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2021 Iowa Biofuel Standard Legislation FAQ

What is the Iowa Biofuel Standard Legislation?

The Iowa Biofuel Standard Legislation is a proposed policy that expands the use of biofuels grown and produced in Iowa, and supports increased infrastructure funding for higher biofuel blends while protecting the Iowa taxpayer. The legislation, with an agriculture focus, calls for fuel specifications that will increase demand of higher biofuel blends such as B20 and E15, thus improving the quality of the fuel supply. In addition, by reforming existing biofuel tax credits, this legislation provides significant sources of revenue for the underfunded, overutilized Renewable Fuels Infrastructure Program. Furthermore, with the restructuring of these existing biofuel tax credits the Iowa General Fund will see a return of tens of millions in savings every year.

Why the need for a standard?

Today, coastal states are largely driving the future of transportation fuel as they enact electric vehicle (EV) mandates and other legislation tipping the scales to promote EV’s. We’ve seen Washington D.C. and at least one major automaker joining this effort now, too. Midwestern states must become a part of the transportation fueling conversation to carve out markets that value our participation in the green energy movement, which will in turn benefit our farming communities and rural livelihoods. If we do not join the effort, the science-based benefits of biofuels, including the significant reduction of greenhouse gases, could be left behind. 

Iowa is a leading state in corn, ethanol, soybean and biodiesel production. A biofuels standard would help provide stable support for farmers and rural communities, as well as other aspects of our economy. It would also help Iowa weather the vast uncertainty present in policies like the federal Renewable Fuel Standard. Also, other Midwestern states such as Minnesota and Missouri have moved to biofuels standards and are working to further expand them. Illinois introduced a biodiesel requirement bill in 2021. It is common sense that Iowa, the nation’s leader in biodiesel and ethanol production, promotes this vital industry and advances the pro-growth policies we have seen over the last 10 years.
 

How will this help Iowa’s economy?

Hit hard by the coronavirus pandemic, the derecho and drought, Iowa’s economy needs any boost it can get. The increased economic activity generated by biofuels production and associated spending circulates throughout the entire Iowa economy, creating jobs and tax revenue. Importantly, it helps the farm economy and rural communities. When farmers have an opportunity to participate in the energy market, they can diversify their operations. Our state should prioritize using an Iowa-manufactured product like biofuels over fuel made from foreign oil. 

Based on its size and scope, the renewable fuels industry has the following impacts on Iowa’s economy:

  • Accounts for about $4 billion of Iowa’s GDP;
  • Generates about $1.8 billion of income for Iowa households; and
  • Supports more than 37,000 jobs through the entire Iowa economy. 
Will this negatively impact Iowa’s major fuel retailers?

No. In fact, if you look at the national picture, there is a seismic shift in energy underway. It’s noteworthy that other states are trying to phase out petroleum-based products by revamping their infrastructure to accommodate mass adoption of EVs to reduce carbon emissions. But biofuels also reduce carbon emissions and are a more economical choice with more immediate benefits. The bottom line is our fuel supply is evolving and Iowa should remain a leader in this space. If petroleum marketers willingly adopt policies that help lower their carbon score, it will benefit liquid fuels and therefore their own long-term success.

Additionally, most Iowa fuel retailers are well-accustomed to handling biofuels. In 2019, according to an Iowa Dept. of Revenue report, 1,968 Iowa retail locations reported selling at least one type of ethanol blend and 808 reported selling one or more blends of biodiesel. Blends of B11 or higher made up 57.8 percent of total on-road diesel sales. Further, both large and small retailers in Minnesota and Missouri have had no adverse impacts from their states’ laws. In fact, major retailers in Iowa operate hundreds of stores in those states and have been expanding their footprint there. If such standards hurt these businesses, wouldn’t these retailers be leaving such states instead of expanding?
 

Will this legislation restrict consumer choice?

No, just the opposite. It will give consumers more access to fuels other than just petroleum. Also, this legislation still allows retailers to offer E0 (no ethanol) for older cars, small or off-road motors, boats, motorcycles, etc., and has certain exemptions for biodiesel, too. More importantly, the provisions of the legislation will increase access to higher quality, cost-effective fuel choices that will save Iowans’ pocketbooks while cleaning the air we breathe. Furthermore, every car on the road today can legally use E10, while any car 2001 and newer (more than 95% of all cars on Iowa roads) is approved for E15 usage. Likewise, all diesel engines are capable of running on up to 20 percent biodiesel (B20).

Won’t truck drivers just fuel up in other states instead?

Plain and simple, no. This argument was used during the last fuel tax increase debate in 2015, but based on data in the Annual Retailers Report from the Iowa Dept. of Revenue, Iowa has seen on-road diesel sales grow since the fuel tax went up. In addition, Minnesota has a B20 standard while Missouri and Illinois are looking to complete a biodiesel standard this year, and Missouri already has an ethanol standard, which would form a strong biofuels corridor. 

Can our petroleum infrastructure handle higher blends of biofuels?

Yes. Firstly, all equipment is compatible with B20 blends, so no changes are required for diesel fuel blends. For gasoline, savings generated from the proposed biofuel tax credit reforms will provide roughly $10 million annually for the Renewable Fuels Infrastructure Program (RFIP). Over the coming years this funding will ensure that every retailer in Iowa that isn’t currently offering E15 will be able to receive a $50,000 grant to help fund equipment upgrades if they choose to add E15. And remember, even after expanding RFIP, tens of millions of dollars will still accrue to the state’s general fund.

Will the Iowa Biofuels Standard cost the state money?

Quite the contrary. This legislation marks a shift away from incentives which, while effective, cost the state money. Reforms to current biofuel tax credits included in this legislation will significantly reduce state liabilities. Overall, the general fund will save roughly $5 million per year in years 1-2, over $15 million per year in years 3-5 and well over $25 million per year by the end of the decade! It will also allow funding of current incentives for lower blends to be redirected into badly needed infrastructure, a win for the budget.

Are there any performance concerns with biodiesel?

No. Holding on to rumors of poor fuel quality from decades past is like comparing a bag phone from the 1990s to an iPhone today.

Biodiesel blends of 20% or lower demonstrate no significant change in engine performance, according to the DOE National Renewable Energy Laboratory and countless additional research. Additionally, studies by NREL show the biodiesel industry has substantially met or exceeded national fuel quality standards. Plants certified under BQ-9000, the industry’s quality assurance program, consistently hit the quality mark, and all of Iowa’s biodiesel major production facilities are certified. Furthermore, studies show any fuel economy changes with B20 are essentially a wash. Also, with proper blending and handling, B20 has been used successfully all year in the coldest U.S. climates, according to the Department of Energy – although this bill would bring blend levels back down to B5 during winter months as a precaution. 

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