The Clean Fuel Production Credit, or 45Z, took effect Jan. 1, 2025, but farmers have more questions than answers at this point about how it will roll out and when.
At this juncture, one of the few actions farmers can take is to share their opinions as the Treasury Department and the IRS are taking public comments until April 10.
“It does seem a bit crazy that this is where we are on a bill that went into effect on Jan. 1,” Ken Ferrie, Farm Journal Field Agronomist and owner of Crop-Tech Consulting, Heyworth, Ill., told growers during a recent farmer-customer meeting.
Updates Made In January
Ferrie highlighted two updates for farmers to keep in mind, as they try to stay on top of the information pertaining to 45Z:
First, the IRS and Department of Energy released a new version of the GREET model specifically designed to calculate Carbon Intensity (CI) scores for the purpose of the Clean Fuel Production Credit (Section 45Z), called 45zCF-GREET. It stands for 45Z Clean Fuel GREET.
“This version is proposed to be the model that fuel producers use to calculate their CI scores,” Ferrie said. “One noticeable difference to this version is there’s no feedstock calculator for the farmers to use to score their grain.”
However, Ferrie noted that on Jan. 16, 2025, USDA released its version of a feedstock carbon intensity calculator for farmers’ use.
“Some components of it will make things a lot easier to get done. Some components of it, though, could be a challenge for certain growers,” Ferrie said.
To use the USDA feedstock CI calculator, there are approximately five questions farmers will need to answer:
1. Are you planting a cover crop?
2. Do you use no-till or reduced tillage?
3. When are you applying nitrogen?
4. Are you using an approved nitrification inhibitor?
5. How many bushels did the field produce?
A Couple of Details Regarding Cover Crops
For cover crops, Ferrie said farmers can use winter kill or overwintering crops.
“Cover crops can be crimped, chemically killed or winter killed,” he said. “But you can’t take them out with tillage and you can’t burn them off. The residue needs to stay at the surface.”
The ‘Stir Factor’ In Tillage Practices
With regard to any tillage, Ferrie said program administrators will be looking at the stir factor – equipment speed, type of tillage and depth.
“It all comes into play whether you’re in no-till or reduced tillage,” Ferrie said. “Also, moving your N from a fall application to spring and into sidedress would lower your score and/or using a nitrification inhibitor,” he added.
What Gets A CI Score?
Ferrie said with the adoption of the USDA feedstock calculator, each entity would have a CI score.
“It wouldn’t a CI score per bushel; it would be a CI score per entity. Your entity would be scored on all of your acres, whether they’re going into ethanol or not. If you have a father entity and a son entity, they’d each have a separate CI score,” he said.
The USDA’s feedstock calculator will also be county-based by state, as the same conservation farming practices used in one area wouldn’t necessarily score the same as those used in another state or area.
In the USDA plan, there is no credit for using manure.
“This is a big change from scoring it in the original GREET model,” Ferrie said. “In that model, using manure instead of commercial fertilizer dropped your scores hard because you’re recycling fertilizer.”
The USDA plan also addresses what it refers to as mass balance. “If you mix your grain with somebody else’s, the score is going to have to be refigured for that grain,” Ferrie explained. “Many people, of course, had hoped for the book and claim where you could separate the carbon asset or credit from the grain and sell them in different places. But with the mass balance approach, the grain must go to the end fuel production user. So, it’s got to go for fuel.”
Recommendations For Farmers Who Want To Participate
During his recent grower meeting, Ferrie offered these thoughts and recommendations to farmers interested in participating:
Records are going to be essential. Along with farm records, receipts, delivery tickets, and any as-applied maps, all need to be preserved.
“You need to keep your as-applied maps for all the fertilizer going on out in fields and everything that’s done on the farm,” he said. “Keep track of key dates for practices – tillage, depth of tillage and speed, all need to be recorded.”
Farmers will need geo-stamp photos to prove they use no-till and cover crops. Receipts for cover crops will not be enough to offer proof.
“You will need to prove that you had a stand established and that you captured greenhouse gas,” Ferrie said. “Pictures to show residue was still in place at planting will help you prove your no-till claims.”
Be aware that in the USDA proposal, all farmers would be audited by a third-party auditor. “Because this program is being implemented by the IRS, think of it like you do your taxes,” Ferrie said. “Be ready to prove your claims.”
Ferrie reiterated that he would encourage farmers who are interested in the 45Z program and use no-till and the 4R approach to nitrogen to stay the course and document everything.
“If this turns into nothing burger, you’re not out anything because it’s your normal practice,” Ferrie said.
He offered a reminder that the program is not only for farmers implementing new practices.
“So, if you’ve been no-tilling for decades, you’re still eligible,” he said.
To hear Ferrie’s complete insights and recommendations on 45Z, check out his Boots In The Field podcast here:
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