Airport Alert: House Passes Inflation Reduction Act; Measure Moves to President to be Signed into Law

After months of political gamesmanship, party infighting and numerous stalled efforts, House Democrats finally passed on August 12 their partisan reconciliation bill, better known as the Inflation Reduction Act (IRA), by a vote of 220-207. The bill now goes to the president's desk for signature, bringing with it key provisions to advance the production and use of sustainable aviation fuels (SAF). 

Last year, the Biden Administration announced the SAF Grand Challenge, which set a target of 3 billion gallons of domestic SAF production annually by 2030. Under this plan, tax credits play a major role in achieving the administration's goal. SAF currently costs about 2.4 times as much as standard jet fuel and accounted for just 0.1% of global jet fuel production in 2021.

SAF Provisions in IRA

Sustainable Aviation Fuel and Low-Emissions Aviation Technology Grant Program

• The IRA creates a new, $297 million competitive grant program that will enable state and local governments, airport sponsors, for-profit companies, research institutions, and non-profits to carry out projects that produce, transport, blend or store SAF, and to develop or apply low-emission aviation technologies (LAT).

• Specifically, the IRA provides $244.5 million for projects related to the production, transportation, blending or storage of SAF; $46.5 million for projects related to LAT; and $5.9 million for DOT to administer and provide oversight of the program.

• Considerations for proposed projects include:

• capacity to increase domestic production and deployment of SAF or the use of LAT among domestic commercial aviation and aerospace stakeholders;

• projected greenhouse gas (GHG) emissions of a project and the potential reduction of GHG emissions that a project can create for air travel;

• the capacity to create new jobs and develop supply chain partnerships in the U.S.;

• for projects related to SAF production, the projected lifecycle GHG emissions benefits, including feedstock and fuel production and potential direct and indirect GHG emissions (resulting from changes in land use);

• and the benefits of ensuring a diversity of feedstocks for SAF, including the use of waste carbon oxides and direct air capture. 

• The federal cost share for projects is 75 percent, except for those at small hub and nonhub airports, where the federal cost share will increase to 90 percent.

SAF Tax Credits for Five Years

• Starting in 2023 and sunsetting at the end of 2024, the IRA creates a new business credit for each gallon of SAF sold or used as part of a qualified fuel mixture, starting at $1.25 per gallon and capped at $1.75 per gallon.

• The new tax credit would increase by 1 cent for each percentage point above 50% that the SAF reduces lifecycle GHG emissions compared to traditional aviation fuel.

• Starting in 2025 and sunsetting at the end of 2027, the IRA creates a new, technology-neutral Clean Fuel Production Tax Credit to support the production of low-emissions transportation fuel.

• Under this tax credit, renewable aviation fuels receive a base rate of 35 cents per gallon, that can be adjusted to $1.75 per gallon if prevailing wage and apprenticeship requirements are met.

Now that the IRA has passed the House, Congressional Democrats and President Biden have finally accomplished their signature legislative priority for 2022. With the midterm elections rapidly approaching, this will likely be the last major bill passed until after November. Both the House and Senate aren't scheduled to be back in Washington until September, and when they return, their focus will be on passing a stopgap funding bill before funding for the current fiscal year expires after September 30.