SAF Investor News: Do you want fries with that?

opinion

by Fayaz Hussain

September 30, 2024

The US eats 2bn kilogrammes of French fries every year. A third of all potatoes grown in the country end up being chopped up and fried. The country celebrates this with National French Fry Day on July 13th. To fry this many spuds, it requires about 485m litres of cooking oil each year.

With such high consumption of fried foods, the US was a net exporter of used cooking oil until 2021. This changed when it passed Inflation Reduction Act in 2022. New renewable fuel projects were announced and developers rushed to secure feedstock. And this involved looking abroad for waste fats.

Between January, 2023 to June 30th, 2024, the US imported a total of 3.6m tonnes of chip pan oil and tallow. Nearly 55% of this came from China. For perspective, from 2000 to 2021, used cooking oil and tallow imports into the US totalled 2.8m tonnes.

US agriculture groups do not like this. They have voiced their concerns both on the sustainability of imported used cooking oil and energy security. But a bipartisan, bicameral (supported in both houses) bill aims to change that.

Senators and representatives from both parties introduced the Farmer First Fuel Incentives Act earlier this week that would prevent foreign producers from accessing the credits and extend the 45Z tax credits by seven years.

US 45Z tax credits for renewable fuels will kick in from January next year. If you are a producer, the deadline to apply for these credits expired in mid-July. Eligible producers can claim credits on sustainable aviation fuel (SAF) produced between January 1st 2025 till December 31st 2027.

“While we support free trade and open markets, we do not believe foreign feedstocks should be incentivised through the hard-earned dollars of US taxpayers to the detriment of American farmers,” said senator Roger Marshall who introduced the bill. “This legislation puts farmers first to ensure they are the primary beneficiaries of renewable fuel tax incentives and provides businesses a decade of certainty.”

The Act received widespread support from farming groups.

“The National Oilseed Processors Association commends this bipartisan, bicameral legislative effort which puts US fuel producers, US crushers and US farmers first. We thank senators Brown and Marshall and representatives Mann and Kaptur for their leadership,” said Kailee Tkacz Buller, its president.

Farming groups argue that without this legislation, biofuel producers will have added incentive to buy imported feedstocks over domestically-sourced ones. “For continued growth of America’s promising biofuels industry, US farmers need the support of a final 45Z rule that prioritises domestically-sourced feedstock,” said president Josh Gackle, president of the American Soybean Association.

Domestic HEFA-based producers are already diversifying the feedstock they use to produce SAF. Earlier this month, Montana Renewables (Calumet) delivered SAF produced from camelina at Minneapolis-St. Paul International Airport.

Bruce Fleming, Montana’s CEO said that: “This demonstrates shorter local supply chains and pioneers camelina as a viable non-food oil that provides additional cash crop potential for farmers.”

Although the Act benefits US farmers, it would lead to higher costs for producers as prices of domestically-sourced feedstocks have risen substantially over the past few years in view of rising biofuel demand especially renewable diesel.

There could also be a significant headwind for Chinese used cooking oil exports coming. In June Novo Nordisk’s weight loss drug Weigovy was approved for use in the country.