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Dec 22, 2023

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The governor and other supporters argue that incentives for a burgeoning

The governor and other supporters argue that incentives for a burgeoning industry can slash emissions, create jobs and provide a future for Minnesota's large biofuels industry as electric vehicles become a larger share of ground transportation.

Delta Airlines needs to significantly reduce its carbon footprint to reach its goal of net-zero emissions by 2050. The company can remove single-use plastics, and electrify equipment like baggage carts or tugs that move planes around Minneapolis-St. Paul International Airport.

But that would only trim a small share of the airline's emissions. "Ninety-eight percent of our carbon footprint comes in the air," said Jeff Davidman, vice president of state and local government affairs for Delta, during a legislative hearing in March.

Unlike substituting gas-powered cars with electric vehicles, the question of replacing jet fuel is a tricky puzzle to solve. Electric planes are a possibility, though mainly for shorter flights and smaller aircraft. Hydrogen is another potential fuel being tested. Neither appears close to widespread use in the near future.

That's why airlines and government officials are clambering for what they have termed "Sustainable Aviation Fuel," or SAF. It can be made from plant sources like corn and soybeans, used cooking oil, municipal waste and even wood scraps, and can already be blended in with traditional petroleum-based fuel to lower carbon emissions.

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"The need for this as a climate strategy is very difficult to argue against," said Brendan Jordan, vice president for transportation and fuels at the Great Plains Institute, a nonprofit focused on the energy transition. "There just aren't a lot of other good options for aviation."

However, there's not much of the cleaner fuel around. The alternative makes up only a sliver of the overall jet fuel produced and used in the U.S., prompting the federal government to try to grow the industry. Delta and Gov. Tim Walz want that growth to happen in Minnesota, inspiring a successful last-minute push at the Legislature for $11.6 million to effectively double new federal tax breaks in an effort to spark a local hub for cleaner aviation fuels.

The governor and other supporters argue incentives for a burgeoning industry can slash emissions, create jobs and provide a future for Minnesota's large biofuels sector as electric vehicles become a larger share of ground transportation, displacing ethanol and biodiesel.

But the tax break, and the sources of potential alternative jet fuel, are not without controversy among other DFL lawmakers and environmental advocates who say Delta doesn't need to benefit from taxpayer money to shrink its carbon footprint and who worry corn and soybeans grown for biofuels do more environmental harm than good.

Jet fuel made from plants or waste oil is not just something that airlines want. There are plenty of climate advocates who argue it's one the best ways for airlines to reduce their emissions.

The transportation sector is responsible for the most carbon emissions in Minnesota, and state regulators say aviation fuel purchased in Minnesota — but not necessarily burned in the state's airspace — resulted in 2.26 million tons of greenhouse gas pollution in 2020, about 1.6% of total state emissions.

One 2022 report from the United Nations Intergovernmental Panel on Climate Change says biofuel for jets could offer "significant climate mitigation opportunities under the right policy circumstances," especially considering the limitations of other decarbonization strategies for aviation. The amount emissions are reduced by the fuel, however, depends on the source — like the type of crop and the fuel production methods — as well as the amount blended into traditional jet fuel.

Production of sustainable aviation fuel tripled between 2021 and 2022, according to the U.S. Government Accountability Office, signaling a growing sector. But even so, the industry is so tiny as to be almost negligible. The total amount of SAF produced in the U.S. only reached 15.8 million gallons last year, the GAO says. By comparison, the major U.S. airlines used 17.5 billion gallons of jet fuel in 2022.

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Davidman said Delta alone used about 4 billion gallons a year before the COVID-19 pandemic, roughly 270 million gallons annually at MSP.

The biggest barrier is cost, according to the feds, Delta and the IPCC report. Davidman said aviation biofuels can be two-to-three times more expensive for an airline than traditional kerosene-based jet fuel. And building facilities to create the new fuel can be too expensive for it to be worth it, the GAO said.

As part of the federal Inflation Reduction Act passed in 2022, Congress approved tax credits for sustainable aviation fuels that could help expand the industry. President Joe Biden's administration has a goal for production of at least 3 billion gallons per year by 2030 and 35 billion gallons by 2050.

The location of more than 400 biorefineries needed to meet that longer-term goal and the source of that new aviation fuel is an open question. That's why Walz and Delta are pushing for Minnesota, and hope a state tax credit will draw an industry here.

Megan Lennon, energy and environment section supervisor at the Minnesota Department of Agriculture, said there is no sustainable aviation fuel being produced in the state. But she said Minnesota has assets that could make it a good market.

For instance, crops grown in Minnesota could be used for the fuel, like corn and soybeans. Another potential option is oil seeds like winter camelina — used as cover crops promoted by the University of Minnesota along with traditional commodity crops — that help preserve water quality.

Lennon said Minnesota is already a large producer of biofuels like ethanol for vehicles and so it has infrastructure and expertise in a similar field. The state has 19 ethanol plants and produced more than 1.3 billion gallons of the fuel last year.

Outside of the ag sector, Minnesota also has plenty of wood scraps from forestry, Lennon said. And the U of M's scientific research capabilities for innovation to advance the industry is another selling point, said Peter Frosch, CEO of the economic development coalition Greater MSP, which has worked for months to lay the groundwork for an alternative jet fuel sector.

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Plus, Minnesota has a large airport. Davidman said there are economic and climate benefits of producing fuel close to where it's used. Delta hopes to make MSP the first airport in its network to have every departing plane use some of the cleaner fuel, and has a broader goal of having 10% of fuel used by the airline to be from the lower-carbon sources by 2030.

Illinois and Washington state have approved their own versions of a tax credit meant to lure a less-polluting jet fuel industry. Minnesota's Legislature approved $11.6 million for tax credits worth $1.50 for each gallon of fuel that is produced or blended with aviation fuel in Minnesota and sold in the state for use at Minnesota airports. Lawmakers also exempted construction related to biofuel for aviation from sales taxes on building materials.

A few weeks before the Legislature adjourned, it appeared the tax credit proposal was dead. Neither the House or Senate included the incentives in their transportation budget plans.

But it was a big enough priority for the governor for him to intervene in last-minute negotiations and get the credit passed as part of a larger transportation omnibus bill.

There are a few reasons Walz gave for rescuing the tax credit. There's the potential reduction in carbon emissions, but also the possibility of helping grow a new industry — and the existing biofuels sector.

In the last couple of years, the governor faced a wave of criticism from biofuels producers, farm trade groups and Republican lawmakers because he pushed for short-lived, but stricter auto emissions regulations. Many of those opponents argued helping electric vehicles become more prevalent would lead to a smaller — or eventually nonexistent — ethanol and biodiesel sector.

On the other hand, Walz has also supported what's known as a "low-carbon fuel standard," which are rules that require cleaner transportation fuel over time. Those regulations have significantly grown the market for biofuels in California. But the idea, which can lead to an increase in gas prices for drivers, hasn't gained traction in either a politically divided Minnesota Legislature or a DFL-controlled one under Walz's tenure.

"I don't think it's any secret the soybean folks are a little bit irritated because we’re moving towards this," Walz said of his EV regulations and the trend of automakers favoring electric cars. But he said even though biofuels will probably help power cars for decades, airplane fuel could still be "the future of the industry" given "there's nothing on the horizon for batteries" to electrify aircraft, Walz told MinnPost last week.

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"I’m trying to position our biofuels industry to be there for generations to come," he said.

Even with a tax credit, one association that represents many ethanol plants in the state doesn't expect to see a huge new industry any time soon.

Brian Werner, executive director of the Minnesota Biofuels Association, said the tax credit will be helpful for an industry eyeing aviation fuel "in the medium term." But the cost of building new plants or retrofitting existing ones is still high, Werner said.

And Werner said another barrier to making alternative jet fuel is a lengthy permitting system in Minnesota that can make changing lanes from ethanol more expensive and difficult. "It just limits interest and action in this issue in Minnesota," he said.

Last year, Delta announced a seven-year deal with the company Gevo to supply sustainable aviation fuel. That company is building a huge new plant not in Minnesota, where it already has a biofuels plant in Luverne. Instead, it will be in Lake Preston, South Dakota, close to the border with Minnesota.

Still, Davidman of Delta said there are many potential sources of biofuel for jets in Minnesota, and the state money "sends really the right signal for the state of Minnesota."

"That they value SAF and that they want to be a leader in this space," he said.

The new tax credit meant to supercharge a new aviation fuels industry in Minnesota is a cause for concern among at least some environmental nonprofits.

Their main objection is with the land use impact of growing corn and soybeans, taking away habitat and polluting water. The industry has its own problems with carbon emissions. During the Senate hearing, Kathleen Schuler, policy director for Health Professionals for a Healthy Climate, told lawmakers that the tax credit could boost those traditional commodity crops rather than prioritize "second-generation" oilseeds like winter camelina.

Skeptics of ethanol point to recent University of Wisconsin research — funded in part by the National Wildlife Federation and the U.S. Department of Energy — that found ethanol is likely to generate more carbon emissions when compared to typical gasoline. Generally, research by the federal government has found climate benefits from ethanol.

The new Minnesota law says alternative fuel is only eligible for a tax credit if it results in 50% fewer carbon emissions compared to traditional jet fuel.

Peter Wagenius, legislative and political director for the Sierra Club North Star Chapter, testified in March that one of two methods approved by lawmakers to measure carbon intensity, which is supported by the biofuels industry, doesn't account for certain environmental issues like water pollution.

Wagenius said the tax credit should require the alternative jet fuels to become cleaner over time as the low-carbon fuel standard does. "In that approach, the polluter pays," Wagenius said of the regulatory system created by a low-carbon fuel standard. "Here, it is the taxpayer."

Walz, meanwhile, said he recently had the French ambassador to the U.S. make the case on a visit for MSP to be a biofuels hub because of all its international flights. And he referenced an announcement last week that Qatar Airways had signed a deal to use lower-carbon aviation fuel at Amsterdam Airport Schiphol.

"They got a little bit ahead of us," Walz said. "For us we want that to be, in the United States, to be here in Minnesota."

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Walker Orenstein reports on the state Legislature for MinnPost, with a particular focus on covering issues affecting Greater Minnesota. He can be reached at [email protected], and you can follow him on Twitter at @walkerorenstein.

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