Brown, Colleagues Call on Biden Administration to Block American Taxpayer Money from Going to Biofuels Made with Foreign Feedstocks

WASHINGTON, D.C. -Yesterday , U.S. Senators Sherrod Brown (D-OH) and Roger Marshall (R-KS) led a bipartisan group of colleagues in calling on the Biden administration to block taxpayer money from being used to subsidize biofuels produced using imported foreign feedstocks such as Chinese used cooking oil and Brazilian ethanol.

In a letter to Treasury Secretary Janet Yellen, Brown and colleagues called on the administration to restrict the eligibility of the forthcoming 45Z Clean Fuel Production Credit to renewable biofuels fuels made from feedstocks sourced domestically. The tax credit, which was passed as part of the Inflation Reduction Act, was intended to make America more energy independent and spur the production of biofuels made with American-produced feedstocks - building new markets for American farmers.

The letter comes amidst a surge in imports of Chinese used cooking oil being used to produce biofuels in the US that is displacing the use of domestic feedstocks. The Senators warn that a poorly crafted rule will hurt American farmers, undermine the American biofuel industry's competitiveness, and undercut American energy independence.

"As Treasury works to craft 45Z guidance, we urge you to restrict the eligibility to renewable fuels made from feedstocks sourced domestically," the Senators wrote. "If drafted and implemented correctly, the credit will help to support robust American energy independence-incentivizing the production of biofuels made with domestically-produced feedstocks. In order to ensure this objective, it is essential that the 45Z rule articulate clear, workable pathways for domestically-produced renewable fuels derived from domestically-produced feedstocks."

Senate Agriculture Committee Chair Debbie Stabenow, along with Senators Mike Braun (R-IN), Jerry Moran (R-KS), Todd Young (R-IN), Richard Durbin (D-IL), Tammy Duckworth (D-IL), Deb Fischer (R-NE), Pete Ricketts (R-NE), Tammy Baldwin (D-WI), Joni Ernst (R-IA), Amy Klobuchar (D-MN), Tina Smith (D-MN), and Eric Schmitt (R-MO) joined Brown and Marshall in sending the letter to Secretary Yellen.

"Ohio grain farmers are growing the feedstocks necessary for clean fuel production," said Tadd Nicholson, Executive Director, Ohio Corn & Wheat. "The 45Z tax credit has the potential to offer a valuable incentive for the production and use of biofuels that will lower carbon emissions. Without the clear domestic feedstock requirements Senator Brown and his Senate colleagues are asking for, the benefits of this policy are at risk of being diverted from American farmers."

"The federal clean fuel production tax credit is meant to foster a domestic market for cleaner burning fuels that promote American jobs and energy independence," saidRusty Goebel, President, Ohio Soybean Association. "Foreign imported feedstocks shouldn't benefit from American taxpayer investments in this industry. Ohio Soybean farmers support Senator Brown's efforts to ensure Ohio-grown feedstocks aren't undercut by foreign suppliers."

The letter can be found HERE and below:

The Honorable Janet L. Yellen

Secretary

U.S. Department of the Treasury

1500 Pennsylvania Avenue NW

Washington, D.C. 20220

Dear Secretary Yellen:

It is critical to American energy independence and rural prosperity that the Department of the Treasury (Treasury) issue proposed and subsequently final guidance for the Clean Fuel Production Credit (45Z) in advance of its January 1, 2025, statutory deadline. Finalizing this rule in a timely manner will provide farmers, renewable fuel producers, end-users, and other biofuels stakeholders with the certainty and clarity they need to invest and make planting decisions. As Treasury works to craft 45Z guidance, we urge you to restrict the eligibility to renewable fuels made from feedstocks sourced domestically.

45Z is intended to stimulate the development of a domestic, low-carbon fuel supply chain and to increase American competitiveness in the renewable and traditional energy markets. If drafted and implemented correctly, the credit will help to support robust American energy independence-incentivizing the production of biofuels made with domestically-produced feedstocks. In order to ensure this objective, it is essential that the 45Z rule articulate clear, workable pathways for domestically-produced renewable fuels derived from domestically-produced feedstocks, to lead the way in lowering the carbon intensity of American transportation fuels.

While the use of foreign feedstocks can play an important role in producing domestically manufactured ethanol and biodiesel, the rule must make it clear that the tax credit may only apply to biofuels produced from domestic feedstocks. This would be keeping with the two-fold intent of Congress in creating 45Z: 1) support domestic biofuels manufacturing, and 2) utilize domestic feedstocks to lead the way in lowering the carbon intensity of American transportation fuels. This approach marks a deliberate change from the previous Blenders Tax Credit, and it is important that Treasury's guidance capture this nuance and accurately reflect Congressional intent.

Failure to properly structure the feedstock sustainability criteria associated with 45Z credit will incentivize the use of foreign feedstocks over those from U.S. suppliers, contrary to the intent of Congress. If the guidance fails to establish robust, science-based, sustainability criteria that producers of domestic feedstocks can actually meet, and fails to include guardrails that ensure the credit is only available to renewable fuels made with domestically produced feedstocks, renewable fuel producers will take the path of least resistance and import foreign feedstocks, such as used cooking oil (UCO) from China to produce renewable diesel or Brazilian ethanol as a feedstock for sustainable aviation fuel (SAF) in the U.S. This would reduce the utility of the credit to a manufacturing credit, rather than a credit that supports both manufacturing and feedstock production. This was not the intent of Congress.

One need look no further than the dramatic increase in imports of Chinese UCO and Brazilian tallow, and the current use of Brazilian ethanol in producing SAF to understand the consequences of a failure to properly craft the 45Z tax credit in a manner that supports American feedstocks. This has occurred, in part, because under the current guidance for the 40B tax credit for sustainable aviation fuel, no domestically-produced ethanol is able to achieve the criteria set forth by the Treasury Department. This has unintended and counterproductive consequences.

We are deeply concerned that if the Administration fails to address the current market dynamics of foreign UCO, tallow and ethanol, and Brazilian trade barriers for American ethanol, American agriculture will have a limited role in decarbonizing the transportation system. American agriculture, in search of new and robust markets, has been the chief advocate for biofuels adoption. A poorly constructed rule will deny American farmers the long-anticipated benefit of biofuel adoption, which would be unacceptable.

If more is not done to support the production and utilization of domestic feedstocks, the U.S. will see its renewable fuels industry shift focus from domestically oriented feedstocks towards imports. Allowing U.S. tax credits to fund the importation and use of foreign feedstocks to produce biofuels would put U.S. agriculture at the back of the line, while foreign agricultural producers are subsidized by U.S. taxpayers.

We urge you to issue proposed and subsequently final guidance for 45Z in advance of January 1, 2025. Such a rule should include language that only allows for the distribution of federal tax dollars to renewable fuel made with domestic feedstocks as Congress intended.

Sincerely,

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