Biodiesel Supporters Urge Iowa Legislators to Extend Fuel Tax Incentive

(ANKENY, Iowa) – Iowa biodiesel producers, soybean farmers and other supporters took to the State Capitol today to ask lawmakers to extend a break in fuel tax for diesel that contains at least 11 percent biodiesel. The policy has almost tripled the number of retailers carrying biodiesel in Iowa, proponents said, increasing availability for consumers while bolstering the state’s farmers and economy. 

The Fuel Tax Differential amounts to a 3-cent per gallon reduction in the cost of fuel tax for blends of 11 percent biodiesel (B11) or higher. The provision will sunset this year without legislative action. 

A bill that would extend the sunset to June 2026 passed the Senate Ways and Means Committee earlier this week, and is on the House debate calendar.

About 47 percent of on-road diesel fuel gallons sold in Iowa contain B11 or higher, according to the state Department of Revenue. The same report shows 771 retailers carried biodiesel in 2018, the most recent year available, almost triple the number in 2010. 

“This policy has had extraordinary success at boosting biodiesel availability and use in Iowa, and that benefits all Iowans,” said Grant Kimberley, executive director of the IBB. “Biodiesel provides thousands of jobs, supports our struggling farm economy, and benefits the environment.”

In 2015, the legislature passed SF 257 to increase Iowa’s fuel tax. The bill included language creating the current fuel tax differential between diesel fuels based on biodiesel content. 

The IBB is asking the legislature to continue the biodiesel fuel tax differential as currently enacted by either removing or extending the existing sunset.  

“We believe the fuel tax differential is a necessary component of Iowa’s biodiesel promotion program and is key to maintaining Iowa retailers’ competitiveness against other states that provide biofuel incentives,” Kimberley said. 

In 2019, Iowa remained the nation’s leading biodiesel producer, at 310 million gallons. The state’s comprehensive biodiesel policies are a primary reason for that, proponents said. 

A study by ABF Economics shows biodiesel supports about 3,875 full time equivalent jobs and contributes $489 million to the state’s Gross Domestic Product annually. 

The IBB also told legislators it fully supports Governor Kim Reynolds' request for $5 million annually for biodiesel and ethanol infrastructure, through the Rebuild Iowa Infrastructure Fund.

Biodiesel is an advanced biofuel made from agricultural byproducts and co-products, such as soybean oil. The Iowa Biodiesel Board is a state trade association representing the biodiesel industry. For more information on biodiesel, visit IowaBiodiesel.org.