American Energy
American Energy

The "One, Big Beautiful Bill" has passed the House and is en route to the Senate. Among its myriad provisions there is one major step forward coupled with one, if not two, major steps backward for sustainable aviation fuel (SAF) and the American farmers who stand to benefit from the bill. The step forward: the Clean Fuel Production Credit for SAF (referred to in shorthand as "45Z") would be extended from 2027 to 2031. This stands in stark contrast to the more rapid phaseout, if not outright deletion, of most all other clean energy provisions originally enacted in the Inflation Reduction Act. The steps backward: the transferability of this credit is eliminated. The impact of that deletion will be felt by the American farmers and growers who produce the feedstock that is fundamental to SAF. Eliminating transferability will throttle the flow of private capital needed to unlock innovation -- just as commercial projects to produce SAF are progressing towards reality.

Pareen Shah, CMO and government relations lead for BioVeritas stated, said "It's very exciting to see 45Z move forward, and particularly with an extension to 2031. This clearly indicates there is strong bipartisan support for sustainable aviation fuel. One key provision missing in the latest bill, though, is 'transferability,' which would accelerate SAF investment and ultimately maximize the benefits SAF brings to American farmers and for extending America's energy dominance."

Why transferability matters in the first place

The Inflation Reduction Act intentionally paired production credits like 45Z with the concept of "transferability," allowing project developers without large tax liabilities (i.e., start-ups and scale-ups) to sell their credits to other businesses that do. This monetization of the tax credit, generally at a discount of around 10%, is a key enabler for startup and early-stage SAF ventures to recognize financial returns investors require faster than they would otherwise. Faster financial returns, in turn, accelerate growth.

Who wins when SAF growth is accelerated? The entire SAF ecosystem, starting -- in the case of biomass-based SAF -- with the American farmer. "SAF producers need feedstocks that come from farmers, and that win-win relationship is only accelerated by the financial stability that comes with transferability," said David Austgen, Chief Executive Officer of BioVeritas. The GOP-led House Ways & Means Committee, however, was looking for immediate spending cuts as it kicked off the reconciliation process. They first proposed eliminating transferability in the original version of the bill released in mid-May. It stayed out in the many twists and turns leading up to passage of H.R.1 during the early hours of May 22.

The result: A SAF slowdown

Clean fuel projects often run nine-figure capital costs yet generate modest tax liabilities in their first years. Without the ability to monetize 45Z, many developers—especially the innovative start-ups and scale-ups -- "will lose a critical financing pathway," warns industry analysis from Argus.

The US is targeting 3 billion gallons of SAF production by 2035 and 35 billion gallons by 2050. Per the Iowa Renewable Fuels Association, that translates to 63 new 200 million gallon per year ethanol plants, 30 new ethanol-to-jet SAF production facilities, and 6 new HEFA-SAF production facilities. For most start-ups and scale-ups their initial plants are at a smaller scale, so the number of facilities only gets larger. Existing SAF facilities are counting on a transferable 45Z to create greater financial flexibility. Removing monetization through transferability after 2027 forces project developers, and their investors, to take a hard look at their financial projections and project timelines. At best, a number of small to mid-size SAF projects will face meaningful delays – while the rest of the world accelerates. At worst, this will force a US SAF industry rationalization at the wrong time – when new technologies are taking hold and beginning the rapid descent down the cost curve, and as farmers are preparing for the associated surge in demand. Regardless of the outcome, it's the American farmer who stands to lose the most from the proposed changes to 45Z.

The domino effect on America's farm economy

SAF is poised to be the biggest new demand driver for Midwestern corn and soybean growers since the original Renewable Fuel Standard. As Muddy Boots Ag economist Pete Meyer recently told AgriPulse, "the shift to SAF will greatly increase demand for corn and soybeans." Noted Brad Stolter, director of public policy for the Illinois Corn Growers Association, "Currently, [in the US] we have a 14.5 billion gallon marketplace for ethanol," Stolter said. "But we could almost double that if we were to get into these aviation fuels." That explosion in demand creates jobs on the farm and also in the greater value chain: construction, maintenance, logistics, equipment suppliers, support services, and more.

Without the new demand from SAF, Decision Innovation Solutions predicts that US corn acreage will see a dramatic decline through 2050 as yields increase but demand stagnates. Assuming corn-based alcohol-to-jet SAF takes off, it is projected that corn acres harvested will stabilize at 80 million acres with the potential to rise to 87 million by 2050, as opposed to falling to 68.4 million acres by 2050 without SAF. Translating this to economic impact, for the Midwestern states in total, the difference between having a robust ATJ industry develop versus not is approximately $259.3 billion across the 2024-2050 period. This equates to nearly $10 billion per year, on average.

If projects stall, that incremental capacity disappears, ultimately damaging the farmers and the rural economies they drive. This runs counter to the America-first, American farmer-friendly position of the current administration and Congress.

Lenders see policy risk

CoBank's October 2024 white paper framed SAF as rural America's next growth engine—if policy certainty holds. "Any meaningful growth opportunities will be largely dependent on favorable policies and adequate incentives," analyst Jacqui Fatka wrote. Slashing transferability injects precisely the uncertainty CoBank warns about, raising borrowing costs for grain handling co-ops and feedstock aggregators.

Opening the door for foreign competition

While Washington aims to pare back government incentives, Europe is marching in the opposite direction. The EU's ReFuelEU legislation requires a 2% SAF blend starting this year, climbing to 70% by 2050, giving producers long-term demand certainty. The European market faces a severe long-term supply shortage, however, prompting European consumers to look to imported SAF to meet mandated volumes. The US, given its vast feedstock availability, is well positioned to be a key source of SAF for Europe. Yet uncertainty in the US SAF industry, spurred by the elimination of transferability, not only creates domestic supply issues, but makes European buyers wary. Should these risks persist, European SAF consumers will turn to other producers – particularly in Asia – to meet their mandated requirements. Eliminating transferability of 45Z risks transferring America's leading position in the SAF market to overseas producers.

A missed opportunity right now – but there's still time

Cutting transferability may save federal outlays in the immediate term, but it undercuts three policy objectives both parties claim to support: energy security, rural prosperity, and global technological leadership, particularly over China and the EU. The Senate has the opportunity to avoid these shortcomings by re-establishing transferability for 45Z in their version of the One, Big, Beautiful Bill.

Bottom line: For SAF, the House-passed "One, Big Beautiful Bill" delivers an outsized, possibly unforeseen, negative impact to the SAF ecosystem. Said Pareen Shah of BioVeritas, "Eliminating transferability may drive short-term cost savings for the government but ignores the bigger picture – the enormous return on investment that comes from retaining transferability of 45Z. It is a vital piece to ensuring growth for the American farmer, American energy dominance, and American aviation leadership, all outcomes that are welcome across the political spectrum."