Sustainable Fuel Focus Shifts To U.S. States

U.S. government support of sustainable aviation fuel has waned, shifting the impetus for increasing its production to the states. But progress continues.

“It’s a pivot,” says Keith Sawyer, Avfuel manager of alternative fuels. “The focus had been typically on the federal government; now investors are including what may or may not be offered by states in their calculations, in their rates of return on investment in facilities.”

The One Big Beautiful Bill (OBBB) that became law with President Donald Trump’s signature on July 4 amended the existing 45Z clean fuel production credit (CFPC) to benefit biofuel producers instead of blenders and extended it for two years through 2029. Added to the tax code during the Biden administration through the 2022 Inflation Reduction Act (IRA), the CFPC was set to expire in 2027.

The continuation of the tax credit is cause for some optimism that ongoing development of SAF capacity is supported—given that one of Trump’s early actions after becoming president in January was to pause funding disbursements under the IRA, which was considered a major achievement of former President Joe Biden’s climate agenda.

Trump’s executive order was slowed by legal challenges, but the OBBB approved by the Republican majority in Congress contains a section that rescinds unobligated balances of the FAA’s Fueling Aviation’s Sustainable Transition (FAST) grant program, also established under the IRA.

The Biden administration had announced $291 million in FAST grants in August 2024, primarily for 22 projects “that produce, transport, blend or store sustainable aviation fuel.” The largest single grant—$50 million—went to Martinez Renewables LLC, a 50/50 joint venture of Marathon Petroleum and SAF producer Neste, to fund the conversion of a Marathon facility in Martinez, California, for renewable fuels production.

Neste confirmed to BCA that the grant was rescinded by the FAA earlier this year before any funds were disbursed.

Under the OBBB, the CFPC has been modified; the value of the credit for production of “neat” or pure, unblended SAF declines from $1.75-per-gallon to $1-per-gallon after 2025, aligning it with the credit for renewable diesel. And the CFPC will apply only to SAF that is derived from renewable feedstocks produced or grown in the U.S., Mexico, or Canada. Sugar cane, soybeans, tallow, used oils and greases sourced outside of North America won’t qualify.

“It’s a focus on North American supply and very centric to the U.S,” says Sawyer.

The modifications and extension of the CFPC through 2029 represent “a significant win for agriculture-linked, domestic renewable fuels” derived from corn, soybeans and other biomass-based feedstocks, affirms the American Farm Bureau Federation.

Also welcoming the new 45Z credit as one of the OBBB’s “America First” energy provisions was Americans for Clean Aviation Fuels, a coalition that joins Airbus, Airlines for America, Delta Air Lines, and NBAA representing the aviation industry with agriculture groups and energy companies ExxonMobil and BP.

States Take Precedence

The tax credit extension has given investors in SAF plants and infrastructure more certainty for the near future, Sawyer says. At the same time, the federal government’s withdrawal of grant support and funding has shifted the onus of growing the industry to incentives and projects offered in various states.

California, Oregon and Washington have clean fuels programs that incentivize SAF production. Multiple states—Arkansas, Colorado, Illinois, Iowa, and Minnesota among them—provide tax incentives for SAF production or consumption.

There were 110 million gallons of neat SAF supplied in the U.S. last year, of which about 70 million gallons were imported, Sawyer says. (Overall jet fuel consumption was roughly 25 billion gal.) Neat SAF is typically blended with conventional jet fuel at a 30/70 ratio. Much of the imported neat SAF came from Singapore, a hub of Neste’s renewable fuel production operations.

Sawyer expects that neat SAF production will continue to grow to as much as 150-200 million gal. this year, with an increasing proportion of domestic production, as airlines take on more sustainable fuel and new SAF production facilities come on stream.

Finland-based Neste has increased production in the U.S. since commissioning capacity last year to blend and store up to 33.5 million gal. of SAF at the Galena Park Terminal on the Houston Ship Channel.

Calumet Inc., subsidiary Montana Renewables plans to expand annual SAF production at its biorefinery in Great Falls, Montana, from 30 million gal. currently to 150 million gal. by 2026 and 300 million gal. by 2028. The U.S. Department of Energy (DOE) issued a $1.44 billion loan guarantee for the project in the final months of the Biden administration that initially was paused but then allowed by the Trump administration.

Also intact was a $1.46 billion loan commitment Gevo Inc. received from the DOE during the Biden administration for its Net-Zero 1 project in Lake Preston, South Dakota. An alcohol-to-jet project, NZ1 will use regeneratively grown feedstocks—primarily corn—to produce 60 million gal. of SAF annually.

Valero Energy Corp. has completed construction of a SAF project at its Diamond Green Diesel renewable diesel plant in Port Arthur, Texas, that potentially will produce 235 million gal. annually of sustainably sourced jet fuel. Diamond Green Diesel is a joint venture between subsidiaries of Valero Energy and Darling Ingredients of Irving, Texas, the largest collector and processor of used cooking oil in North America.

Ann Arbor, Michigan-based Avfuel, a “refinery-to-wingtip” fuel distributor, takes blended SAF from Neste’s Selby and Vopak terminals in San Francisco and Los Angeles to supply customers on the West Coast and from Galena Park in Houston to supply customers in the mid-continent.

Last October, Avfuel announced a partnership with Valero Marketing and Supply Co. to supply blended SAF across the southeastern U.S. Since then, the company has expanded its distribution footprint beyond Port Everglades in Florida to the East Coast with the addition of a supply terminal in Linden, New Jersey, and to the central U.S. with a terminal in Denver.

Avfuel now has eight SAF supply points in California, Texas, New Jersey, Florida and Colorado serving the U.S. market. “There really isn’t a place in the U.S. that Avfuel can’t supply SAF,” Sawyer says. Including its operations in Europe, the company supplies 58 of the 110 airports where SAF is available worldwide.

Fixed-base operator (FBO) Signature Aviation offers sustainable jet fuel at 33 locations worldwide through multiple blended SAF supply agreements, including eight locations in the Europe, the Middle East and Africa region.

FBO chain Jet Aviation, a General Dynamics subsidiary, has agreements with World Fuel Services and other producers to supply SAF at 12 locations worldwide, including at FBOs in Bedford, Massachusetts; Dallas and Houston, Texas; Palm Beach, Florida; Scottsdale, Arizona, and Teterboro, New Jersey.

Industry analysts estimate that around 10% of neat SAF is consumed by business aviation operators and airframers including Boeing, Embraer, Dassault Falcon Jet, Gulfstream and Textron Aviation that are mainly supplied by truck at fueling locations. The bulk of SAF is delivered by pipeline to major airports, including Chicago O’Hare, New York JFK, and Los Angeles and San Francisco international airports, and consumed by airlines.

Sawyer doesn’t think SAF has become less of a priority for business aviation, though he observes that corporations with flight departments have become more focused on other issues like tariffs. He notes that fractional operators NetJets and Flexjet are strong proponents of using SAF as a percentage of their fuel.

Avfuel remains committed to aviation’s goal of producing net-zero carbon emissions by 2050.

“With the SAF being produced, the ability to put it in the pipelines and get it to truck racks has really opened up the infrastructure to permit the delivery,” Sawyer says. “We’ve worked very hard with our suppliers to enable that infrastructure to be able to supply the volumes we need to support our customers.”