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Randy Delbert Letang | SGP Bioenergy | Reduce Carbon Emissions To
Net Zero | Latest Discussion On Inflation Reduction With Panama
Government
The discussion around the Inflation Reduction Act has largely ignored a well-intentioned but misplaced
effort to clean up air travel. Included amongst a range of new clean energy tax credits offering up to
$1.75 per gallon incentive for sustainable aviation fuels (SAF).While I applaud the spotlight on SAF and
the focus on growing the industry, the incentives offer little more than a seventh-inning solution to a
second-inning problem.
There is no question that emissions from air travel are hard to abate. While commercial air travel is
reducing emissions annually by implementing new technologies into aircraft design and engines, the
kerosene-type fuel that powers jets still accounts for about 3% of US emissions and total emissions
could increase threefold by 2050. You’re not going to get on an electric or hydrogen flight across the
country anytime soon, so the best current answer is to make cleaner jet fuel.
The early adopter demand for SAF far exceeds available product. Every drop currently produced is
already contracted to airlines. Supply, on the other hand, is nearly non-existent. Last year, 33 million
gallons of SAF were produced globally – about 1% of the way toward the Biden Administration’s
domestic production target of 3 billion gallons annually eight years from now. Global demand is
expected to reach 230 billion gallons by 2050.
Economics 101 says if you lower cost, you increase demand. Tax credits have been shown to do this and
those included in the Inflation Reduction Act for electric vehicles or solar panels make sense right now
and allow for creative financing solutions to project developers looking to build more supply.These
industries have reached a level of maturity demonstrated by established independent and large
businesses with products in the market, active supply chains, and a core market demand. They are in
the seventh inning of their maturity and these tax credits will further drive demand to push these
industries to the end of the game – global mass market adoption.
SAF on the other hand, is closer to the second inning of its development. There are limited independent
players receiving investor capitalto break down barriers and drive innovation. The supply chain for
feedstock, refining capacity and delivery is almost non-existent outside the state of California.
While incentives may eventually play an important role, what we need now is more targeted
investmentthatfocuses on overcoming the two biggest barriers to advanced biofuels to date: 1) a lack of

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supply of purpose-grown crops and other waste material for use as feedstock and 2) a need for
integrated, end-to-end financingforactivating large-scale production facilities.
For more than 100 years we have developed a supply chain for petroleum and for close to 50 years we
have done the same for corn-based ethanol. We can’t wait decades to get alternative fuel feed stocks
into production. To accelerate this progress requires a better path for agriculture that also solves for
idled land and labor and does not in any way jeopardize our potential for growing much-needed food
stock for global consumption.
Rather than short-term incentives for off-takers and producers with established and finished biofuel
facilities, the focus should be on expanding farm subsidy programs to incentivize farmers to grow
targeted cover crops such as Camelina, CoverCress, Canola, and industrial, non-food crops such as Hemp
with an understanding that the cost to the biofuels producers of the final product is capped. Currently,
there is only enough agricultural residue to produce around 6.1 billion gallons of SAF per year, according
to the Commercial Aviation Alternative Fuels Initiative and 90 percent of the cropland is tied to corn,
wheat, and soy production. Incentivizing purpose-grown feedstocks would also help to quickly transition
refiners and infrastructure operators to purchase feedstocks from waste and contracted producers and
industry at cost.
With an increase in feedstocks, the second piece is support for the construction of large-scale advanced
biofuel refineries. In 2010, the U.S. Department of Energy’s Loan Program Office (LPO) gave a $465
million loan to an independent start-up named Tesla. By investing in an independent auto
manufacturer, the government helped foster innovation for which the Big Three were incapable. What
LPO did for electric vehicle innovation in 2013, it now needs to do for SAF and other advanced biofuels.
I am glad to see the creation of the $27 billion “Green Bank” included in the Inflation Reduction Act and
hope some of that investment will go to this type of targeted investment in advanced biofuel
production.
Not only is this possible, SGP BioEnergy is already doing the work. I was proud to stand beside the
president and secretary of energy of Panama this summer to announce the largest advanced and fully
integrated biorefinery and SAF production platform in the world. The Biorefineria Ciudad Dorada
(Golden City Biorefinery) in Colon and Balboa, Panama will produce 2.6 billion gallons of advanced
biofuel a year and is located at a central hub serving more than 1,900 ports worldwide; serving a global
demand to reduce carbon emissions to Net Zero. We will reach this mark in stages over the course of
five years, substantially increasing the supply of SAF and Renewable Diesel with the goal of ultimately
reducing the costs to near parity with conventional jet and diesel fuel.
The advanced biofuel industry is still early in the game of cleaning up aviation and now is the time to set
up companies for success in delivering on the scale that is required and mandated.Then once the
industry matures, we can call on tax and other incentives to ensure producers stay in business and
airlines reach their decarbonization goals.
Randy Delbert Letang
President and CEO
SGP BioEnergy