Iowa Legislature Passes Renewable Fuels Bill

Iowa Legislature Passes Renewable Fuels Bill

Bill would boost E15 ethanol sales in Iowa, and also help Iowa biodiesel producers to be better able to compete in the marketplace with biodiesel produced in other states. This bill is expected to be signed into law by Governor Branstad, but that's not a sure thing.

The Iowa Legislature on May 4, 2011 completed work on comprehensive renewable fuels legislation that boosts E15 ethanol sales in Iowa and helps the state's biodiesel producers. The Iowa Senate passed the bill by a vote of 48 to 1 on May 2. The Iowa House of Representatives passed the bill, known as SF 531, on a vote of 81 to 13 on May 4. The bill now heads to Governor Terry Branstad who is expected to sign the bill into law.

However, the Iowa Corn Growers Association, which supports the bill, is taking nothing for granted. ICGA leaders are encouraging farmers to call the governor's office and "tell his staff you want the governor to sign this bill."

Included in the bill is a new 3 cent per gallon retailer tax credit for E15 ethanol sales. "This provision makes Iowa the leader in E15 public policy," says Monte Shaw, executive director of the Iowa Renewable Fuels Association. "With final E15 approval expected from the federal EPA this summer, Iowa fuel retailers will have an incentive to begin offering E15 on day one. E15 will be an option for Iowa motorists only if Iowa retailers and gas stations choose to offer the higher blend. The E15 tax credit is an important tool for retailers looking to add the lower E15 ethanol blend to their fuel product mix."

Bill also creates short-term production incentive for biodiesel

The bill also creates a short-term production incentive for Iowa biodiesel producers. "The biodiesel industry is really going through a shaking out process right now," notes Shaw. "It's a financial shakeout as the states surrounding Iowa have taken aggressive steps to protect their biodiesel producers."

He adds, "However, this new production incentive for Iowa will help our state's biodiesel producers compete with biodiesel production plants in neighboring states. Ramping up Iowa's biodiesel production will create thousands of direct and indirect jobs."

The bill contains a number of other provisions, including:

• Misfueling liability protection for retailers.

• An enhanced E85 retailer tax credit.

• An extension of the biodiesel retailer tax credit for blends of B5 (5% biodiesel with 95% petroleum diesel) and higher.

• $3 million in annual funding for Iowa's Renewable Fuel Infrastructure Program which provides grants for installation of blender pumps, E85 pumps and biodiesel dispensers at fuel stations across the state. Some money will go to biodiesel terminal infrastructure for improvements there too.

• Modifications to Iowa's 25% Iowa renewable fuels standard and the state's ethanol tax credit.

• Codifying the ASTM fuel specification for biodiesel blends between 6% and 20% biodiesel.

Important legislation, especially for next generation of biofuels

If Iowa is going to be a leader in production of biofuels, which it already is, then Iowa should be a leader in the use of biofuels too, says Mindy Larson Poldberg, director of government affairs for the Iowa Corn Growers Association. "What the legislature has done here today by passing this legislation is very important for the next generation of biofuels, such as E15 ethanol, which is the 15% ethanol blend with gasoline that motorists need to start using," she says.

"The Iowa Legislature, in passing SF 531, provides a number of much-needed incentives both for ethanol and biodiesel," adds Poldberg. "Iowa will now truly be leading the nation in regard to providing incentives for the use of biofuels."

"For example, the bill includes a 3 cent per gallon incentive for E15 use," she explains. "There are a lot of people who want to use E15 and consumers in the U.S. are going to be able to use it in conventional cars very soon. The Iowa Legislature has shown its support this week by including that very important incentive in this new legislation. It's a 3 cent per gallon retailer tax credit for sales of E15 ethanol. The bill also includes a 16 cent tax incentive for E85 ethanol to encourage more use of the 85% ethanol blended fuel."

Incentives are needed to help move E15 into the marketplace

There is a lot in this bill to boost renewable fuels by providing more and stronger incentives, and this legislation is truly needed, says Poldberg.

Market access for E15 ethanol is necessary because of the increasing amount of ethanol the U.S. produces each year. The traditional 10% blend or E10 ethanol fuel is now running into the so-called "blend wall." Blending ethanol at 10% with gasoline, and with the U.S. using 130 billion to 140 billion gallons of gasoline a year, means the E10 ethanol market is already saturated. The U.S. is now producing 13 to 14 million gallons of ethanol per year.

"So the use of the E15 blend is the way our nation must go, to expand ethanol's share of the gasoline market. We are giving a big thanks to the Iowa Legislature today for recognizing the need for E15," says Poldberg.  

Incentives for biofuels are good for state of Iowa's economy

She adds, "The tight financial situation regarding the state of Iowa's budget is constantly in the news and every dollar our state spends needs to be an important investment of Iowa taxpayer dollars, and such an investment must be good for our economy. Legislators this week have shown that they believe biofuels are a priority for our state. These incentives for biofuels will not only be good for Iowa corn growers, but will also be good for consumers because this legislation will help result in lower gasoline prices for them and certainly we already know that the biofuels industry creates jobs in the Iowa economy."

Supporters of the legislation see it as an investment by the state because Iowa has had such good growth in its ag economy in the past few years, compared to the problems in the rest of the economy nationwide. Thanks to strength in corn and soybean prices due in large part to development of the biofuels industry, this investment in biofuels makes a lot of sense, says Poldberg. Besides, it doesn't look good if you produce a large amount of biofuel in your state and don't encourage its use in your own state, as you are asking other areas of the country to use more biofuel.

Governor needs to sign this bill before it can become law

Also noteworthy is the 4.5 cent per gallon tax credit for a B5 blend of biodiesel. That's a significant change in the law in Iowa. Iowa has previously provided an incentive for the B2 or 2% blend. "Now, if this bill is signed into law, we are going to provide the incentive for B5, a higher blend of biodiesel," she says. "That's a very important step."

In addition, the bill calls for a $3 million annual commitment by the state to provide cost sharing for infrastructure. Specifically, blender pumps, E85 pumps, heaters for biodiesel storage tanks at terminals, and other specialized and costly equipment need to be installed by retailers and others. This is very important if Iowa is to grow biofuel production and biofuel markets in this state, she adds.

Supporters of ethanol and biodiesel expect that governor Branstad will want to sign this bill. He has been a strong backer of biofuels with his policies in the past. "But at the same time," says Poldberg, "we know these days with an extremely tight state budget, every dollar is very important and state legislators and the governor's office are now in very serious budget discussions. So we are asking farmers and other supporters of renewable fuels to call 515-281-5211 with a simple message. Just tell the people at the governor's office that you want Governor Branstad to sign this bill."

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