Context

The 45Z Clean Fuel Production Credit is the first regulated market-based incentive that can reward a lower carbon intensity (CI) score earned in the field. That score only has value if the documentation reaches the plant, passes through every party that owns the grain along the way, and holds up to the credit buyer’s review.

USDA’s Secretary said the final rule puts “farmers, not Washington bureaucrats, in the driver’s seat”[1], and Treasury’s Notice 2026-53 conditions reduced-CI claims on USDA’s chain-of-custody and verification standards in 7 CFR Part 2100[4]. Final regulations are still pending.

However, the market remains unclear on one critical question: who keeps the mass balance books, and where. The answer will decide how much of the 45Z opportunity reaches U.S. farmers and whether the U.S. will lead the next generation of global agricultural markets. As written, the rule keeps the books with whoever owns the grain, so commercials and plants can buy and manage scored grain the same way they buy grain today: by title.

This article covers what the rule says, how grain trades, and how to keep the books so they fit both. In developing it, the Consortium engaged with leading verifiers, the Office of the Chief Economist (OCE) in the USDA (7 CFR Part 2100 primary authors), tax assurance providers, and some of the largest credit buyers and brokers. The reading rests on the codified text and on how commercial grain trades, and it is open for industry comment.

Title and ownership in grain markets

Grain trades by title. Under the Uniform Commercial Code, a sale is “the passing of title from the seller to the buyer for a price” (UCC § 2-106(1)), and the parties can agree in the contract when title passes (§ 2-401)[10]. Part 2100 uses the same concept: where the trade says a buyer “takes title,” the rule says an entity “takes ownership” (§ 2100.010). Ownership moves with the title, wherever the grain physically sits.

This matters because the rule’s chain-of-custody requirements apply to every party that “produces, processes, or takes ownership” of scored grain (§ 2100.010). In grain, the party that owns the bushels is often not the one holding them. For example:

• A farmer who stores corn on a warehouse receipt still owns it while it sits in the elevator’s bin.
• On a delayed-price contract, title passes to the elevator at delivery, even though the price is set later.
• A merchandiser can take title to grain in someone else’s elevator and sell it without ever handling it.
• In a string trade, title passes through several paper traders before a bushel ships, and each one owns the grain in between.
• A broker who arranges a trade for a commission never takes title at all.

Those arrangements carry roughly 5.5 billion bushels of corn that go to ethanol each year[11]. Some plants buy directly from farmers, some buy through commercials, and some contract all their origination to a single merchandiser that buys on their behalf[6]. Keeping the books with the owner lets every elevator, merchandiser, and ethanol plant buy and manage scored bushels with the same contracts, value chains, and systems it uses today.

Mass balance under Part 2100

Part 2100 uses mass balance. USDA chose it because it “allows for more flexibility than an identity preserved system, while still putting measures into place to protect against fraud”[3]. The interim rule defines it: “Mass balance is a method of accounting used to track the weight or volume of products moving through an entity without product segregation. The weight or volume of reduced-CI crops that is sold should not exceed the amount purchased”[5]. In practice, scored and conventional grain can share a bin, and the books and the audit protect against fraud.

Four provisions settle where the books are kept[2]:

1. The rule attaches to ownership.

   The first point of aggregation is “the entity that purchases crops directly from the farm” (§ 2100.002), and the interim rule puts it the same way: “The first entity to take ownership of reduced-CI feedstock after the farm is referred to as the first point of aggregation”[5]. Purchase and ownership are title terms, so the obligation follows the owner. A paper trader that takes title keeps mass balance books and is audited on them (§ 2100.034(a), § 2100.040(c)). A broker keeps none.

2. The books close by entity.

   Scored bushels bought plus opening stock must equal scored bushels sold plus closing stock, by CI, on a dry basis, over periods of no more than three months (§ 2100.034). Incoming grain is what was “purchased by entity,” and stored grain is what was “maintained by the entity” (§ 2100.034(d)(1)). Subpart D never uses a site, facility, or location as the unit of accounting, so a location-level balance would mean reading in a word the text does not contain.

3. Mixing is allowed, not required.

   “Crops with different CIs can be physically mixed at any entity along the supply-chain” (§ 2100.030(b)). That line sits directly under the requirement for mass balance accounting (§ 2100.030(a)) and is repeated in the applicability section (§ 2100.011). The definition of a mass balance system describes the result, “a claim on a part of the output, proportional to the input” (§ 2100.002), and nothing in § 2100.034 ties the books to grain moving.

4. Three documents go with every sale.

   Each sale carries proof the seller was verified, the farm’s Biofuel Feedstock Report, and an attestation of amount and CI signed under penalty of perjury (§ 2100.032(c)). Records must keep “a clear link between reduced-CI crops and documentation at all times” and “prevent the double sale” of scored grain (§ 2100.032(a)). The mass balance itself stays with the entity and goes to its own verifier (§ 2100.034(c)).

Subpart D is titled “Chain of Custody standards,” but every section under it is a recordkeeping standard, kept by the entity that bought and sold the grain (§ 2100.032(a)(1)). Custody in this rule is the paper trail that follows the grain from owner to owner.

Application to commercial supply chains

The claim moves with title: farm to first buyer, through any commercials, to the plant. Each owner closes its own balance and passes the three documents forward, so a plant can buy scored grain from a farmer or a commercial on the same terms. Grain flows largely stay as they are, and only the third-party verification and documentation change.

Every owner in the chain has its own audit obligation (§ 2100.040). If scored bushels pass through three commercials on the way to a plant, three verifiers test three sets of books. A shared entity-level ledger, with one balance per owner wherever the grain is stored, gives each verifier the same record instead of three reconciliations that may not agree. It also keeps any owner from selling more scored bushels than it bought.

Double counting is a central integrity risk in any environmental attribute market, and the field identifier is the rule’s most direct control against it. Every Biofuel Feedstock Report carries “a unique identifier for each field or management unit” (§ 2100.031(e)(3)(i)). If each field is registered once at the source and checked against other programs on the same acres, a duplicate is caught before it enters any ledger. Books kept bin by bin at each location are unlikely to catch a field that shows up in two places or two programs. The rule does not require it, but the same identifier can also be tied to the purchase contract, which buyers already have to keep on file (§ 2100.032(a)(2)). The ledger and a field-level clearinghouse then check the same claim from two directions, bushels on one side and acres on the other.

The report that moves with each sale names the farm, the producer, and the farm location (§ 2100.031(e)(2)), and the rule requires it to go to the buyer (§ 2100.032(c)(2)). A commercial selling scored grain to a plant therefore hands over part of its grower list with every load. Meeting that requirement without exposing the list, for example by controlling who sees grower details and how, brings more commercial participation into 45Z, and more of the opportunity to farmers.

The plant’s verifier is not the last check. Credit buyers, their lenders, and their counsel run their own due diligence before money moves. A record that reads the same at every link, from field to plant, is more likely to clear that review without a costly rebuild.

Current implementation and open questions

The infrastructure for this is already live. The Consortium connects verified data to shared mass-balance ledgers that run from the plant back through the commercials and growers that supply it[7]. Others have recently launched institutionally backed, field-level registries that bring further credibility and standardization to the market[8][9]. Consortium members, whose systems touch roughly 70% of U.S. grain[12], are working with registry providers to ensure interoperability with the ledgers and clearinghouse technology already built into their workflows. The technology, commercials, and plants are ready. What the market needs now is regulatory clarity.

One question belongs to Treasury: when scored grain is sold between two separate companies, does the claim move with the sale if the grain ships from a location other than where the scored grain was received? A ledger-based system that flags those sales lets Treasury’s answer apply to them without changing how grain trades and flows today, protecting both the credibility and the economic value of 45Z.

In summary, Part 2100 attaches mass balance obligations to the entity that takes ownership, closes the balance at that entity, and protects the claim with records, attestations, and audit. The Consortium asks Treasury and the IRS to adopt that reading in the final regulations: Part 2100 as written, applied at the entity that takes ownership. That keeps the books with the party that already signs the contract, gives the auditor one record to test, and lets the industry-supported infrastructure, already in place, scale with confidence.