It’s been a while since I’ve posted an article on the blog but not because there hasn’t been any activity during the summer that needed attention. On the contrary, I made some decisions that changed some of the directions I needed to go. In mid-June to late July, I’ve put in less time on the road with gas prices so high, and focused most attention on the business of GCGA and less on the agronomic side. GCGA has kept abreast on UGA’s Extension corn agronomist position and has pushed hard to get a qualified replacement. In the meantime, Mr. Rome Ethredge (interim Extension agronomist) served corn and soybean growers and Extension agents throughout the state with exceptional skills, timely information and great empathy. I’ve been honored to share many discussions and thoughts with Rome as he served tirelessly. Thank you, Rome. I know he is as excited as I am that UGA has recently hired Dr. Richard Roth to fill the position that Dr. Corey Bryant vacated last year. You will be hearing more from Dr. Roth when he and his wife get settled into Georgia sometime in August.
During the last two months, growers have suffered through dry, hot weather conditions during silking and grain fill followed by widely scattered wet conditions that was merciful to some and not to others. Diseases such as southern rust plagued some areas but timely fungicide applications held some of the infections in check. Now as we approach early harvest, some who had the ability to sustain decent growth or fortunate enough to have good timely rainfall will see the fruits of their labor. Several growers are reporting irrigated yields of 200 to 250 bushels per acre. This is good but, unfortunately, more costly than last year.
Off the farm, much has happened over the last two months. Much time and energy has been spent on behalf of corn growers bringing focus on trade, ethanol, fuel prices, fertilizer cost, and a new farm bill among other problems and issues. There have been some good victories for corn growers. Last week in Washington D.C., the U.S. International Trade Commission revoked hefty anti-dumping duties on urea ammonium nitrate fertilizers from Russia and Trinidad and Tobago. The National Corn Growers Association, along with Georgia and other state affiliates, led the charge against these tariffs. We will continue to apply pressure regarding the cost of phosphorus and potassium and seek for better competition in the market place. Earlier, EPA finalized a favorable 2022 Renewable Fuel Standard volume rule that gives drivers greater access to lower-cost, lower-carbon fuels. In addition, the House of Representatives passed legislation that included a permanent E15 solution and support for biofuels infrastructure.
Now for the main point of this blog article. Yesterday, one of the biggest surprises of the summer so far, was the Senate announced a reconciliation deal between Sen. Joe Manchin (D-WV) and Senate Majority Leader Chuck Schumer (D-NY). The bill dubbed, the Inflation Reduction Act of 2022, carries a $740 billion price tag and according to its authors will reduce the deficit by $300+ billion while making key investments in domestic energy production, manufacturing and reduced carbon emissions. The bill also extends the Affordable Care Act for three more years and will allow Medicare to negotiate for prescription drug prices, which is calculated to save $288 billion itself. Lastly, more than $20 billion was included for farm bill conservation assistance and additional incentives for low-carbon biofuels.
It’s not 100% clear if the Senate has the votes to pass this legislation through the chamber. Keep in mind in a reconciliation bill, only Democrats will vote for the bill and they will need all 50 for passage. Should the bill pass the Senate, process timing would suggest it could pass the Senate floor sometime next week. The House is set to leave for their August work period this week, so Speaker Pelosi would have to bring the chamber back in August to vote on passage.
Here is a summary of certain parts of the bill that GCGA will be tracking:
-Would provide $19.9 billion for four conservation programs over four years, plus another $1 billion for conservation technical assistance and $300 million to NRCS to measure the impact of agriculture practices on greenhouse gas emissions. The breakdown (of the four programs) is as follows…
- 8.45 billion for the Environmental Quality Incentives Program (EQIP)
- $6.75 billion for the Regional Conservation Partnership Program (RCPP)
- $3.25 billion for the Conservation Stewardship Program (CSP)
- $1.4 billion for the Agricultural Conservation Easement Program (ACEP)
-With each program, UDSA would be required to prioritize projects that “mitigate or address climate change through the management of agriculture production.”
-TOTAL REVENUE RAISED: $739 billion
- 15% Corporate Minimum Tax
- $313 billion – Joint Committee on Taxation (JCT) estimate
- Prescription Drug Pricing Reform
- $288 billion – Congressional Budget Office (CBO) estimate
- IRS Tax Enforcement
- $124 billion – CBO estimate
- Carried Interest
- $14 billion – JCT estimate
- Background from the Tax Policy Center on carried interest
-Compared to previous proposals, the legislation does not add or include changes to:
- Stepped Up Basis / Capital Gains
- Individual Tax Rates
- Estate Taxes
- International Minimum Corporate Tax Rate
- “Billionaire Tax” or taxes on Unrealized capital gains for billionaires
- Domestic Carbon Tax / Carbon Border Adjustment Tax
- $500 million to remain available through 2031 for USDA to provide grants for infrastructure to sell, blend, store or distribute higher blends of biofuels.
- Higher blends defined as the same or greater than levels required for the 2020 HBIIP program (infrastructure to sell at least E15/B20)
- Federal cost share for grants of no more than 75% of a project
–Biodiesel and SAF Tax Credits: 2022- 2024
- Extends current biodiesel tax credit through December 31, 2024
- Creates a new $1.25/gallon tax credit for Sustainable Aviation Fuel (SAF) through December 31, 2024.
- SAF must have at least a 50% GHG reduction compared to petroleum-based jet fuel
- Lifecycle GHG emissions for SAF are measured based on either 1) the international CORSIA model adopted by ICAO; OR 2) A similar methodology that meets criteria of the LCA for the RFS under the Clean Air Act (includes land use change, etc). Use of DOE/Argonne GREET would meet these criteria.
- Additional credit up to 50 cents more per gallon based on each percentage point the fuel exceeds the 50% GHG reduction threshold.
–Clean Fuel Production Tax Credit: 2025-2027
- The biodiesel and SAF credits transition into a broader Clean Fuel Production Credit beginning in 2025.
- Because of the time needed to write/implement regulations and register fuel producers for the initial 2023-2024 SAF credit, and current low levels of SAF production, the implementation of the Clean Fuel Production Credit that begins in 2025 is expected to be more impactful for SAF production than the initial credit that runs through the end of 2024 – this second phase of the credit is more important.
- Base credit of 20 cents per gallon for qualifying non-aviation fuels, up to $1 per gallon for fuels produced at facilities that meet certain wage and labor standards. Ethanol would qualify for some credit.
- For aviation fuels, base credit of 35 cents, up to $1.75 per gallon for fuels produced at facilities meeting specified wage and labor standards
- Treasury annually publishes an emissions rate for similar types and categories of fuels based on GHG emissions; Fuels with lower emissions rates receive higher tax credit.
- Fuel producers cannot claim both the Clean Fuel Production Tax Credit and the 45Q credit (tax credit for carbon capture/sequestration).
–Alternative Fuel Refueling Property Credit
- Extended to 2032 and increases the credit per item, rather than a total limit.
- Continues to apply to E85 infrastructure as an alternative fuel; expands credit to certain EV charging equipment
–Carbon Capture and Sequestration Credit (45Q)
- Extends carbon capture and sequestration tax credit for facilities/carbon capture equipment constructed/installed through the end of 2032 and increases the credit
- Lowers the threshold for eligible facilities to at least 12,500 metric tons of carbon captured (helps more ethanol facilities qualify).
–Other Major Energy Tax Provisions of Interest
- Clean Vehicle Credit: Up to $7,500 tax credit for new vehicles (same a current credit), with limits based on source of critical minerals and battery components
- Increasing requirement that these materials be sourced/processed in U.S., North America or countries we have free trade agreements with to qualify for credit, reaching 80 percent of critical mineral content by 2027 and 100 percent of battery components by 2029 to qualify
- Income limits for eligibility: $150K single taxpayer/$300K joint income
- Vehicle price limits: $55K for cars and $80K for trucks and SUVs
- Removes limit on how many vehicles per manufacturer can qualify for the credit
- New advanced clean energy manufacturing/investment tax credits for manufacturing facilities that produce items such as vehicles, solar panels, wind turbines, batteries, etc.
- New loans to build new clean vehicle manufacturing facilities and grants to retool existing manufacturing facilities
- Extension of current wind and solar energy production tax credits, transitioning to a Clean Electricity Production Tax Credit in 2025 for electricity sources based on emissions reduction
- New clean hydrogen production tax credit
More will follow as harvest moves forward and politics continue to frustrate us all.