Renewable Fuels
The Inflation Reduction Act, Bioheat®
Fuel & the Buy-Sell Agreement
Mark Twain famously said, If
How the new law affects decarbonization efforts & securing Bioheat®
you don’t like New England
weather, wait a few minutes.
As we enter yet another heating season,
the weather is indeed changing—and
so is home heating, thanks to political
and regulatory directives from every
facet of government. While Twain’s
quote lives on, mine probably won’t
endure the test of time, but here it
goes: If you don’t like the New England
heating-oil market, just wait—it’ll
change too.
I’ve been beating the drum for
years—even decades—now about
how this market must be willing to
future-proof itself, so much so that my
hands are sore and the drum skin worn
thin. A grassroots movement—such as
the Bioheat® fuel revolution—starts
with innovative leaders at influential
companies leaping blindfolded and
headfirst into unsettled waters, allowing
safe diving for those behind them.
That was done years ago.
Have you tested the water yet or
are you still on dry, scorched land
wondering where everyone went?
The water’s fine and those in it are
enjoying the benefits that come with
the swim—namely, not languishing in
the destruction of indecision.
There was a time when indecisive
or complacent heating oil dealers in
this market could survive, maybe even
thrive, without giving two thoughts
about carbon intensity, greenhouse
gases (GHG) and the future of their
industry. With congressional passage
and President Joe Biden’s signing of
the Inflation Reduction Act (IRA),
those days are over.
IRA, Biofuels & Home Heating
The massive spending bill is a revived,
scaled-down version of President
Biden’s “Build Back Better” agenda
that cleared the House late last year
but got held up in the Senate over lack
of support from Sen. Joe Manchin.
With a new name and smaller price
tag, Senate Majority Leader Chuck
Schumer secured the much-needed
Manchin vote in the evenly split
chamber and the legislation passed on
a straight party-line vote through the
budget-reconciliation process, with
VP Kamala Harris breaking the tie.
IRA kicks electrification of every
U.S. energy sector into high gear,
including home heating. The cost of
conversion, which is particularly untenable
for lower-income residents, is
one area the heating oil industry has
long felt it’s had an edge over electric
heat pumps. However, IRA makes
$4.275 billion available to States and
$225 million available to Native U.S.
Tribal Communities through Sept. 30,
2031 to create electrification-rebate
programs for single-family homes
and multifamily buildings. Only lowto
moderate income households are
eligible for rebates under this section.
Despite its arc toward electrification,
IRA also includes several key
biofuel and Green-energy incentives.
It extends the $1-per-gallon biodiesel
blenders tax credit through 2024,
which was set to expire at the end of
this year. The new law also extends
the 50-cent-per-gallon (cpg) alternative
fuel tax credit and includes
various other important incentives
for the biofuels industries, including
carbon capture and storage, Green
hydrogen and renewable natural gas.
It also includes, for the first time, a
sustainable aviation fuel (SAF) tax
credit, which starts in 2023 and runs
through 2024, and ranges in value
from $1.25 to $1.75 per gallon, based
on GHG reductions.
One particular aspect of IRA that
may be ringing alarm bells in downstream
markets such as the heating oil
sector is how a newly created clean fuel
production tax credit, whose value will
Paul Nazzaro
President
Advanced Fuel Solutions Inc.
978-258-8360
paulsr@yourfuelsolution.com
be based on how much GHG emissions
reductions a fuel delivers, will replace
the biodiesel blenders tax credit come
2025. No longer will blenders be in
control of the credit, nor is it likely
that the value of the producer credit
will ever reach that of the blenders’
credit. For instance, today, soybean
biodiesel on average reduces GHGs
by 57% compared to petroleum diesel
fuel. Such reductions would only net
the producer 20 cpg. While this in
itself is inherently concerning, SAF
achieving the same GHG reductions
in this so-called “technology-neutral”
approach would receive 35 cpg.
In its analysis of IRA, the National
Energy & Fuels Institute (NEFI)
pointed out that the legislation’s drive
to incorporate more biofuel into aviation
will have only nominal short-term
impacts on the heating and on-road
transportation sectors.
“Future demand for renewable fuels
and related feedstocks in the aviation
sector may have longer-term implications
across all sectors,” the organization
stated. “NEFI is working with the
National Oilheat Research Alliance
and partners in the renewable fuels
industry to assess short-term and
long-term impacts, both positive and
negative.”
NEFI is also skeptical that the
Internal Revenue Service and Treasury
Dept. will be able to establish
this “complex tax incentive” by 2025,
referring to the clean fuel production
tax credit.
“NEFI has warned Congress that
the shift from a blender to producer
credit harms marketers that are
investing millions of dollars in downstream
biofuel blending and storage,”
NEFI stated. “We alerted Northeast
lawmakers that establishing a credit
only for domestic biofuel production
will discourage imports of biofuels
from Canada and other U.S. trade
8 ICM/November/December 2022