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Tax differential, infrastructure funding front and center during Capitol visit

Article cover photo
Members of the Iowa Biodiesel Board spent the day at the Iowa State Capitol outlining legislative priorities for lawmakers. (Photo: Joseph L. Murphy/Iowa Soybean Association)

By Bethany Baratta, ISA senior writer

Biodiesel proponents this week met with legislators at the Iowa capitol to secure support in extending a fuel tax break for diesel that contains at least 11% biodiesel (B11).

The Fuel Tax Differential, a 3-cent tax reduction to blenders who add at least 11% biodiesel to their petroleum, began in 2015. It’s set to sunset on June 30 if no legislative action is taken.

The implementation of the legislation has led to a growth in biodiesel, said Grant Kimberley, director of market development for the Iowa Soybean Association (ISA) and executive director of the Iowa Biodiesel Board (IBB).

“Since 2015 when the fuel tax differential was first put into place, we’ve seen a 75% increase in blends of b11 or higher used in Iowa,” he said.

About 47% of on-road diesel fuel gallons sold in Iowa in 2018 contained B11 or higher, according to the latest data available from the state Department of Revenue. The department’s report shows that 771 retailers carried biodiesel in 2018, almost triple the number in 2010.

The IBB believes the fuel tax differential is a necessary component of Iowa’s biodiesel promotion program and is key to continuing to keep Iowa retailers competitive against other states that provide biofuel incentives.

Governor Kim Reynolds and Lt. Governor Adam Gregg visit with members of the Iowa Biodiesel Board and the Iowa Renewable Fuels Association at the Iowa State Capitol yesterday.

“Without the differential, it would create some headwinds for the biodiesel industry in Iowa that would make some retailers back away from the product,” said Dave Walton, treasurer for the ISA board of directors and member of the IBB. “That would, in turn, translate to demand destruction for biodiesel and therefore soybean oil and other feedstocks like animal fats which are used in biodiesel production.”

Iowa leads the nation in biodiesel production. According to the National Biodiesel Board, Iowa’s 10 biodiesel plants produced an estimated 310 million gallons in 2019.

A FC Stone study shows that biodiesel adds about 13% to the price of soybeans. In 2019, biodiesel added more than $1 per bushel to the price of soybeans. Without that support, Walton, a crop and livestock farmer from Wilton says the 2019 growing season would have been an even greater challenge.

“If we lost $1 off the price of soybeans, no one would make money growing soybeans,” he said. “It would definitely be a detriment to the soybean industry. If there’s no soybean industry, there’s no soybean oil to make biodiesel.”

The IBB reiterated its support for Iowa Governor Kim Reynolds’ request for $5 million annually for biodiesel and ethanol infrastructure through the Rebuild Iowa Infrastructure Fund.

Funding support through grants and incentives discussed at the Capitol this week are vital to growing the biodiesel industry, said Reo Menning, the president and CEO of Urbandale-based RINAlliance.

“There are many retailers in the state of Iowa who want to continue to invest in biodiesel or even get started with blending, and these incentives are critical to them being able to that,” Menning said.

RINAlliance helps the fuels industry take advantage of RIN economics under the Renewable Fuel Standard. The company serves blenders in 38 states. Menning said policies and incentives in Iowa make it supportive to blenders here. It also supports Iowa’ economy, a new study from ABF Economics shows.

According to the study, biodiesel production in 2019 supported 3,875 fulltime equivalent jobs and infused $489 million to the state’s gross domestic product. Biodiesel added $263 million in household income in Iowa.

Reynolds recognized the importance of the biofuels industries in a joint discussion between the IBB and the Iowa Renewable Fuels Association (IRFA).

In total, ethanol and biodiesel contributed $4.881 billion in GDP, 46,295 jobs, and $2.356 billion in household income in 2019, according to a recent study.

“I appreciate the impact you have on our economy and our state,” she told the attendees gathered in her office. “. We’re not done. We have to be diligent.

IRFA President Derek Winkel commended the governor and Lt. Gov. Adam Gregg for their relentless support for the federal biodiesel tax credit and for signing an executive order requiring state agencies to purchase diesel engines and vehicles with manufacturer support for at least a 20% blend of biodiesel (B20). Counties in Iowa are following the governor’s push for biodiesel. The Dickinson County Board of Supervisors unanimously passed a proclamation declaring all new diesel vehicles secured by the county must be approved for the use of B20. At least three more county boards have indicated interest in doing the same.

“We just don’t let up,” Reynolds said. “And we’re not done. We have to be diligent and keep pushing forward.”

Participating in events with legislators like the one this week helps keep vital incentives and programs top of mind, Walton said.

“This is a good opportunity to come and meet one-on-one with legislators who not only represent our districts, but our House and Senate leadership as well,” Walton said. “It’s important for me as a farmer to make sure they understand our issues and understand how the biodiesel industry and agriculture in Iowa are intertwined.”

Contact Bethany Baratta at bbaratta@iasoybeans.com.

For media inquiries, permission to republish articles or to request high-res photos, please contact Katie James, ISA Public Relations Manager at kjames@iasoybeans.com. © 2020 Iowa Soybean Association. All rights reserved.

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