Iowa Governor Terry Branstad signed a piece of legislation into law on May 26 that will provide fuel retailers with tax credits to use biodiesel and also to use the 15% ethanol blend or E15. The new law also has provisions which create production incentives for Iowa biodiesel producers. The three key provisions are:
* The bill gives retailers a state income tax credit in 2012 of 2 cents per gallon for biodiesel blended at a 2% rate (B2 biodiesel blend) and 4.5 cents per gallon for a 5% or B5 biodiesel blend. In 2013, the credit for the 5% blend would continue but the 2% credit would disappear.
* For Iowa's 14 biodiesel plants, the new legislation creates a production sales tax credit of 3 cents per gallon in 2012, 2.5 cents per gallon in 2013 and 2 cents per gallon in 2014 (for the first 25 million gallons per producer).
* The bill also provides retailers with a 3-cent per gallon retailer state income tax credit for sales of the E15 ethanol blend.
Fuel retailers must be persuaded to install blender pumps for E15
"The job now turns to educating fuel retailers and consumers on how this new bill will help promote more fueling freedom at the pump," says Monte Shaw, executive director of the Iowa Renewable Fuels Association. Shaw and ethanol proponents must persuade retailers to install pump and tank equipment to handle E15, which was approved late last year by federal regulators for use in newer model cars and trucks nationwide. Biofuels proponents hope the higher blend (E15) will replace the currently used 10% (E10) blend.
The biofuels tax incentive bill was introduced and passed by the Iowa Legislature this year after lawmakers in 2010 declined to create a state mandate for ethanol use. Likewise, a proposal to mandate biodiesel use statewide also went nowhere in the previous session of the Iowa Legislature. "We are certainly glad our state lawmakers finally passed this legislation this year, and we thank Governor Branstad for signing it into law to provide these incentives," says Shaw.
The biodiesel industry virtually shut down its production in 2010 when Congress let the federal tax credits for biodiesel expire at the end of 2009. However, the credits were reinstated at the end of 2010. "The biodiesel industry was jumpstarted this year when Congress renewed the $1 per gallon tax credit and also imposed a first-ever mandate of 800 million gallons of biodiesel use in 2011.
Iowa corn and soybean groups, biofuel producers applaud new law
The Iowa Corn Growers Association also applauded Branstad's signing of the Iowa biofuels bill into law. "The bill, known as Senate File 531, improves the state of Iowa's incentives for biofuels use and also provides more money to improve the biofuels infrastructure to encourage service stations and other fuel retailers to install such items as blender pumps throughout Iowa," says Craig Floss, executive director of ICGA.
"We are excited that this," says Dean Taylor, a corn farmer from Prairie City in central Iowa who is the current ICGA president. "The delegates who participated in our annual ICGA policy process ranked ethanol and biofuels as a legislative priority and we are applauding the passage of this biofuels legislation".
ICGA leaders cite several provisions of the May 2011 Iowa biofuels bill as being particularly helpful. They point out that the new law:
* Improves the Iowa Renewable Fuels Standard's incentives by increasing the amount of incentive given to a retail station for meeting the Iowa RFS. The bill maintains the schedule as established in 2006, but provides additional incentives to retailers who meet the schedule.
* Extends the E-85 Promotion Credit at a stable level of 16 cents until December 31, 2017.
* Creates a new promotion tax credit for each gallon of E15 sold, regardless of the retail station's status in meeting the ethanol promotion (schedule). The bill provides an additional 3 cents for blends between E-15 and E-69. It eliminates the 50% requirement for biodiesel tax credit eligibility, and provides 4.5 cents per gallon on B5 blends.
* Provides $3 million per year for infrastructure such as blender pumps, E85, or biodiesel. The funds are redirected to the Renewable Fuels Infrastructure Program (RFIP) prior to being deposited into the Underground Storage Tank (UST) fund.
* Allows retailers to calculate both the RFS schedule calculation and their individual tax credits on a site-by-site or a company wide basis. This would leave the option for the retail station for method of calculation.
* Allows retailer stations with liability protection from consumer lawsuits for misfueling, so long as the retail station has provided the proper and legal labeling.
New law promotes biodiesel use, jobs and energy independence
Signing of the bill took place May 26 in the Iowa Capitol building. Officials of Renewable Energy Group (REG) a company that owns biodiesel manufacturing plants in Iowa and several other states, were on hand. REG president Daniel Oh thanked governor Branstad for signing the bill and supporting a comprehensive
renewable fuels program which encourages biodiesel made by Iowans to be used by Iowans. Oh says the new Iowa law promotes biodiesel use, green collar jobs and energy independence.
"With the Governor's signature on this bill, every Iowan has an opportunity to break free from imported petroleum use by burning biodiesel blends in their trucks, on their farms and in every diesel application in their business," he adds.
The bill encourages Iowa's petroleum marketers to blend biodiesel into on- and off-road diesel in a multi-year incentive program, points out Oh. In 2012, retailers will earn 2 cents per gallon for blends of 2% biodiesel (B2) and 4.5 cents per gallon for 5% biodiesel (B5) in 2012. For 2013 through 2017, retailers will earn 4.5 cents per gallon of B5.
Helps Iowa biodiesel producers compete with those in other states
"REG looks forward to continuing to partner with retail diesel locations, farmer-owned cooperatives and petroleum refiners to make Iowa a biodiesel utilization leader," says Oh. "REG is committed to being a reliable supplier of high quality biodiesel throughout the supply chain."
The new law also creates a biodiesel production incentive of 3 cents per gallon in 2012, 2.5 cents per gallon in 2013, and 2 cents per gallon in 2014 (for first 25 million gallons per producer). "By pairing a retailer's credit with a producer's credit, Iowa legislative leaders have created a successful program to promote Iowa's manufacturing sector while supporting green collar jobs and supporting Iowa farmers," he adds.
Monte Shaw, the chief executive of the Iowa Renewable Fuels Association, says this short-term production incentive for Iowa biodiesel producers is sorely needed. "This new production incentive will help Iowa biodiesel manufacturers compete with the producers of biodiesel in neighboring states, which have taken aggressive steps to protect their biodiesel producers," he says. "Jumpstarting biodiesel production in Iowa will create thousands of direct and indirect jobs."
Oh says REG's biodiesel is made from Iowa-produced animal fats, inedible corn oil, soybean oil and used cooking oil, all of which are by-products of protein and food production. REG, headquartered in Ames, employs nearly 200 nationwide and owns/operates two biorefineries in Iowa, one in Ralston and one in Newton.