How the OBBBA Changed 45Z for SAF Producers

Section 45Z of the Internal Revenue Code provides a production tax credit for clean transportation fuels based on their lifecycle carbon intensity. The Inflation Reduction Act established 45Z with a SAF-specific applicable amount of $0.35 per gallon base, or $1.75 per gallon for producers meeting prevailing wage and apprenticeship (PWA) requirements. The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, made three changes that fundamentally alter SAF economics.

First, the SAF premium was eliminated. The applicable amount dropped to $0.20 base / $1.00 with PWA, the same rate as all other transportation fuels. SAF lost its privileged position in the tax code.

Second, indirect land use change (ILUC) emissions were excluded from the carbon intensity calculation for fuels produced after December 31, 2025. This benefits crop-based feedstocks (soybean oil, corn ethanol) whose CI scores carried ILUC penalties of approximately 14 to 26 kg CO2e/mmBTU under previous methodology, depending on the feedstock and model version.

Third, feedstock origin was restricted to the United States, Canada, and Mexico for fuels produced after December 31, 2025. Imported feedstocks, including Chinese used cooking oil and Brazilian sugarcane ethanol, no longer qualify.

The credit formula itself remains unchanged: Credit = Applicable Amount x Emissions Factor, where Emissions Factor = max(0, (50 – Emissions Rate)) / 50. The emissions rate is measured in kg CO2e/mmBTU, and a fuel must score below 50 to qualify for any credit at all. But at the new $1.00 maximum, the math produces very different outcomes depending on which pathway and feedstock a producer uses.

What Each Pathway Actually Receives Under the New Credit

Not every SAF producer gets $1.00 per gallon. The credit scales with carbon intensity: lower CI fuels earn a higher percentage of the maximum. The 45ZCF-GREET model, developed by Argonne National Laboratory for the IRS, does not publish fixed default CI values for every pathway. Instead, it produces facility-specific results based on a producer’s actual inputs. But representative CI ranges for common HEFA feedstocks illustrate the differences.

HEFA from used cooking oil (UCO) typically produces a CI in the range of 8 to 13 kg CO2e/mmBTU under 45ZCF-GREET, yielding a credit of roughly $0.74 to $0.84 per gallon. HEFA from tallow scores in the range of 13 to 17, producing a credit of approximately $0.66 to $0.74. HEFA from distillers corn oil lands in the range of 16 to 20, delivering approximately $0.60 to $0.68 per gallon. These ranges reflect facility-level variation in process energy, hydrogen source, and co-product allocation.

HEFA from soybean oil is where the picture gets complicated. Under the CORSIA default methodology (which 45Z permits for SAF), soy HEFA SAF carries a CI of approximately 40.4 g CO2e/MJ (roughly 42.6 kg CO2e/mmBTU), which fails to qualify for any 45Z credit because it exceeds the 50 kg CO2e/mmBTU threshold when assessed against the required 50% emissions reduction from the 89.53 baseline. The original 45ZCF-GREET model included ILUC in its calculations, though at lower values than CORSIA or CARB LCFS: roughly 14 to 17 kg CO2e/mmBTU for soybean oil versus CARB’s approximately 31 kg CO2e/mmBTU. The ILUC removal enacted by OBBBA should lower soy’s CI score substantially under 45ZCF-GREET, potentially making soy HEFA SAF credit-eligible. But Treasury has not yet published updated emissions rate tables reflecting this change. Until those tables appear, soybean oil HEFA producers face real uncertainty about their actual credit amount.

Alcohol-to-Jet and Fischer-Tropsch SAF pathways face a different problem: the 45ZCF-GREET emissions rate table does not yet provide finalized default CI values for these production routes. ATJ from corn ethanol, ATJ from sugarcane ethanol, and FT-SPK from biomass gasification all require producers to request a Provisional Emissions Rate from the Department of Energy. This adds time, cost, and uncertainty to the credit claim process. Power-to-Liquid (e-SAF) is similarly absent from the default tables.

The practical result: HEFA producers using waste feedstocks (UCO, tallow, corn oil) can model their credit with reasonable confidence based on 45ZCF-GREET runs using their facility data. Every other pathway is operating with greater regulatory ambiguity about the credit amount they will actually receive.

At $1.00 per gallon, 45Z effectively sorts SAF pathways into three tiers: HEFA with waste feedstocks can compete, HEFA with crop feedstocks might compete pending updated CI tables, and everything else faces a cost gap that the credit alone cannot close.

Why California HEFA Producers Still Win the Credit Stacking Math

The 45Z credit does not exist in isolation. For SAF producers operating in California, three federal and state incentive programs stack to create a combined per-gallon value that can approach or exceed the cost premium over conventional jet fuel.

Consider a HEFA producer using UCO at a California facility meeting PWA requirements. The federal 45Z credit delivers approximately $0.74 to $0.84 per gallon depending on the facility’s specific CI score. SAF qualifies for 1.6 D4 Renewable Identification Numbers (RINs) per gallon under the federal Renewable Fuel Standard (per 40 CFR 80.1415 equivalence values). At the D4 RIN price of roughly $0.41 as of late February 2026 (per EPA EMTS data), that produces approximately $0.66 per gallon in RIN value.

California’s Low Carbon Fuel Standard (LCFS) adds a third layer. LCFS credits were trading at approximately $70 per metric ton in March 2026. The per-gallon value depends on the CI differential between the fuel and the jet fuel benchmark (86.64 g CO2e/MJ in 2025). For UCO-based HEFA SAF with a CI around 10 g CO2e/MJ, that differential is approximately 77 g CO2e/MJ, producing an LCFS credit value of roughly $0.68 per gallon at $70 per metric ton. (By comparison, Stillwater Associates calculated an LCFS value of $0.41 per gallon for SAF with a CI of 40 g CO2e/MJ at $68 per metric ton, reflecting the lower CI differential of higher-carbon feedstocks like soybean oil.)

The approximate total for UCO-HEFA in California: $2.14 per gallon in stacked incentives ($0.80 from 45Z at mid-range CI, $0.66 from RINs, $0.68 from LCFS). Against HEFA production costs of $3.50 to $4.50 per gallon and conventional jet fuel prices in the $2.50 to $3.00 range, that stack narrows the gap to roughly breakeven for efficient producers. It does not guarantee profitability, but it makes the business case workable.

Two caveats apply. RIN prices have been extremely volatile. D4 RINs traded above $1.50 in 2022 and 2023, which would have produced a per-gallon SAF value exceeding $2.40. The current $0.41 level is historically weak, driven by a collapse in the bean oil-heating oil (BOHO) spread and D4 RIN oversupply relative to obligations. Second, the LCFS credit price at $70 per metric ton is well below the $150-plus levels seen in 2022 and 2023. If either RINs or LCFS credits recover, the California stack strengthens considerably. If they decline further, even California UCO-HEFA producers face margin pressure.

The geographic concentration is notable. Montana Renewables (Calumet) in Great Falls, Montana, and World Energy in Paramount, California, are the two largest operating SAF producers in the US. World Energy holds the distinction of operating the world’s first commercial-scale SAF facility since 2016, producing approximately 40 to 50 million gallons per year of renewable fuels. Montana Renewables currently produces roughly 30 million gallons per year of SAF with a MaxSAF 150 expansion targeting approximately 150 million gallons by 2026, backed by a $1.44 billion DOE loan facility. In February 2026, the two companies announced a partnership to deliver over 70 million gallons of SAF over three years.

Producers outside California do not benefit from LCFS credits, which means their incentive stack drops to approximately $1.46 per gallon (45Z at mid-range plus RINs). That thinner stack leaves a gap of $0.50 to $1.50 per gallon against HEFA production costs, making the economics tighter, particularly for producers using feedstocks with higher CI scores that yield smaller 45Z credits.

How Alcohol-to-Jet Faces a Double Hit

ATJ producers confront two simultaneous challenges that neither existed under prior law.

The credit reduction from $1.75 to $1.00 per gallon hits ATJ harder than HEFA in absolute terms. ATJ production costs run $4.00 to $7.00 per gallon, higher than HEFA’s $3.50 to $4.50 range for waste-fat feedstocks. The cost premium over conventional jet fuel is larger, so the shrinking credit absorbs a bigger share of ATJ’s already-thin margin.

The feedstock origin restriction compounds the problem. ATJ converts ethanol to jet fuel. The lowest-cost ethanol feedstock globally is Brazilian sugarcane ethanol, which historically offered both lower cost and lower carbon intensity than US corn ethanol. After December 31, 2025, Brazilian ethanol no longer qualifies. ATJ producers are now restricted to US, Canadian, or Mexican ethanol, with US corn ethanol as the practical default.

The feedstock cost floor for ATJ using corn ethanol is approximately $2.83 per gallon of SAF (based on the ethanol input requirement alone), before capital costs, energy, and operating expenses. Combined with the reduced credit, the per-gallon economics have shifted substantially from the assumptions under which ATJ projects were initially planned.

LanzaJet’s Freedom Pines facility in Soperton, Georgia, is the only biorefinery in the United States currently producing ethanol-based SAF, operating at 10 million gallons per year. It received the Renewable Fuels Association Industry Award in February 2026. But Freedom Pines was designed and financed under the prior credit regime.

Gevo’s Net-Zero 1 project in Lake Preston, South Dakota, illustrates the planning uncertainty more directly. The project, designed for approximately 65 million gallons per year of ATJ SAF from corn ethanol, holds a $1.46 billion DOE Loan Programs Office conditional commitment that has been extended to April 16, 2026. Construction has not begun. Gevo is evaluating project scope modifications, including a potentially smaller 30 million gallon per year ATJ-30 facility at its existing North Dakota ethanol plant. The connection between the scope reconsideration and the credit reduction is direct: the project economics modeled at $1.75 per gallon do not produce the same returns at $1.00.

The ILUC removal provides a partial offset for corn ethanol-based ATJ. Corn ethanol historically carried substantial ILUC penalties in lifecycle models: approximately 21 to 26 kg CO2e/mmBTU under 45ZCF-GREET’s methodology, and higher under CARB LCFS or EPA RFS frameworks. With ILUC excluded from 45Z calculations, corn ethanol’s CI should drop, increasing the emissions factor and the per-gallon credit. But the updated emissions rate tables have not been published, and ATJ pathways require a Provisional Emissions Rate from DOE regardless, adding another layer of uncertainty.

Where Fischer-Tropsch and Power-to-Liquid Stand

FT-SPK (Fischer-Tropsch Synthetic Paraffinic Kerosene) from biomass gasification or municipal solid waste carries production costs of $5.00 to $8.50 per gallon. Like ATJ, FT-SPK lacks finalized default CI values in the 45ZCF-GREET emissions rate table. The pathway is commercially proven but has seen limited US deployment relative to HEFA. At $1.00 per gallon maximum credit, the gap between FT-SPK production cost and conventional jet fuel remains $2.00 to $5.50 per gallon before incentives, a range too wide for the federal credit alone to bridge.

Power-to-Liquid (PtL) or e-SAF occupies a different category entirely. Production costs range from $8.00 to $16.00 per gallon at current scale, with projections suggesting $5.00 to $6.00 per gallon may be achievable by 2030 if renewable electricity costs continue falling. The cost gap over conventional jet fuel ranges from $5.00 to $13.00 per gallon. A $1.00 credit (even if the full amount were received, which requires demonstrating a CI below 50) closes between 8% and 20% of that gap. The credit is functionally irrelevant to PtL investment decisions.

Twelve, the most prominent US e-SAF developer, has raised approximately $645 million, including $400 million in project equity led by TPG Rise Climate and a $200 million Series C. Its AirPlant One facility in Moses Lake, Washington, uses CO2 electrolysis to produce synthetic jet fuel, with offtake agreements from Alaska Airlines and IAG (parent of British Airways). But Twelve’s investment thesis rests on technology cost reduction curves and future carbon pricing, not on the 45Z credit. The reduction from $1.75 to $1.00 changes nothing meaningful for PtL project economics.

The implication for US SAF diversity is significant. The EU’s ReFuelEU Aviation mandate includes a specific Power-to-Liquid sub-mandate starting at 1.2% in 2030, rising to 35% by 2050. That mandate creates guaranteed demand for e-SAF regardless of its cost premium. The US has no equivalent mechanism. Without a mandate or a dramatically larger credit, e-SAF capital will flow to jurisdictions that guarantee offtake.

What the Retail Fuel Lobby’s Alternative Would Mean for SAF

NATSO, SIGMA, and NACS (representing over 90% of US retail fuel sales) have publicly opposed the carbon-intensity-based structure of 45Z. Their position, articulated in response to the February 2026 proposed regulations, calls for reinstating the flat $1.00 per gallon biodiesel blenders’ tax credit (Section 40A of the IRC) that expired at the end of 2024 when 45Z took effect.

Their argument rests on four points. First, the CI measurement requirements of 45Z are too complex for most ethanol producers to access, eliminating potential retail gasoline price reductions. Second, according to NATSO and SIGMA, FAME biodiesel consumption fell from approximately 1.9 billion gallons in 2024 to 960 million gallons through October 2025, a decline they attribute directly to 45Z’s structure. Third, the flat $1.00 per gallon credit helped grow the combined biodiesel and renewable diesel market from approximately 100 million gallons in 2005 to nearly 4.8 billion gallons in 2023 (per EIA data), a track record the CI-based approach cannot match. Fourth, Treasury missed the January 1, 2025 statutory deadline for implementation and the updated GREET model was not ready at launch, creating market uncertainty.

What would a flat credit mean for SAF? Under a flat structure, every qualifying gallon receives the same amount regardless of carbon intensity. This eliminates the incentive to use lower-CI feedstocks and pathways. For SAF specifically, a flat credit would remove the differentiation between UCO-based HEFA (roughly $0.74 to $0.84 under current 45Z depending on facility) and higher-CI fuels. It would also remove any CI-based advantage that advanced pathways like ATJ or FT might achieve once their provisional emissions rates are established. The CI-based structure, for all its complexity, at least rewards fuels that deliver greater emissions reductions. A flat credit does not.

The retail fuel lobby’s real concern is road biofuels, not SAF. But SAF producers should watch this debate closely. If political pressure drives a reversion to flat credits, SAF loses whatever differentiation the CI-based system provides.

What the Senate Restoration Bill Would Change

The Securing America’s Fuels (SAF) Act, introduced as S. 3759 in the Senate and H.R. 6518 in the House, proposes two changes. First, it would restore the SAF-specific applicable amount to $0.35 base / $1.75 with PWA, reinstating the premium eliminated by OBBBA. Second, it would extend the 45Z credit for all clean fuels through December 31, 2033, four years beyond the current 2029 expiration.

Senate sponsors include Jerry Moran (R-KS), Amy Klobuchar (D-MN), Joni Ernst (R-IA), and Catherine Cortez Masto (D-NV). House sponsors include Mike Flood (R-NE), Tracey Mann (R-KS), Sharice Davids (D-KS), and Buddy Carter (R-GA). The bipartisan composition reflects SAF’s unusual position as a clean energy credit with strong support from agricultural-state legislators in both parties.

If enacted, the restoration would fundamentally change the analysis above. At $1.75, UCO-based HEFA would receive approximately $1.40 per gallon (versus roughly $0.80 currently). The California incentive stack would approach $2.74 per gallon. ATJ and FT projects financed under $1.75 assumptions would regain their original economics. But the bill has been referred to committee with no floor vote scheduled as of April 2026. Its passage is uncertain, and producers cannot plan around legislation that may never move.

The uncertainty itself is damaging. SAF production facilities require 3 to 5 years from final investment decision to commercial operation. Investors underwriting those projects need credit certainty across that timeline. A credit that changed from $1.75 to $1.00 in July 2025, might change back to $1.75 if a Senate bill passes, and expires entirely in 2029 unless extended, does not provide that certainty.

Key Takeaways

• HEFA using waste feedstocks (UCO, tallow, corn oil) is the only SAF pathway where the reduced $1.00 per gallon 45Z credit, combined with RINs and California LCFS credits, can meaningfully close the cost gap with conventional jet fuel. The approximate California incentive stack for UCO-HEFA is $2.14 per gallon ($0.80 from 45Z, $0.66 from D4 RINs, $0.68 from LCFS at $70 per metric ton).
• Alcohol-to-Jet faces a double hit: the credit cut from $1.75 to $1.00 and the feedstock origin restriction eliminating Brazilian sugarcane ethanol. Gevo’s $1.46 billion Net-Zero 1 project is evaluating scope reductions, and the DOE conditional commitment expires April 16, 2026.
• Power-to-Liquid production costs of $8.00 to $16.00 per gallon make the 45Z credit functionally irrelevant to e-SAF investment decisions. Without a PtL-specific mandate comparable to ReFuelEU’s 1.2% sub-mandate (2030), e-SAF capital will flow to the EU.
• Treasury has not published updated emissions rate tables reflecting the ILUC removal enacted by OBBBA, and ATJ and FT-SPK pathways lack finalized default CI values in 45ZCF-GREET. Producers of these fuels face regulatory ambiguity about their actual credit amounts.
• The bipartisan Securing America’s Fuels Act (S. 3759 / H.R. 6518) would restore the SAF credit to $1.75 and extend 45Z through 2033, but has no scheduled floor vote. The credit has changed value twice in 18 months, and SAF facilities require 3 to 5 years to build.

Sources and methodology notes:

• 45Z credit formula and OBBBA changes: IRS, Treasury proposed regulations (Federal Register 2026-02246, February 4, 2026); Clean Air Task Force statutory overview; Baker Botts, Bracewell, RSM legal analyses.
• CI scores and emissions factors: 45ZCF-GREET model (Argonne National Laboratory, May 2025 release) produces facility-specific results, not fixed defaults. Representative ranges cited reflect typical facility configurations per pathway. CORSIA default for soy HEFA (40.4 g CO2e/MJ) from ICAO CORSIA SARPs. ILUC values for soybean oil under 45ZCF-GREET estimated at 14-17 kg CO2e/mmBTU; under CARB LCFS approximately 31 kg CO2e/mmBTU. Updated 45ZCF-GREET tables reflecting OBBBA ILUC exclusion have not been published as of April 2026.
• Production cost ranges: Aggregated from ScienceDirect lifecycle studies, ICCT e-kerosene cost analysis, and RSC Power-to-Liquid studies. Ranges are indicative and vary by facility scale, feedstock price, and region.
• D4 RIN price (~$0.41): EIA, EPA RIN Trades data, late February 2026. SAF generates 1.6 D4 RINs per gallon.
• California LCFS credit price (~$70/MT): OPIS/CARB weekly average, March 2026. Per-gallon SAF value calculated using LCFS formula: (CI_benchmark – CI_fuel) x 126.37 MJ/gal x credit price / 1,000,000. Jet fuel CI benchmark for 2025: 86.64 g CO2e/MJ per 17 CCR 95484. Stillwater Associates February 2025 analysis used for cross-reference.
• Securing America’s Fuels Act: BillTrack50 (S. 3759), Congress.gov (H.R. 6518), NBAA press release (February 2026).
• Producer data: Calumet/Montana Renewables SEC filings and DOE loan announcement; World Energy/Montana Renewables partnership press release; LanzaJet/RFA; Gevo SEC filings and DOE LPO extension; Twelve Series C announcement.