More than a dozen trade groups representing U.S. fuel producers on June 6 wrote to leaders of the U.S. Senate urging them to amend the “One Big, Beautiful Bill” to include a legislative fix to section 45Z clean fuel production credit’s qualified sales provision. The suggested change would clarify that sales from producers to intermediaries are permitted. 

The U.S. House of Representatives on May 22 passed a reconciliation bill by a vote of 215 to 214 that includes provisions updating and extending the 45Z tax credit. In addition to extending the tax credit through the end of 2031, the bill limits credit availability to fuels made from feedstock produced or grown in the U.S., Mexico and Canada and excludes indirect land use change (ILUC) from being used to the calculate lifecycle greenhouse gas (GHG) emissions of eligible fuel. The bill, H.R. 1, commonly known as the “big, beautiful bill,” is now under consideration by the Senate. 

Members of the U.S. biofuels industry have applauded the provisions in H.R. 1 related to feedstock origin and ILUC, but are urging members of the Senate to clarify 45Z language related to qualified sales. “Otherwise, availability of the 45Z credit to a wide range of U.S. fuel producers will be limited,” the fuel groups wrote. “Both large and small producers across the clean fuels sector, including but not limited to, clean highway transportation fuels and sustainable aviation fuels, likely will be significantly impacted.”

“The section 45Z credit contains statutory language defining a qualified sale as a sale to an unrelated party ‘for use by such person in a trade or business,’” the fuel groups continued. “This problematic language raises questions over whether fuel that is produced and sold to a fuel reseller would qualify for the credit.”

Within the letter, the groups explain that the sale of clean fuel to resellers is a standard industry practice and that producers of clean fuels generally cannot easily alter their business model to sell directly to fuel users. “The producer who sells to the reseller often has limited insight into the ultimate buyer’s end-use of the fuel,” they wrote. “This practice ensures efficient distribution and availability of clean fuel across the country. Resellers have the capacity and expertise to deliver fuel to consumers across various regions. For example, renewable diesel (RD), which has seen significant growth in consumption, is produced in less than 15 states. Resellers play a critical role to ensure that RD, and other fuels whose production is geographically limited, can find diverse U.S. markets.”

Failure to clarify the qualified sales language within H.R. 1 could be particularly harmful to smaller fuel producers to often lack the marketing capacity and network to sell directly to end-users, the groups continued. U.S. farmers that produce fuels or partner with small fuel producers would also be negatively impacted.

“The qualified sales provision is a barrier to achieving the administration’s goal of American energy dominance,” the groups wrote. “In a competitive global fuels market, clean fuel production is necessary to unleash energy abundance and economic growth. Credit predictability is vital for fuel producers to securely invest in new production and advance project development. Operational uncertainty due to confusion on credit eligibility could lead to supply chain disruptions, affecting the availability and cost of materials for production. Overall, a lack of clarity on this issue could hinder job creation, investment, and growth within the clean fuels sector—an important part of the American energy portfolio—giving foreign fuel producers a competitive advantage in the U.S. and global markets.”

The letter is signed by Advanced Biofuels Association, Alternative Fuels & Chemicals Coalition, American Biogas Council, American Fuel & Petrochemical Manufacturers, American Petroleum Institute, Clean Fuels Alliance America, Coalition for Renewable Natural Gas, Fuels America, Growth Energy, National Milk Producers Federation, Renewable Fuels Association, SAF Coalition, and The Transport Project.