A newly passed federal bill is being hailed as a major victory for Iowa’s biodiesel producers, who have faced a tough year marked by financial strain, low Renewable Fuel Standard (RFS) blending levels, and uncertainty around clean fuel tax credits, reports Energy.Agwired.com.
The legislation—referred to by industry leaders as the “Big Beautiful Bill”—extends key incentives and restores critical tax credits aimed at reviving the domestic biodiesel industry. It has brought much-needed optimism to producers across the state, many of whom had idled plants or reduced operations due to market instability in 2025.
Monte Shaw, Executive Director of the Iowa Renewable Fuels Association (IRFA), said the bill comes at a crucial time. “Countries around the world and many of our states are demanding ultra-low carbon fuels,” he said. “This bill helps open the door for the investments needed to produce those fuels here at home, using North American feedstocks.”
The legislation extends the §45Z Clean Fuel Production Credit through 2029, allows for the transfer of the credit, and reinstates the Small Agri-Biodiesel Producer Tax Credit through 2026—raising its value to 20 cents per gallon.
Grant Kimberley, Executive Director of the Iowa Biodiesel Board (IBB), said the renewed support is especially critical for small, independent producers. “This is a vital lifeline to biodiesel plants across Iowa. We’re grateful to Senator Chuck Grassley for championing this provision,” he said.
He also praised the bill for prioritizing North American feedstocks and eliminating penalties tied to indirect land use change—two changes that could significantly benefit soybean farmers and biodiesel plants alike. “For producers who’ve been idled or operating below capacity since the start of the year, this sends a strong, hopeful signal about the road ahead,” Kimberley added.
However, industry leaders expressed concern over the bill’s changes to incentives for Sustainable Aviation Fuel (SAF). The credit for SAF production was reduced from $1.75 to $1.00 per gallon, and technical adjustments now make it harder for producers using ethanol as a feedstock to qualify for the credit. SAF is seen as a key future market, potentially reaching 100 billion gallons annually by 2050.
Given that many of the 45Z tax credit changes don’t take effect until 2026, IBB is urging the U.S. Treasury to quickly issue clear rules and guidance for how the credit will be implemented in both 2025 and beyond.
The bill is expected to restore momentum in Iowa’s biofuel sector, offering new hope to producers and farmers alike after a year of deep uncertainty.
