Bill Introduced in Legislature to Boost Ethanol Sales

Those blue and green ethanol stickers will stay on gas pumps.

A proposal by an Iowa legislator to remove the labels on gas pumps that identify which gasoline contains E10 or 10% ethanol has died. The proposal triggered a number of complaints from consumers that lawmakers wanted to trick motorists into buying ethanol, who might otherwise avoid buying the E10 blend.

The president of the Iowa Senate—state Sen. Jack Kibbie, a Democrat who is a farmer from Emmetsburg, that's not true. He made the proposal thinking that the content of the gasoline mattered less than the price per gallon. He figured removing the E10 labels from the pumps might prompt some motorists to choose the cheaper ethanol fuel rather than straight gasoline.

The proposal would have left the decision on whether to take off the labels up to gas station owners. Both Democrats and Republicans in committee meetings discussed the matter and gave the proposal a "thumbs up."

Ethanol labels will stay on the pumps

But on February 28, after hearing so many complaints from Iowans during the past two weeks, Kibbie deleted the part of his proposed renewable energy bill, Senate file 2137, that called for allowing the E10 labels to be removed. "For most Iowans, what we learned is that they want to know what's in their gas," he says.

Kibbie still believes the main consumer issue when it comes to gasoline is how much it costs. But enough Iowans disagreed to get him to drop his proposal from the original renewable energy bill he introduced a couple of weeks ago. Thus, on February 28 the Iowa Senate unanimously approved the modified legislation and the bill now goes to the House.

The modified Senate file 2137, if it is passed by the House and is signed into law by the governor, would allow 87 octane gas in Iowa to contain ethanol. Currently, Iowa law allows ethanol in gas with an octane level of 89 or higher. Gas with 89 octane with ethanol is typically a dime per gallon cheaper than the 87 octane straight gasoline, notes Kibbie.

Law now requires E10 labels on pumps

A couple of weeks ago Kibbie introduced the original Senate file 2137 with the idea of increasing sales of ethanol in the state. The bill called for allowing gas stations to remove the ethanol labels on E10 pumps. The proposed legislation was written so that the businesses would decide on their own whether or not to remove the labels. Currently, ethanol labels are required on gas pumps selling the 10% ethanol blend in Iowa.

By changing the state law and allowing the labels to be removed, Kibbie reasoned that usage of the 10% ethanol blend would increase in Iowa, since motorists would buy more of the corn-based fuel. The bill would apply only to E10, which is 10% ethanol, while E85, biodiesel and other renewable fuels would still have to be labeled on the pumps.

Kibbie notes that the E10 blend now accounts for around 73% of gasoline sales in Iowa, a percentage that hasn't risen for the past few years. The idea of removing the labels from the pumps is to mask the contents of the E10 so motorists - especially out of state motorists--who don't burn ethanol in their vehicles would buy it anyway.

Legislative proposal has been revised

The Iowa Corn Growers Association worked to convince Kibbie to change part of the bill. ICGA wants to keep the E10 labels on the pumps.

At the urging of ICGA and others, last week Kibbie struck the labeling portion of the bill and replaced it with an amendment to give consumers access to another ethanol product by allowing ethanol to be blended into fuel with an 87 octane rating. Iowa currently only sells the E10 blend in the 89 octane version.

"If passed, this revised bill will likely result in increased ethanol usage, and deliver even cheaper fuel to the consumer, who is paying about $3 per gallon at the pump today," says Mindy Larsen Poldberg, director of government relations for ICGA. "We support this amendment and we thank Senator Kibbie for working with us on this important bill."

ICGA supports labeling of pumps

ICGA supports mandatory ethanol pump labels for several reasons, she explains. "First, we want to ensure no backsliding for our current E10 sales, which are around 75% statewide in Iowa," says Larsen Poldberg. "Other states that have removed labels have not reached a level of sales higher than Iowa. For example, Kansas is only 50%."

Another reason is that in states where there is voluntary labeling of the ethanol pumps, consumers may be charged a "premium" price for the "specialty" product. That would hurt sales of ethanol.

Still another consideration in Iowa is 2009 is the first implementation year for the 25% Iowa Renewable Fuels Standard, which is an incentive ICGA supports. The 25% Iowa RFS will help boost ethanol sales, she says.

Iowa RFS will help boost ethanol sales

ICGA worked hard and got the Legislature to pass the Iowa RFS legislation and the governor to sign it into law last year. How will the Iowa 25% Iowa RFS work? Beginning in 2009, gasoline retailers who do not push more ethanol into E10 blends or offer E85 or biodiesel will soon see a reduction in their tax incentives.

"There is strong consumer support for ethanol—Iowa's home-grown motor fuel," says Larsen Poldberg. "It is true that with nearly 75% of the gasoline sold in Iowa now containing 10% ethanol--that means 25% of Iowa's consumers do not choose E10. But we think this newly revised bill that the 2008 session of the Iowa Legislature is considering is a better approach than voluntary labeling would be."

Talk of requiring ethanol to be mixed in all gasoline sold in Iowa never got traction in the Legislature during the past couple of sessions. However, Minnesota and Missouri already have laws on the books that require ethanol in all gasoline fuel blends sold in their states, notes Kibbie.

Retailers have different view

Tara Deering-Hansen, a spokeswoman for Kum & Go convenience stores in Iowa, says the chain would leave the stickers on, if a bill passed the Iowa legislature giving gas stations the option of labeling ethanol pumps. "We believe our customers want to know this information," she says.

Dawn Carlson, president of Petroleum Marketers and Convenience Stores of Iowa, says most of the 1,500 retailers who belong to her organization would leave the stickers on the pumps. "People have a right to know what they are buying," she says. "For whatever reason, 25% of consumers in Iowa are choosing not to buy ethanol, even if it means paying a dime more a gallon for 87 octane gasoline that doesn't contain any ethanol."

Monte Shaw is executive director of the Iowa Renewable Fuels Association, which represents ethanol and biodiesel manufacturers in the state. Shaw says members of his organization want the state to remove the requirement that retail gas stations post the ethanol label on E10 pumps, but he also says IRFA isn't pushing the issue. "We are more interested in the proposal that would clear the way for stations to start selling ethanol in 87 octane fuel rather than just 89 octane fuel," says Shaw.

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