The United States is the top biofuel producer in the world, with the Midwest generating hundreds of millions of barrels of ethanol and tens of millions of barrels of biodiesel annually. As a top-five producer of ethanol and biodiesel in the United States, policymakers, fuel producers, farmers, and communities in the state will be influential in the country’s ability to both lower agricultural emissions and deliver low-carbon energy for liquid fuel-reliant transportation modes. Federal funding under the Bipartisan Infrastructure Law and the Inflation Reduction Act offers new opportunities for Minnesota to support its own Sustainable Aviation Fuel Credit and the launch of the Minnesota Sustainable Aviation Fuel Hub through the Greater MSP Partnership. Capitalizing on federal and state initiatives to support sustainable fuel production, Minnesota can leverage its unique position to establish robust supply markets, improve the climate and sustainability impacts of biofuels, bolster community health and wellbeing, and support demand-side opportunities for the long-term uptake of low-carbon biofuels. This brief provides insights from a roundtable hosted in Minneapolis in October 2023 that explored the low-carbon fuels opportunity and the associated market, regulatory, and technological challenges in Minnesota.

Key Recommendations

Below is a list of key recommendations from the discussion. Additional recommendations can be found in each section.

Supply a low-carbon biofuel market

• Congress should reauthorize and fund the following USDA programs, as part of the farm bill’s five-year reauthorization (currently extended until September 2024):
  • Reauthorize the Higher Blends Infrastructure Incentive Program to fund the construction and maintenance of infrastructure compatible with higher blends of ethanol and biodiesel, with a revised prioritization toward freight, rail, and marine infrastructure because of their longer-term reliance on liquid fuel. The USDA should also prioritize funding the replacement of aging infrastructure such as underground tanks.
  • Fund the Biorefinery, Renewable Chemical, and Biobased Produce Manufacturing Assistance Program to assist the development, construction, and retrofitting of new and emerging advanced biofuels technologies.
  • Fund the Advanced Biofuel Payment Program to expand production of advanced biofuels.
  • Fund the Rural Energy for America Program to provide loans and grants to agricultural producers and rural small businesses for renewable energy systems and energy efficiency improvements.
• Congress should extend the duration of production tax credits for low-carbon fuel (the combined duration of 40(b) Sustainable Aviation Fuel Credit and the 45(z) Clean Fuel Production Credit is five years) to a minimum period of 10 total years.

Improve sustainability

• Congress should establish a national clean fuel standard for the transportation sector consistent with achieving net-zero emissions by midcentury. The new technology-neutral fuel standard should credit low-carbon fuels for ground, maritime, and aviation sectors with differentiated compliance obligations for each to accommodate each sector’s respective stages of developing and adopting alternative fuel solutions.
• Minnesota State Government should establish a state clean transportation standard which establishes a compliance market to support in-state production and consumption of credited fuels. The standard should support the long-term competitiveness of Minnesota-produced fuel by adopting carbon intensity benchmarks and methodologies that are robust and consistent with national-level goals (e.g., net-zero by 2050).
• The Minnesota Legislature should amend (or the Minnesota Department of Revenue should interpret) the Minnesota SAF production tax credit to apply to fuel produced using biogenic carbon dioxide and clean hydrogen.
• Congress should clearly designate a federal agency as having regulatory authority over the siting of interstate carbon dioxide pipelines. The federal siting authority should have a formal process for engaging and consulting with Tribal governments.
• Congress should authorize and fund a Conservation Equipment Loan Program under the Farm Service Agency (FSA), either through an existing program or as a standalone endeavor. This targeted loan program should offer financial incentives (e.g., lower interest rates and longer terms compared to traditional FSA loans) to help producers access expensive equipment necessary for climate-smart agriculture such as variable rate application technologies (VRT) or tools like roller-crimpers, which terminate cover crops without soil tillage. The agency should prioritize applications for equipment that directly facilitates greenhouse gas reductions or carbon sequestration. The loan program should be supplemented by an education and outreach program which supports training for the use of loan-eligible equipment and resources for farmers to project the financial costs and returns of implementing related practices.
• Minnesota Government should continue to support the Minnesota Pollution Control Agency’s Nutrient Reduction Strategy (NRS) to identify and scale agricultural best management practices (BMPs). Following the release of the 2024 NRS update, which will mark the 10-year implementation milestone, the Minnesota Government should consider what additional resources can be made available to ensure significant progress in scaling BMPs.

Address community considerations for low-carbon fuels projects & infrastructure

• The Council on Environmental Quality (CEQ) and other federal agencies should provide clear, transparent guidance on Justice40, which commits to assign 40 percent of the overall benefits of applicable federal investments to disadvantaged communities. Clearer guidance can be provided by indicating, for example, how benefits are quantified and in what geographic radius the “communities” are defined. Covered federal programs that are applicable to Minnesota’s communities and biofuel workforce include those under the USDA (e.g., FSA), DOE (e.g., Loan Program Office [LPO]), and DOT (e.g., Federal Transit Administration (FTA), Tribal Transportation Program).
• Congress should establish a funding program through DOE and EPA that facilitates engagement between low-carbon fuel infrastructure developers and communities, including environmental justice groups, tribal communities, and farmers. This program should focus on proposed hydrogen hubs, pipelines, and biorefineries that will be used to advance the low-carbon biofuel economy. Information gained from these engagements should be collected and summarized in a comprehensive report describing community concerns and opportunities related to low-carbon biofuel, while offering recommendations to update regulations and implementation guidelines to better meet the needs of communities.
• Minnesota State Agencies should prioritize and support local capacity building to assist the state and local communities in accessing federal resources, including under the Loan Programs Office Title 17 Clean Energy Financing Program, related to upgrading essential infrastructure, adopting emissions mitigation technologies and practices, and climate resilience preparation.
• Congress should expand U.S. Department of Education resources for career and technical education that can support recent graduates and mid-career workers in skilled trades to acquire expertise relevant to the clean-energy industry. Congress should also fund K-12 outreach programs that educate young people—especially those in marginalized communities—on career opportunities and skills needs in the sector.