With recently announced guidance from the Department of the Treasury, to support the documentation of agricultural production required to participate for Section 45Z tax credits, Bushel and Verity have integrated their on-farm data, sustainability modeling and compliance platform. Kimberly Bowron, president of Verity, and Jake Joraanstad, CEO of Bushel, explain what’s next for traceability in the grain business.
Lessons From The Field
Bowron says the pilot project at Gevo’s ethanol facility in Richardton, North Dakota, helps to illustrate the opportunities that are unfolding and how it will effect the entire supply chain. Its “farm-to-flight” program included 500,000 acres being loaded into the program with the farm-level attributes.
When it comes to farmer engagement in programs, she says it really boils down to three things:
- Eliminate Duplicate Paperwork: Streamlining the administrative burden.
- Data Sovereignty: Ensuring data is protected and ownership remains with the farmer.
- Economic Clarity: Providing a clear, transparent financial upside.
“We’re learning that workflow is everything. And so if it feels like there’s extra admin work and uncertain payoff, participation sort of slows down. But if we can be clear about all of those things, then growers are very engaged,” she says. “I think another takeaway is just trust. Farmers really want to know exactly who’s seeing their data, so we like to be transparent about how that’s being used. And that transparency isn’t really optional for us. We want to be clear about the economic opportunity and the adoption.”
Bowron shares the supply sheds around the biofuels producer will be driven by the evolution of these programs, the value presented to the farmers, and how market-based opportunities continue to expand including carbon intensity, scope 3 emissions and more. But the common undercurrent empowering the conversation of what’s possible is transparency.
Joraanstad says traceability was once a long time ‘scary’ word in the grain business because of the difficulty in delivering the full origination of a kernel of corn through the supply chain.
“It just wasn’t practical,” he says. “But if you’re a biofuels plant in the future, if you can’t do this then you’re going to be losing to those who can.”
It’s the intersection of the real dollars of cents potential of tax deducations such as 45Z plus the technology advancing the digitization of records putting this new mandate on how to stay competitive and profitable.
“This has been a long time coming,” Joraanstad says. “But the truth is that all of the previous discussion around what data is required, there was a lot of voluntary effort, and let’s call it the first version of all of this effort.”
For the biofuels producers, Bowron says the digitization not only provides participation for the carbon credits or tax deductions but also the specialized markets.
“Verity’s real role is to take all that farm-level data, translate that into a field CI (Carbon Intensity), and then take that CI and attach it to a gallon in an ethanol plant,” Bowron says. So that you have a CI that attaches to that gallon. We also think about this in terms of different attributes, like practice attributes. ‘This gallon can go to Canada because it’s got all those attributes; this gallon can go to California.’”
While the 45Z guidance is helping proving an outline for the potential, it’s a whole new chapter. And one that is still being written. The final rule isn’t expected to be released before June.
“We’re still wanting some better final answers as we’re going through this,” Jooranstad says. “But now all of us can act with some confidence that that’s true and this is a requirement and it’s not just a hope and a dream.”
Both industry leaders says it’s important to note how 45Z works, especially that it’s the biofuel producer receiving the tax credit.
“This isn’t like an EQIP program. There’s no direct USDA payments that are happening. And for an ethanol plant, it’s actually a lot of work,” Bowron says. “They can’t sell the value of that tax credit for the headline price.”
The ‘hidden costs’ for ethanol plants include:
- Discounted Value: Credits are often sold at 90-95% of face value.
- Overhead: Costs include broker fees, legal counsel, and insurance wraps for audit protection.
- Delayed Realization: Benefits are filed with taxes and often not realized until a year later.
Hear more from these industry voices in the latest Scoop Podcast.
