Sustainable aviation fuel tax credit could be expanded, extended

Could Minnesota’s economy be transformed by winter camelina and pennycress?

More than one testifier at Wednesday’s meeting of the House Taxes Committee said yes. That’s because they are key winter cover crops in the creation of sustainable aviation fuel, or “SAF,” which might do for airplanes what ethanol did for cars and trucks, except without the impact on our food supply and with significant reductions in carbon emissions.

That’s why a bipartisan coalition of legislators created an income tax credit in 2023 to incentivize the production of sustainable aviation fuel. However, no one has yet applied to receive it. So the taxes committee co-chair, Rep. Greg Davids (R-Preston), is sponsoring a bill to expand the tax credit and introduce a new set of environmental safeguards.

HF1669 was laid over, as amended, for possible inclusion in an omnibus tax bill.

It’s also clearly an issue that inspires great interest, as it attracted an overflow crowd to the hearing room, with testimony of support from those in the fields of agriculture, forestry, environmentalism, renewable energy, labor and economic development.

“SAF is a cleaner alternative to conventional jet fuel,” said Agriculture Commissioner Thom Petersen. “It’s a renewable fuel produced using woody biomass, waste wood, agricultural crops and cover crops like winter camelina.”

It’s also what’s known as a “drop-in” fuel, meaning it can be used in current airplanes.

The bill would modify the state’s existing income tax credit to produce sustainable aviation fuel by:

• modifying the types of fuel that qualify for the credit to include fuel derived from gaseous carbon oxides;
• providing a supplemental credit for increases in fuel having certain carbon intensity reductions and raising the limit of the credit;
• increasing the credit allocation for fiscal years 2026 and 2027; and
• extendin g the availability of the credit through fiscal year 2035.

The Revenue Department estimates that the bill’s changes would reduce the General Fund by $5.3 million in Fiscal Year 2027. A qualifying taxpayer may claim a credit for blending or producing sustainable aviation fuel in Minnesota and selling it to a purchaser who certifies it will be used in an aircraft departing from an airport in Minnesota.

“This is a good day for agriculture,” said Rep. Bobbie Harder (R-Henderson), while Rep. Cal Warwas (R-Clinton Township) advocated for the use of woody biomass in the process, which he said wouldn’t drive up food costs as might happen if corn or soybeans were used.

Expressing more caution about the proposal was Rep. Andy Smith (DFL-Rochester).

“A lot of the benefits we’re talking about are true,” he said. “Air travel is something that we really don’t have any idea of how to decarbonize well. There are no electric airplanes coming down the pipe. It’s true that cover crops have tremendous environmental positives, and one of the barriers to large-scale adoption to cover crops is that there’s really no market for them. The same is true of the woody biomass we’re talking about. … So this would help create a market for our logging industry.”

But Smith expressed concerns that there could be increased emissions from the agricultural sector to lower aviation emissions.

“We need to enter this market carefully,” he said.