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A Sustainable Aviation Fuel Hub Set For Take Off in Minnesota

Through the GREATER MSP Partnership, a group of leading businesses announced in August ambitious plans to make Minnesota a leader in the production of Sustainable Aviation Fuel (SAF) and contribute to decarbonizing the aviation industry while finding new uses for the state’s agriculture products.

The Minnesota SAF Hub Coalition is a broad group of partners that includes companies like Delta Airlines, Bank of America, Xcel Energy and EcoLab. The Coalition set a goal of bringing SAF to Minnesota as early as 2025 through a “phased approach to scaling production.”

Airlines around the world are currently utilizing SAF made from inputs such as used cooking oil, renewable feedstocks and municipal waste. Supporters say the use of SAF can reduce carbon emission from air travel by more than 80 percent. Delta uses roughly 250 million gallons of jet fuel annually at the Minneapolis-St. Paul International Airport alone, while overall airline industry use in the U.S. is roughly 30 billion gallons. This year, Delta announced a goal of increasing the use of SAF at the Minneapolis airport by more than 10 percent by 2027 and 50 percent by 2035.

Connecting the farm to the airport with a SAF hub is an ambitious plan with ample positive impacts for Minnesota’s economy and environment. Achieving that goal, however, will take a concerted effort from the state’s agriculture industry, business community, renewable energy producers, researchers and government leaders. Exciting progress has already been made, and the partners of the Minnesota SAF Hub Coalition are confident that with this announcement they can kick start the commercial scaling of SAF and make Minnesota a global leader in sustainable aviation.

One hurdle to overcome is price. SAF can cost up to eight times more than traditional jet fuel according to industry analysts. However, recent federal and state tax credits are poised to make SAF a more attractive area for investment and development. The federal Inflation Reduction Act includes renewable energy legislation that provides significant tax credits for SAF. Earlier this year, Minnesota approved tax credits for SAF as part of the Omnibus Transportation Law.

According to the Minnesota Bio-Fuels Association, Minnesota is a top five producer of corn and ethanol, with the latter topping 15 billion gallons nationwide in 2022. Minnesota’s biofuels producers are ready and able to ramp up production in support of the SAF movement but there are policy decisions that must be made to guide the industry forward.

The federal government must first clarify eligibility for the tax credits included in the Inflation Reduction Act. Additionally, the U.S. Treasury Department has yet to determine how companies will measure the carbon intensity scores to qualify.

There are two main models that calculate the carbon lifecycle reductions that are necessary to apply the tax credits. The Minnesota Bio-Fuels Association supports use of the Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) model because it incorporates the most recent data from federal and academic institutions on crop and biofuel production into lifecycle analyses. “Leveraging the latest science ensures accuracy in carbon accounting and rewards farmers embracing lower-carbon production practices,” explains Brian Werner, executive director of the Minnesota Bio-Fuels Association. A second model called CORSIA, Werner says “uses antiquated European emissions estimates of corn and biofuel production. If the federal government uses the CORSIA model it would make it much more challenging for many biofuels to qualify for the credits.”

The second issue is the permit process here in Minnesota. Our existing ethanol plants would need to implement new technologies and make investments in new facilities to produce aviation fuel that would meet the carbon intensity score needed to qualify for the tax credits. The Minnesota Pollution Control Agency would also need to approve permitting before the plants can make those investments and begin work on any projects. “The permitting process needs to be expedited,” Werner notes, “because the tax credits expire in 2027.”

He adds: “Our members are looking at SAF as a phenomenal opportunity for agriculture and biofuels, especially as the energy transition continues. But they also have concerns about whether the permitting will be in place for us to take advantage of this opportunity in Minnesota. It is difficult to expect these businesses to make a significant capital investment to build a new plant or implement climate smart solutions when there is uncertainty about whether they can get a permit approved in a timely manner and qualify for the tax credits to help offset costs.”

Megan Lennon is the energy and environment section supervisor for the Minnesota Department of Agriculture. Her department is working on the policy guidelines for how sustainable jet fuel producers and blenders can qualify for the state tax credit. “The department is very excited about the announcement because it would use Minnesota grown feedstocks to help meet the state’s climate and greenhouse gas emission reduction goals,” she says. “The Minnesota tax credit has a few distinct provisions that make it more attractive for businesses than SAF tax credit programs in other states.”

For example, the tax credit is refundable. Smaller companies that don’t produce high volumes of SAF, or pay a large amount of tax, can still claim the credit as a refund. Additionally, there is a sales tax exemption for the construction or purchase of materials and equipment to build or retrofit a facility that produces SAF.

“The purpose of this hub is to solve a big challenge: How do you create and develop an industrial scale supply chain? There are so many layers and not one partner can do it alone from end to end. That is why this partnership is so important,” Lennon says. “It brings the knowledge of all these different entities together to solve this problem. This isn’t just one technology provider, or one large energy producer. It is really a collaborative effort across the whole spectrum because eventually we will need the participation of many sectors to move the technology forward to meet this goal.”

The Minnesota SAF Hub Coalition is straightforward about the challenges and obstacles. The organization says it is balancing pragmatism and ambition by using existing technologies to make progress as quickly as possible, while accelerating the technologies with the greatest carbon reduction potential.

“Despite the challenges and uncertainty, markets can be influenced through a combination of policy decisions and industry solutions,” says Steve Csonka, executive director of the Commercial Aviation Alternative Fuels Initiative (CAAFI.) CAAFI hopes to get the price of SAF on a negative trajectory while the price of petroleum-based jet fuel will likely get more expensive as the world adapts to Paris Accord commitments. Meanwhile, the airline industry is aggressively working to meet greenhouse gas emission standards, as well as their own commitments to limit and reduce such emissions. Csonka believes government policy, as well as SAF production technology improvements can further close the price gap, and the alternative fuel industry can also invest in solutions to make production cheaper and more efficient.

“Every time we bring a new SAF project online it is a one-off success that takes years and years of work and sacrifice and hundreds of millions of dollars. It is difficult to make one of these projects a reality,” Csonka explains. “That needs to change. Instead of having five or 10 of these projects in the pipeline, as we currently do, we need to have 60. Instead of them taking years and years to complete, it needs to become routine. We are not there yet, but we are getting closer to that point every day.”

CAAFI’s goal is to promote the development of alternative jet fuel options that provide equivalent safety and favorable costs compared with petroleum-based jet fuel, while offering environmental improvement and energy supply security for aviation. Csonka’s group is in contact with the Minnesota SAF coalition to offer assistance and support. Working with BBI International at the inaugural National SAF conference, CAAFI created the opportunity for the Greater MSP group to disclose their project to assist with development of a SAF Supply Chain to feed the Minneapolis-St. Paul airport. “Minnesota has solid infrastructure in place, feedstock availability, policy support and a strong group of champions to make a lot of progress on a SAF hub in a short amount of time,” Csonka notes.

“The Agricultural Utilization Research Institute (AURI) is very supportive of the Minnesota SAF Hub Coalition announcement and advancing new biofuels opportunities,” says AURI’s Executive Director Shannon Schlecht.

“We are looking at what our role as an organization should be with this coalition and industry effort. We are exploring where we can be most impactful to fill value-chain gaps. It is certainly very exciting and an important value-added opportunity for our state’s agriculture industry.”