Could Iowa farmers earn billions by cutting greenhouse gas ... - Des Moines Register

Could Iowa farmers earn billions by cutting greenhouse gas emissions?

Can push for carbon capture pipelines also mean billions for conservation-minded farming?
Donnelle Eller

- Builders of carbon capture pipelines stand to reap billions in tax credits. Will farmers also get a share?
- Advocates say incentives to adopt less carbon-intensive farming practices also could be part of the equation.
- Whether that will happen may depend on which model the U.S. Department of Agriculture chooses to measure carbon reduction.

While three controversial carbon capture pipeline projects in Iowa could receive billions of dollars in federal tax credits, experts say it’s unclear how much of the financial boon will make its way into farmers’ pockets.

The companies behind the pipelines vow their projects will slash ethanol’s greenhouse gas emissions and help secure the future viability of the renewable fuel, which absorbs half of Iowa's corn crop. But pipeline critics say major ag companies and ethanol producers will get most of the money, leaving farmers in the cold.

"These dirty energy projects are only benefiting these big agricultural interests," said Jim Walsh, policy director for Food & Water Watch, a Washington, D.C., environmental group that opposes the pipelines. "The money would be better spent helping farmers transition off of this ethanol treadmill to a more resilient food system."

More: Iowa's legendary soil, the bedrock of its economy, is losing its richness, new research shows

Others, however, see an opportunity not only to retain renewable fuel markets but grow them, driven by incentives not just for the pipeline but for on-farm conservation measures that help improve water quality and soil health.

"We have some real opportunities here," said Mitchell Hora, a southeast Iowa crop consultant. On-farm conservation practices "could add tens of millions of dollars per year, per ethanol plant" through a federal clean fuel tax credit, he said, and a share of "those dollars should flow to those family farms" adopting low-carbon corn-growing practices.

Should corn-growing practices be part of ethanol's carbon equation?

The road to cutting the nation's greenhouse gases is complicated.

Pipeline developers in Iowa say capturing carbon dioxide emissions from ethanol plants — then liquefying the gas under pressure and transporting it via the pipelines to be sequestered deep underground in either North Dakota or Illinois — will cut ethanol's carbon footprint in half, enabling the renewable fuel to be sold in low-carbon fuel markets such as California, Oregon and other states.

But experts say farmers also can cut ethanol's greenhouse gas emissions and help ethanol producers qualify for even greater tax incentives by adopting measures such as planting cover crops and improving fertilizer use, potentially making the renewable fuel carbon-negative.

The federal government supports lowering fuels' carbon emissions through two lucrative federal tax credit programs. One would pay companies to capture carbon dioxide, with a premium for sequestering it, referred to as 45Q,. The other, which supports lowering transportation fuels' environmental impact, is called 45Z.

The federal government is now assessing how it will calculate ethanol’s greenhouse gas emissions, a critical step in determining whether ethanol could be used to make sustainable aviation fuel, a 35-billion-gallon-a-year market that could more than double ethanol demand.

“Farmers need to understand the significance of this,” U.S. Agriculture Secretary Tom Vilsack told ethanol industry leaders at a Sept. 12 ethanol industry conference in Washington, D.C. “The future of this industry is … linked to its capacity to take advantage of this new and amazing opportunity.”

The former Iowa governor added that it's “critical to keeping mid-sized and small folks (farmers) in business. And that's critical to keeping small towns vibrant.”

David Miller, chief economist at Decisions Innovation Solutions in Urbandale, in a report earlier this year warned Iowa could lose $10 billion annually without carbon capture pipelines to lower ethanol’s greenhouse gas emissions. Those losses include about $1 billion annually in income to the state’s farmers, the report said.

But Miller said Iowa farmers also have an opportunity to boost their income if corn-based ethanol can be used to make sustainable aviation fuel.

The federal law requires companies to cut greenhouse gas emissions at least 50% below those of fossil fuels to qualify for sustainable aviation fuel tax credits. The U.S. Treasury Department is weighing models that will go into determining whether feedstocks like ethanol can be used to meet the sustainable aviation fuel goal.

The ethanol industry backs a U.S. Department of Energy model, saying it's the most scientifically accurate, wrapping in updated ethanol production and conservation-oriented corn-growing practices. Vilsack said the U.S. Department of Agriculture will spend up to $400,000 to improve the model, responding "to concerns and criticism we've heard about it."

The decision is important, since sustainable aviation fuel production carries rich tax incentives: Low-carbon ethanol could snag up to $1 a gallon in tax credits through the clean fuel tax credit, while sustainable aviation fuel could pull in as much as $1.75 a gallon.

But Miller said another model under Treasury consideration more heavily weighs the effect of clearing trees and grasslands so corn and other row crops can be grown. That model “takes no individual agronomics into account,” such as farmers who use cover crops, no-till farming and other conservation practices to lower their corn’s carbon footprint, he said.

With that model, “it doesn't matter what you do as a farmer,” he said. So, “there's no incentive” for ethanol producers “to pay anybody any differently.”

Vilsack: Ethanol could have high-flying future

At last week's Growth Energy conference, Vilsack said he’s talked with President Joe Biden, Treasury Secretary Janet Yellen and U.S. Environmental Protection Agency Administrator Michael Regan, among others, about the importance of using a model that makes low-carbon ethanol eligible for use in sustainable aviation fuel.

Without low-carbon ethanol, the airline industry will have difficulty getting the amount of sustainable fuel it needs, Vilsack said.

“Not only will we be disappointed, but the airline industry will be disappointed,” he said.

But he cautioned ethanol leaders that “you have to be able to make the case that your product is in fact a low-carbon fuel. Which means you got to do something with CO2."

“I’m not going to tell you what you should do about it. But you need to do something about it,” he said.

Miller said the pipelines are needed to meet the clean fuel tax credit’s greenhouse gas reduction benchmark. But on-farm conservation practices would help lower the score more, with direct financial benefits for farmers, he said: “Your choice of nitrogen, your choice of tillage, all that could be monetized.”

But just how those practices will be quantified as climate solutions is a question mark, Miller said.

“No one has written the rules around the agronomics yet,” he said. “We’re flying blind here.”

Despite the uncertainties, Hora, CEO of Continuum Ag, a southeast Iowa agricultural consulting company, said ethanol producers should be talking with farmers about what they can do to lower their operations’ carbon footprint.

Next year’s crop will be used to produce ethanol in 2025, when the federal clean fuel tax incentives become available. Many farmers will make decisions this fall about their 2024 practices, including whether to plant cover crops, tillage and fertilizer use.

“My worry is that a lot of groups are being very quiet about it, sitting on the sidelines … unsure how it’s all going to pan out” with the carbon capture pipeline projects, which are still seeking permits, Hora said. “But the opportunity is way too big to just sit back and wait.

“We need to encourage massive reductions in a very short amount of time,” he said, adding that ethanol companies will need to “give farmers an equitable share” of the tax benefits if they want long-term success.

The federal clean fuel tax incentive, available through 2027, is expected to cost $19 billion, The Brookings Institute reports.

Through the 45Q tax incentive, pipeline and ethanol companies could share $85 for every ton of carbon dioxide they sequester with the multibillion-dollar projects. Over 12 years, the life of the incentives, Iowa pipeline developers alone could snag as much as $45.9 billion. It’s about half of the $100 billion that BloombergNEF estimates the tax credits will cost taxpayers.

Should tax breaks fund cleaner fuel, growing food or both?

Opponents of pipeline projects in Iowa frequently question how much Iowa farmers will benefit from the pipelines that Summit Carbon Solutions, Navigator CO2 Ventures and Wolf Carbon Solutions have proposed — especially when weighed against concerns about the pipelines. Those concerns include potential safety hazards, the pipelines' potential impact on farmland, and Summit and Navigator's unpopular plan to use eminent domain to obtain the needed land, forcing property owners to sell them access if they refuse the companies' offers.

More: Navigator says it's 'pausing' efforts to buy land easements 'in some parts of Iowa'

Summit is the first project that Iowa regulators are considering. An Iowa Utilities Board hearing on the Ames company’s requested permit to build its pipeline began Aug. 22 in Fort Dodge.

More: Summit avoids going back to square one with pipeline permit application in North Dakota

Attorneys for landowners and other groups are fighting to get access to Summit's agreements with ethanol companies to learn more about the potential financial benefits to farmers. And they’re pushing hard to learn more about the investors in Summit, asking the utilities board to subpoena Bruce Rastetter, founder of Summit Agricultural Group, which spun off Summit Carbon Solutions in 2021, so he can be questioned.

Summit has pushed back on the efforts, telling regulators that the so-called “offtake agreements” with ethanol companies contain proprietary information that should remain confidential. And it called efforts to subpoena Rastetter an “improper strategy … to grandstand on irrelevant and unsupported theories in opposition to the pipeline.”

More: Iowa agribusiness magnate's access to Gov. Kim Reynolds paves way for pipeline, lawyer says

Walsh, the Food & Water Watch policy director, sees the tax-subsidized pipelines as a costly effort to extend the life of ethanol in an economy turning away from carbon-based energy production. He said those billions should instead be invested in helping farmers transition to a post-ethanol era.

"We need to help support a truly more resilient food system that's centered on sustainable agricultural food security, not propping up these technologies that are in place only to benefit the corporate interest," said Walsh, whose group supports increased investment in expanding locally grown food.

The federal government could adopt changes that "actually incentivize and subsidize more food crops that those of us in the United States enjoy in a regular basis," he said.

Vilsack has touted USDA programs that promote growing local and regional food as part of the agency's broad support for farming. But he said last week he sees a major role for agriculture in decarbonizing the nation's transportation system.

He said the work could help revitalize rural America.

"If you double the industry, that's small towns thriving. That's manufacturing coming back," Vilsack said, adding that it's also the leadership, energy and passion of "young people staying in rural places."

Donnelle Eller covers agriculture, the environment and energy for the Des Moines Register. Reach her at deller@registermedia.com or 515-284-8457.