Biden administration to release aviation fuel subsidy guidance by end of week - sources

By Stephanie Kelly and Jarrett Renshaw

NEW YORK, Dec 11 (Reuters) - The Biden administration expects the Treasury to release guidance by the end of this week on whether to make it easier for sustainable aviation fuel made from corn-based ethanol to qualify for subsidies, multiple sources familiar with the administration's thinking told Reuters.

For months the administration has been divided over this issue, as it faces a strong lobbying push from stakeholders in the U.S. Farm Belt, a key political constituency ahead of next year's presidential election.

Corn-based ethanol producers see sustainable aviation fuel (SAF) as one of the only routes to grow their industry amid rising sales of electric vehicles. They also argue that the U.S. needs to use ready technology to quickly reduce carbon dioxide emissions.

Meanwhile, environmental groups say clearing land to grow crops for fuel is counterproductive to curbing global warming.

It is unclear what the administration's guidance will say. The White House and Treasury Department declined to comment for this story.

Reuters reported in September that the Biden administration would likely delay a decision until December. The guidance was expected in September.

In late November, Agriculture Secretary Tom Vilsack told Reuters he was confident ethanol will become an SAF feedstock, when asked.

"They (U.S. Treasury) will provide some direction and guidance, and I think the actual rules and regulations and so forth may take a little bit longer," he said.

The billions of dollars of subsidies the ethanol industry hopes to have access to are part of last year's Inflation Reduction Act (IRA), President Joe Biden's signature climate law. SAF producers seeking tax credits must demonstrate with an approved scientific model that their fuel generates 50% less greenhouse gas emissions over its lifecycle than petroleum fuel.

Midwest ethanol producers have asked the administration to adopt the Department of Energy's Greenhouse Gases, Regulated Emissions and Energy Use in Technologies (GREET), which would enable ethanol-based SAF to qualify, while environmentalists want standards that would favor inputs like used cooking oil and animal fat.

(Reporting by Stephanie Kelly and Jarrett Renshaw; Editing by Mark Porter and Aurora Ellis)