4 minute read
Protecting Soy’s Marketplace Value From Harmful Policies
Every year as the Illinois General Assembly looks at its internal deadline of May 31 to conclude the year's legislative session, there is often a great shift. The hot topics tend to change from the beginning of the session to the end of the session. This year is no different.
Going into session, there was a lot of concern about proposed pesticide regulation with legislation that attempted to ban or heavily regulate every commonly used crop protection tool Illinois farmers rely on. In the final weeks, the focus transitioned to a discussion of wetlands, how those should be regulated and what impact that would have on home and building construction and in turn, on agriculture. Many concerns surround this legislation, including, “What is the role of the property owner, and what, specifically, is a wetland?” These questions are important and certainly have been the focal point of lawsuits over the past few years. If this legislation passes, it will continue to be a focus for years to come.
Although the wetlands legislation has dominated discussions toward the end of session, the middle of session had a different focus. Agriculture groups, environmntal groups, electric vehicle proponents and the trucking industry had discussions about a proposed Clean Fuel Standard (CFS) for the state of Illinois. Low carbon fuel standards or clean fuel standards are a mechanism to decarbonize the fuel supply in each state. Currently, California, New Mexico, Oregon and Washington have such policies enacted. These policies differ in their intent and incentivize different fuels and feedstocks that would decarbonize the transportation sector.
The emergence of renewable diesel into the California marketplace is driven largely by their Low Carbon Fuel Standard (LCFS). Bringing this legislation to Illinois or any other Midwest state such as Minnesota, which is also debating these policies, would potentially create challenges through the supply, cost and distribution of different fuel types. These questions and many more have been at the center of discussions on the CFS legislation proposed in the Illinois State Senate. The Illinois Soybean Growers (ISG) lobbying team is working diligently to ensure that the marketplace we currently have in the State of Illinois at over 250 million gallons of B100 used annually would not be harmed under any LCFS or CFS policy. Based on work done by ISG in the 2022 legislative session, the current Illinois state sales tax exemption for blends of biodiesel increased on April 1 to blends of 14 percent or B14. Over the next few years, the blending threshold will increase to blends approaching 20 percent or B20 in summer months and revert to 11 percent or B11 blends in the winter. This increase is the first time in over 20 years that Illinois has driven up the amount of biodiesel we incentivize in our fuel market. Forecasts show that at B20 blends, Illinois could use 400 million gallons of B100 biodiesel annually, which is the equivalent of soybean oil from over 200 million bushels of Illinois soybeans.
The entire regulatory and legislative discussion around biofuels has changed dramatically in the last few years. These changes have had strong effects on the marketplace. Another policy that has changed the biofuels discussion is Section 45Z of the Inflation Reduction Act that passed in 2022. This law creates a Clean Fuel Production Tax Credit (CFPTC) that goes into effect in 2025. For biodiesel and renewable diesel, the current blenders' tax credit, which stands at $1 per gallon, would be replaced by the new CFPTC. Under this new law, different feedstocks would have different carbon intensity scores and lead to different levels of tax credit support. For soybean oil, estimates show that the level of incentive will drop to around $0.33 per gallon. This drop will have a major impact on the financial viability of biodiesel production in the country. It is a primary mission of ISG through both state and federal carbon, biofuels and tax policy to continue the support for the Fatty Acid Methyl Ester (FAME) biodiesel marketplace that has been a staple of soybean demand in Illinois for over 20 years. At the federal level, ISG is working with legislators and other stakeholders to find ways to diminish the potential negative impacts of the CFPTC on Illinois-made biofuel products.
Your team at ISG is working feverishly every day to ensure that farmers have access to tools they need, the resources in production and viable markets to allow them to grow soybeans in Illinois. Whether we are focused on the legislation we've discussed here in this article or dozens of other bills that we didn't have space to include, it's our privilege and honor to defend your farm while actively promoting Illinois agriculture.
