The IRS public hearing on the proposed Section 45Z Clean Fuel Production Credit regulations opens today at 9 a.m. ET as a three-day, telephonic-only session, with Treasury and IRS officials taking oral testimony Wednesday through Friday on REG-121244-23, the proposed rule published in the Federal Register on February 4, 2026. The rule defines emissions-rate methodology, eligibility, and registration requirements for the credit that pays both SAF and non-SAF clean transportation fuels up to $1.00 per gallon, scaled by carbon intensity.
The hearing’s structure itself is the early signal of how much is at stake. Treasury and the IRS first extended the originally one-day May 28 hearing into a May 27-29 window via a Federal Register notice published April 29, then on May 8 converted all three days to telephonic-only via a follow-up notice (FR document 2026-09141). The IRS Auditorium in Washington is no longer the venue. Persons who had requested to testify in person or by phone have been issued phone-number and access-code credentials, with no need to resubmit.
For SAF producers, the final rule will determine the realized value of the credit on every qualifying gallon produced from 2025 onward. Calumet’s Montana Renewables segment disclosed $22.5 million of 45Z credit generation in its Q1 2026 results, the largest single-quarter producer-side number publicly visible. Gevo’s alcohol-to-jet Net-Zero 1 facility, which relies on the ATJ pathway built on credited corn ethanol, sits at the centre of the primary-feedstock disqualification debate discussed below.
The hearing’s structure itself is the early signal of how much is at stake.
The contested-provisions list is well-developed. Top of the agenda is the proposed exclusion of indirect land use change (ILUC) from emissions calculations. The rule states that “for transportation fuel produced after December 31, 2025, the emissions rate of a fuel does not include any emissions attributed to indirect land use change.” That helps US corn-ethanol-derived pathways but is being challenged by agricultural and environmental groups that want ILUC factored back in. Second is the climate-smart agriculture provision and how feedstock carbon intensity values are incorporated into the IRS-administered 45ZCF-GREET model, with industry pressing for greater operational flexibility where actual practices deviate from model assumptions.
Third is the primary-feedstock disqualification, and it is the structurally most consequential issue for the ATJ cohort. The proposed rule provides that “transportation fuel produced from, and having as a primary feedstock, a fuel for which 45Z Credits are allowed is not eligible for 45Z Credits.” Process-fuel use of an upstream 45Z-credited fuel does not disqualify the downstream gallon, but ATJ pathways that use 45Z-credited corn ethanol as the primary feedstock would on the face of the text lose 45Z eligibility for the downstream SAF gallon. That puts the dominant near-term US ATJ pathway directly in the line of fire, and whether Treasury narrows the provision in the final rule is one of the most consequential single points of testimony for the ATJ cohort this week. Fourth is the mandatory use of the 45ZCF-GREET model for non-SAF fuels and either the CORSIA Default or CORSIA Actual methodology for SAF, with the R&D GREET model explicitly disallowed and limited room for producers running non-standard processes to validate alternative emissions-rate calculations. Registration burdens, related-party transaction rules, and the interaction between the elective payment and credit transfer mechanisms round out the principal-issue set.
The post-OBBB equalisation between SAF and non-SAF caps changes the economics meaningfully. Before the One Big Beautiful Bill (H.R. 1), SAF was eligible for a maximum of $1.75 per gallon versus $1.00 for non-SAF, scaled by carbon intensity, a cap differential that let best-in-class low-CI SAF pathways earn meaningfully more per gallon than the equivalent non-SAF clean fuel. OBBB, signed July 4, 2025, eliminated that cap differential for fuel produced after December 31, 2025, putting SAF on equal footing with non-SAF transportation fuel at the same $1.00 per gallon ceiling before CI scaling. The CORSIA-vs-45ZCF-GREET methodology split is now the principal point of SAF-specific differentiation in the proposed rule, and how the dominant US SAF pathways score under each methodology is the variable that drives forward per-gallon SAF economics.
Treasury is operating against an unusual structural constraint: 45Z is already in force (the credit took effect January 1, 2025) but the rules that govern how it is calculated are still in proposed form. The proposed rule itself specifies that the emissions-rate-table provisions are proposed to apply to qualified sales in tax years ending on or after January 10, 2025, which is the structural source of the retroactivity, not Treasury discretion. Every clean transportation fuel gallon produced in 2025 and the first half of 2026 has been generated under producers’ best-estimate interpretations of the proposed rule, with adjustment risk if the final rule’s emissions table materially diverges.
What to watch through Friday: which provisions draw the most testimony minutes, whether Treasury officials signal openness to narrowing the primary-feedstock disqualification, and whether climate-smart agricultural practices get a clearer pathway in the final rule. The next milestone after the hearing is the publication of the final rule itself.
Source: Federal Register — Section 45Z Clean Fuel Production Credit; Hearing
