ACE urges Treasury to fully credit farm practices in 45Z rules

The American Coalition for Ethanol on May 28 urged Treasury to make the final 45Z clean fuel production credit rules fully credit low-carbon farm practices, arguing that no-till, reduced tillage, cover crops and precision nutrient management make up roughly half of ethanol’s carbon-intensity profile and cannot be left on the sidelines.

ACE Chief Consultant and Policy Advisor Jonathon Lehman used the Treasury and IRS hearing to cast farmers and ethanol plants as one value chain, with ACE saying its members include U.S. ethanol biorefineries, farmers, investors and rural communities that sit at the intersection of American agriculture and American energy. The group’s message was that if Treasury does not let those field-level practices flow directly into the emissions score, the credit will miss the carbon savings that determine its value.

That matters because 45Z is now structured as a market tool, not just a tax provision. Treasury and IRS proposed regulations on Feb. 3 would extend the credit to fuel produced after Dec. 31, 2024, and sold by Dec. 31, 2029, while limiting eligible feedstocks to those grown or produced in the United States, Mexico or Canada, eliminating the special SAF rate and prohibiting negative emissions rates except for fuels derived from animal manure. ACE said the rule should stay simple enough for producers to monetize lower emissions rather than burying the benefit in a new compliance layer.

USDA’s Feedstock Carbon Intensity Calculator beta already quantifies carbon intensities for field corn, soybeans and sorghum, and lets users test no-till, reduced till, cover crops, nitrification inhibitors, split in-season fertilizer application and spring-only fertilizer application. USDA says the calculator is a preliminary tool subject to beta testing, peer review and public feedback. ACE wants Treasury to build on that framework and fold it into 45ZCF-GREET, the model the Department of Energy released on Jan. 15, 2025 specifically for section 45Z.

ACE also pointed to an ongoing South Dakota project with USDA and DOE as evidence that conservation practices can be measured at the field level. USDA says its county-level method compares crop carbon intensity with and without climate-smart agriculture practices and then aligns the baseline with Argonne’s R&D GREET model.

The stakes are straightforward for ethanol plants, farmers and lenders. If lower-carbon corn earns full credit, producers can capture better margins, farmers can turn conservation into a new revenue stream tied to fuel markets, and lenders get a clearer case for financing. If Treasury undercounts the farm side, the industry says the credit loses economic force and the credibility that Congress intended.