The Iowa Legislature created a 3-cent per gallon differential tax rate for B11 and higher biodiesel blends in the road funding legislation passed Feb. 24. This provision is expected to boost the availability and sales of cleaner-burning, locally produced biodiesel. The bill was passed today by a vote of 28 to 21 in the Iowa Senate, and a vote of 53 to 46 in the Iowa House. It now heads to the governor’s desk to be signed into law. 

Under the legislation, diesel fuel will be taxed at a rate of 32.5 cents per gallon. However, if diesel fuel is blended with 11 percent or more of biodiesel, the state excise tax is reduced to only 29.5 cents per gallon. The 3-cent per gallon differential for B11 and higher blends will go into effect on July 1, 2015.

“The biodiesel community thanks the Iowa Legislature for its commitment to increasing the use and availability of higher biodiesel blends,” stated Iowa Renewable Fuels Association Policy Director Grant Menke. “The 3-cent differential for blends containing at least 11 percent biodiesel will be a useful tool to build upon the progress we’ve made in cleaning up our air and supporting our economy through the use of homegrown Iowa biodiesel. The B11 differential further demonstrates Iowa’s policy leadership in expanding market access and consumer choice for renewable fuels.” 

“With no end in sight on the federal policy uncertainty for biodiesel, I am grateful the Iowa Legislature took this opportunity to drive sales of higher biodiesel blends,” stated IRFA Vice President and Western Dubuque Biodiesel General Manager Tom Brooks. “This 3-cent differential for B11 and higher blends represents another step forward for the economic, environmental and energy security benefits that come along with a strong Iowa biodiesel community.”  

Biodiesel is made from a wide range of feedstocks, including soybean oil, animal fats, distillers corn oil, and used cooking oil. Iowa produced 227 million gallons of biodiesel in 2014, roughly 16 percent of U.S. biodiesel production for the year. According to the EPA, biodiesel reduces greenhouse gas emissions by 57 percent to 86 percent compared with petroleum diesel.

Iowa is the nation’s leader in renewable fuels production. Iowa has 12 biodiesel facilities with the capacity to produce nearly 315 million gallons annually. In addition, Iowa has 43 ethanol refineries capable of producing more than 3.8 billion gallons annually, including 22 million gallons of annual cellulosic ethanol production capacity and one cellulosic ethanol facility currently under construction.