Farm interests, fuel retailers battle plan to require higher ethanol, biofuel blends

Donnelle Eller
The DesMoines Register
A Kum & Go gas pump is seen on Jan. 26, 2021, in Des Moines. Gov. Kim Reynolds says she will seek legislation that mandates all commercial renewable fuel sold in Iowa to contain at least 10% ethanol and 11% biodiesel.

Some powerful industries have begun battling over Gov. Kim Reynolds' proposal to set a renewable fuel standard in Iowa, a move that would require retailers to offer motor fuel with higher levels of ethanol and biodiesel.

A new group called the Fuel Choice Coalition, which includes Iowa-based convenience store giants Casey's and Kum & Go, along with trucking and transportation businesses, is slamming the governor's bill. The group says the legislation would reduce consumer choice, raise prices for Iowa motorists and cost retailers at least $1 billion to upgrade their pumps, tanks and other infrastructure to meet the mandate.

On the other side are the Iowa Renewable Fuels Association, Farm Bureau Federation, Iowa Corn Growers Association and the Iowa Soybean Association. They are releasing a study, given in advance to the Des Moines Register, that says the mandate would create 3,500 jobs in Iowa and add nearly $550 million in household income from 2022-2026.

The study, paid for by the Iowa Renewable Fuels Association, says the proposed standard — requiring Iowa retailers to sell motor fuel with at least 10% ethanol or 11% biodiesel — would add millions of dollars annually to the state's economy, reaching nearly $460 million in 2026.

The increased economic activity, combined with tax credit changes, would generate about $235 million in added tax revenue over five years, the study says.

"If you look at it from a state of Iowa standpoint, from a consumer standpoint, from a taxpayer standpoint, this is a really good piece of legislation," said Monte Shaw, the renewable fuels association's executive director.

Critics: A 'terrible plan' for truck stops, retailers, customers

Iowa is the nation's largest ethanol and biodiesel producer, using the state's corn and soybean crops to make the renewable fuels. About half the state's corn crop, also the nation's largest, goes to the production of ethanol.

The mandate would add 117 million gallons of ethanol demand and 203 million gallons of biodiesel demand in Iowa from 2022 to 2026, the study says.

But Delia Meier, senior vice president of the I-80 Group, which owns the Iowa 80 Truckstop in eastern Iowa, and a member of the Fuel Choice Coalition, said the cost of the mandate would damage the state's transportation-related businesses — in particular, truck stops, whose customers could make their fuel purchases in other states. 

"It’s a terrible plan for truck stops, for retailers and for customers," Meier said. "I don't think it will even help (biofuels) producers."

The bill would require diesel fuel at most pumps to contain at least 11% biodiesel, beginning in the summer of 2022, climbing to 20% in the summer of 2024. The standard would be 5% during the winter, when higher biodiesel blends can gel at low temperatures.

The bill would continue tax credits the state provides retailers for selling higher blends of biodiesel and would make $10 million available annually so they can add pumps and other infrastructure needed to dispense the higher ethanol and biodiesel blends. But it would eliminate the credit for lower blends, which the coalition members say could make Iowa less competitive on price than other states and result in lower sales of biodiesel.

"Our customers are going 1,500 miles before they have to fill up ... so it's very easy to bypass Iowa," said Meier, whose family runs what's billed as the world's largest truck stop, near Walcott on I-80, serving about 5,000 vehicles a day.

Citing a 2019 report, the coalition says Minnesota has seen the average annual taxable diesel gallons fall 6% since enacting a biodiesel standard. At the same time, the average annual taxable sales of diesel in Iowa increased by 5%. In addition, the average price of diesel in Minnesota was 4 cents per gallon higher than in Iowa, the report showed.

Minnesota enacted its biodiesel mandate in 2002, but stepped up the requirements over time, requiring 10% biodiesel by 2014.

Advocates tout bill as expanding consumer choice

Shaw said he understands that businesses are upset with the tax credit changes that may reduce how much they receive. Iowa expects the retailers will claim about $23.6 million in biodiesel tax credits this fiscal year. But Shaw said the changes to the tax credits would cover the cost of infrastructure improvements.

"Some of the opposition is just kind of knee-jerk philosophical, 'Don't tell me what to do,'" he said. "OK, I get that. But there's a bigger public policy play for the state of Iowa."

Shaw argues the bill would expand consumer choice. Now, only about 300 of 2,400 Iowa retailers offer gasoline with 15% ethanol, he said. But with the increased investment proposed through the state's renewable fuel infrastructure program — providing retailers with about 70% of the improvement costs — "this is actually going to open up choices for consumers," Shaw said.

E15 is generally 5 to 10 cents per gallon cheaper than E10 at Iowa pumps. Most U.S. gasoline sold contains at least 10% ethanol.

Requiring more, cleaner-burning ethanol in fuel is "going to boost the economy, it's going to clean up the emissions from our air, and it's going to add household income," Shaw said, adding, "It's good for Iowa," especially rural Iowa.

Even though corn and soybean prices have risen in recent weeks, thanks to strong demand, in particular from exports, Shaw said the added demand from ethanol and biodiesel production will improve price support.

 "(Corn and soybean) exports look pretty good right now, but somebody flips the switch next month, and we'll be back in the red for farmers," Shaw said. U.S. and Iowa farmers have struggled to see profits since hitting record highs in 2013.

Meier and other members of the Fuel Choice Coalition said they support Iowa farmers and agriculture and have worked to expand access to biodiesel and ethanol, with the help of the tax credit incentives.

Meier said her business already has invested $350,000 to upgrade the fueling station's infrastructure so it can offer higher blends of biodiesel.

"We don't need to be micromanaged by the state," she said.

In a statement to the Register, Darren Rebelez, Casey's CEO, said the Ankeny-based company is an "advocate for renewable fuels and Iowa’s rural communities." But "we believe a free-market, incentive approach is the best way to increase renewable fuel sales in Iowa, not a government mandate."

Brenda Neville, CEO of the Iowa Motor Truck Association, said the group's 600 members often transport agriculture products — from manufactured goods to grain and livestock. But they are concerned about the bill.

One member, for example, told Neville he paid $10,000 in January to cover the cost of towing trucks that used a biodiesel blend that gelled, leaving drivers stranded. And anyone not wanting to buy biodiesel blends in sub-zero temperatures will be lined up at the one pump the bill would allow per retailer that could dispense gasoline and diesel without ethanol or biodiesel blended in it.

"The trucking industry has absolutely no issues with biodiesel," Neville said. "But we do have an issue when we're being told what we have to put in our trucks. ... Time is money for us."

Grant Kimberley, the Iowa Biodiesel Board's executive director, said the bill calls for using fuel with 11% or higher biodiesel only in the summer months. Fuel with 5% biodiesel would be allowed from October to mid-April, although it would not qualify for tax credits.

He said industry surveys show a majority of Iowa truck stops and retail sites typically offer B-11 and higher blends at least nine months of the year. And many other parts of the country use fuel that's 20% biodiesel or higher year-round. In New York City, "they use B20 blends all year long in their emergency fleets and snowplows," Kimberley said.

The Fuel Choice Coalition said most of the $1 billion costs that retailers could face would come from upgrading underground tanks, pumps and other infrastructure for gasoline with 15% ethanol. Nearly 2,000 underground tanks were installed before 2007 and would need to be replaced, the group said.

Shaw questions whether those tanks would need to be upgraded to accommodate higher biofuel blends. And, he said, the bill allows Iowa's governor the discretion to determine if the ethanol standard should be increased to 15%, beginning in 2025.

"Supporters recognize that there needs to be some flexibility there," he said, adding that the bill could be modified to provide more clarity around requiring higher blends.