LINCOLN, Neb. (DTN) -- The U.S. Department of Treasury is set to publish guidance on the 45Z Clean Fuel Production tax credit, including key details and rules on how biofuels and other companies can qualify.

Reaction to the proposal was mixed on Tuesday following posting on the Federal Register website.

Biofuels, agriculture, petroleum, airlines and other industries have been waiting for more guidance on the tax credit designed to fuel the development of a sustainable aviation fuel industry.

The Renewable Fuels Association said the 170-page proposal was a good first step toward bringing certainty to industries.

"Today's 45Z proposed rule is a step in the right direction toward providing the clarity and certainty that ethanol producers are seeking," said Geoff Cooper, RFA president and CEO.

"We thank the Treasury department and Trump administration for listening to the input provided by ethanol producers and other stakeholders. The proposal appears to resolve some of previous confusion around what constitutes a 'qualified sale,' and begins to integrate the important improvements to 45Z that resulted from the One Big Beautiful Bill Act, such as removal of indirect land use change emissions from the carbon intensity scoring framework."

However, Cooper said there continues to be unresolved issues including the release of a revised version of the 45Z GREET model to be used in calculating greenhouse gas emissions for purposes of determining credit values.

"In addition, questions remain to be resolved around the quantification of emissions related to low-carbon feedstock production at the farm level, implementation of foreign feedstock prohibitions, and provisions related to the use of energy attribute credits," Cooper said.

PUBLIC HEARING SET

A public hearing is scheduled for May 28, 2026, with requests to attend the hearing due on May 26, 2026, according to the proposal.

The proposal also calls for integrating a feedstock carbon intensity calculator under development by USDA. This will allow for carbon intensity adjustments for feedstocks produced using no-till farming, cover crops and nutrient management practices.

So, farmers producing corn and soybeans or other feedstocks with lower carbon intensity would benefit from making the crops more valuable to biofuels producers seeking higher credits.

"RFA initially filed detailed comments with Treasury in April 2025, stating that the final 45Z regulations must recognize the realities of today's biorefining and agriculture sectors and the complexities of our nation's transportation fuels marketplace," the RFA said in a news release.

"At the same time, we said, final regulations must maintain an intuitive and manageable approach to registration, reporting, and recordkeeping that creates the kind of dependable value that empowers businesses to invest."

NO FOREIGN FEEDSTOCKS

According to the proposal, fuels produced after Dec. 31, 2025, must be derived exclusively from feedstocks produced or grown in the U.S., Canada and Mexico, with no foreign feedstocks allowed. The rules would be in effect for fuels production after Dec. 31, 2024, since the credit originally went into effect in 2025.

The proposal is designed to protect U.S. farmers from foreign competition for biofuels feedstocks and to secure a domestic market for U.S. corn, soybeans and other crops.

The 45Z credit would require producers to sell fuel to an unrelated person in their trade or business and the credit could only be claimed for the year of sale.

Clean Fuels Alliance America said on Tuesday that although the credit has been in effect since January 2025, "producers and farmers have struggled to capitalize on it with only minimal guidance."

Kurt Kovarik, vice president of federal affairs for Clean Fuels, said in a statement the proposed rule does resolve some uncertainties with 45Z.

"The delay in rulemaking led to market uncertainty that took a heavy toll on our industry, undercutting fuel production and the value added to agriculture," Kovarik said.

"Clean Fuels and its members look forward to working with IRS and treasury to finalize rules that support renewed growth for biodiesel and renewable diesel producers."

Fuel retailers were not satisfied with the 45Z credit, as they continue to call for biofuels policies that address affordability.

On Tuesday, SIGMA: America's Leading Fuel Marketers, and the National Association of Convenience Stores, said the tax credit was a step in the wrong direction.

"But years of regulatory reviews, public comments, copious stakeholder input, and Congressional reevaluation, can't alter the fact that 45Z is a giant step backward for American biofuel policy," the groups said in a statement.

"NACS, NATSO and SIGMA, which represent 90% of retail fuel sales, urge Congress and the administration to support simpler biofuel policies that would quickly reinvigorate biodiesel consumption and higher ethanol blends while enhancing the economy and energy market security."

David Fialkov, executive vice president of government affairs for the groups, said the 45Z would not actually lower fuel prices or benefit biofuels or farmers.

"It is past time for lawmakers and regulators to acknowledge that 45Z is too complicated and flawed and it should be replaced with simpler tax incentives that lower fuel prices and support American farmers," he said.

With the expiration of the biodiesel blenders tax credit, biodiesel production plummeted while the industry waited for 45Z guidance.

The groups said the 45Z proposal "underscores the need" to reinstate the biodiesel tax credit.

The 45Z guidance proposal was met with support by the American Soybean Association and the National Oilseed Processors Association.

"Updating federal biofuel policies to prioritize soy-based fuels is a key ASA priority, and we applaud treasury for this action which will help build domestic markets for U.S. soybeans," said Scott Metzger, ASA president and Ohio farmer.

"While Treasury's work to update tax guidance is critical, ASA strongly urges the administration to immediately finalize RFS (Renewable Fuel Standard) blending targets that complement the work of Treasury and Congress, by setting robust biofuel volumes and implementing new policies that will prioritize the utilization of U.S. soybeans in production."

NOPA President and CEO Devin Mogler said the industry also needs a "strong RFS that includes the import RIN (renewable identification numbers) reduction mechanism."

Another key aspect of the 45Z proposal is its removal of the indirect land use change penalty on agriculture feedstocks.

Read more on DTN:

"Agriculture, Energy Groups Weigh Next Steps on 45Z Clean Fuels Production Tax Credit," https://www.dtnpf.com/…

Todd Neeley can be reached at todd.neeley@dtn.com

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