US issues proposed rule for clean fuel tax credit

Feb 3 (Reuters) - The U.S. Treasury Department on Tuesday issued a proposed rule governing how biofuel makers can access a $1-per-gallon tax credit for low-carbon transportation fuels, including aviation fuel.

The rule was welcomed by biofuel trade groups that said the plan could provide more certainty for producers of ethanol, biodiesel and other products seeking the credit.

The program, dubbed 45Z, was created under former President Joe Biden's Inflation Reduction Act and was amended last year in President Donald Trump's One Big Beautiful Bill.

Changes included allowing for low-carbon fuel produced with feedstocks grown in Canada and Mexico as well as tweaks to the methodology for calculating a feedstock's land use intensity.

"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, president and CEO of the Renewable Fuels Association.

He said some questions about the program remained unanswered, however, including the makeup of a revised climate model that could impact fuel eligibility and the implementation of foreign feedstock prohibitions.

Representatives for soy farmers also welcomed the rule.

"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, president of the American Soybean Association.