SAF’s eligibility for USDA bioenergy programs. These programs include the Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program, the Biomass Crop Assistance Program (BCAP) and the Bioenergy Program for Advanced Biofuels.

Outside of the climate and agricultural aspects. Farm-to-Fly is also being sold as a national security bill, with legislators claiming that it will help increase American energy independence.

Reactions and Next Steps

The introduction of the Farm-to-Fly Act has received a warm welcome from the farming, biofuels and airline industries. These groups believe federal action will continue to be a boon to their future business opportunities.

On the other side of the issue, some environmentalists have raised concerns that the bill does not go far enough to reduce greenhouse gas emissions by making it too easy to apply for SAF-related tax credits. These groups are more likely to be focused on the upcoming executive guidance than the bills in either chamber. There has also been some lobbying from truck stops and fuel retailers that are nervous that an expansion in SAF would reduce their access to biofuels.

Due to the narrow scope of the bill and the busy floor schedules of Congress, the legislation seems more likely to be added to a larger package, such as a funding bill or a farm bill, than passed on its own. Its bipartisan support and broad industry backing could portend a higher chance of passage. This is especially true if the House version were to garner more Democratic support, which the newly introduced bipartisan Senate bill could assist with.

Brownstein will continue to track SAF policy for any further developments in the coming months.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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