By Leah Douglas

WASHINGTON U.S. Agriculture Secretary Tom Vilsack said on Wednesday he was confident the Treasury Department would release guidance by the end of the year that would make it easier for sustainable aviation fuel made from corn-based ethanol to qualify for subsidies.

The Biden administration has been divided over this issue for months, as it faces a strong lobbying push from stakeholders in the U.S. Farm Belt that see sustainable aviation fuel (SAF) as one of the only routes to grow the ethanol industry.

Environmental groups say clearing land to grow crops for fuel is counterproductive to curbing global warming, while the ethanol industry argues that the U.S. needs to use ready technology to quickly reduce carbon dioxide emissions.

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

"You can be confident you'll see something coming from Treasury, I would anticipate and hope, by the end of the year," Vilsack said in a conversation with Reuters reporters. "They will provide some direction and guidance, and I think the actual rules and regulations and so forth may take a little bit longer."

When asked if he was confident that ethanol will become an SAF feedstock, Vilsack said he was.

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.

Vilsack also said that updates to GREET underway at USDA primarily deal with how the model calculates emissions from tilling land to grow crops.

(Reporting by Leah Douglas in Washington; writing by Leah Douglas and Stephanie Kelly in New York)