The Republican-led budget approved in late May after an all-night debate is a case study in backroom dealing and corporate influence. The House bill systematically made massive cuts that will kick more than 4 million people out of anti-hunger programs and more than 7 million off Medicaid, while increasing the debt by $2.4 trillion over the next 10 years. Hidden amid the harmful cuts were a slew of favors for industries with powerful lobbying machines. The biofuel sector was one of those industries, which successfully preserved and expanded tax credits and subsidies tied to an industrial system of agricultural production.
In particular, factory farm gas and corn ethanol benefitted from the House budget process to win policies that, if adopted by the Senate, would further lock in an industrial agriculture system tied to a number of environmental and economic harms.
Here are five ways the factory farm gas and biofuel industries benefit from the House budget bill:
1. Extending tax credits for factory farm gas
Within the House budget bill, Republicans wiped out most policies promoting renewable energy that were included in the nation’s biggest climate policy, known as the Inflation Reduction Act (IRA). But the factory farm gas industry, which includes big meat and dairy companies and global gas corporations, won an extension of the Clean Fuel Production tax credit to 2031, known as 45Z. The industry also carved out special recognition for factory farm gas produced through big dairy and hog operations that use liquified manure systems — a major ask of the industry.
The factory farm gas industry argued that because those operations pollute so much of the potent greenhouse gas (GHG) methane, projects that capture that gas should get extra credit. Expensive factory farm gas projects rely on a host of state and national credits and subsidies to be economically viable.
2. Boosting corn ethanol for sustainable aviation fuel
Air travel still relies heavily on fossil fuels. The same tax credit used by the factory farm gas industry, 45Z, also includes credits at 35 cents per gallon for so-called Sustainable Aviation Fuels (SAF). To access the SAF credits, biofuels must meet certain GHG reduction criteria, which corn ethanol has struggled to meet, partly because of how the expansion of corn acres affects emissions and land use in the U.S. and around the world. Corn production is tied to nitrogen fertilizer use, a major source of the potent GHG nitrous oxide. The expansion of corn acres, often clearing land that was not in farming, increased corn ethanol’s climate footprint, with some research finding that it is comparable to gasoline. The House budget bill eliminated consideration of land use effects from calculating the climate footprint of corn ethanol (reporter Michael Grunwald writes on this win for the industry.)
3. Slowing the electric vehicle build-out
One of the biggest threats to corn ethanol is the electric vehicle build-out supported in a variety of ways by the IRA. The House budget bill targets EPA funding and eliminates clean energy and electric vehicle credits, fuel economy standards and other policies that support the electric vehicle infrastructure build-out. The slowing of investments in renewable energy and electric vehicles is coupled with the House bill’s provisions to open up vast tracts of land for fossil fuel development.
4. Speeding approval of carbon pipelines
The construction of pipelines transporting carbon dioxide to be buried underground is enormously controversial in Midwest states, with opposition often crossing party lines. These expensive carbon capture projects, which collect CO2 from manufacturing facilities including corn ethanol facilities, require the construction of new pipelines through rural communities in multiple states. There are safety concerns associated with CO2 leaks and continued doubts about the climate benefits of such projects.
These carbon capture projects depend on a variety of government credits to be economically viable. The House bill maintains carbon capture credits, using the 45Q credit, through 2033 for the industry. Further, the House bill offers companies a path to expedited approval for building carbon pipelines by paying a fee of $10 million, acting as essentially a pay-to-play permitting process that would overrule state or local restrictions. It also makes changes around ownership structures and depreciation that allow pipeline investors to avoid federal taxes.
Captured CO2 from ethanol plants would, in theory, lower the climate score for the fuel. There has been enormous pushback against CO2 pipelines — South Dakota just passed new limits on eminent domain related to pipeline construction, and a bill placing new restrictions on pipeline projects was passed at the conclusion of Iowa’s legislative session. While the House bill did speed up the permitting process, it also could end up hurting the CO2 carbon capture industry by eliminating the transfer of credits created by such projects two years after the bill becomes law. Those credits were a key financing tool for the industry hoping to profit from these projects.
5. Locking in the over-production of corn and soybeans
Low-priced, often below-cost, corn and soy are essential for the factory farm and biofuel system. Farm Bill commodity and insurance programs remove much of the risk for farmers in growing these crops. Through the budget reconciliation process, Republicans increased payments for farm commodity crops and crop insurance subsidies (where taxpayers pay insurance companies to cover farmers) by $52 billion over the next 10 years. The result is an expansion of the government subsidy system for commodity crops, instead of policies that could address unfair markets or reforms that reduce overproduction and improve prices for farmers. The Trump administration’s damage to agriculture export markets through his on-again, off-again tariff fights threaten to push domestic prices for soybeans and corn even lower, serving as an indirect subsidy for factory farms and biofuel facilities.
Taken as a whole, the House budget bill may be one of the most destructive pieces of legislation IATP has analyzed, effectively acting as a wealth transfer from the poor (cuts to anti-hunger programs and Medicaid) to the rich (massive tax cuts). Also coming out ahead are the factory farm gas and biofuel industries, further entrenching a polluting industrial agriculture system that has steadily reduced the number of farmers in the country. The Senate is expected to work on its version of the budget bill this summer. They would do well to scrap the House bill and start over.
