Iowa ponders future of biodiesel incentives

By | April 25, 2007
Has the Iowa biodiesel industry matured to the point where it's going to keep on growing without the state subsidy? According to Mike Tramontina, interim director of the Iowa Department of Economic Development (IDED), this is a question that has been raised among members of the IDED board of directors in recent days.

On May 18, 2006, the IDED board of directors voted to pull back direct incentives to developers looking to construct dry-mill, corn-fed ethanol plants in the state. The move stopped new projects from receiving $100,000 in forgivable loans and $300,000 in zero-interest, five-year loans, but allowed them to continue receiving Iowa state income tax benefits. The reason for the change was simple: The ethanol industry in Iowa was robust, and the incentives were no longer needed.

Nearly a year later, the same question has been brought up in regard to the state's biodiesel industry. "The growth of ethanol production and the use by consumers at the retail level is way ahead of biodiesel in this country," Tramontina said. "Because there were so many more ethanol plants on line and coming on line, and the equity drives and the debt raising was going seemingly so well, the board decided they would no longer put in the value-added agriculture grant and loan. So what the board has asked now a year later, 'Isn't it time to look at biodiesel in the same way we looked at ethanol plants a year ago to determine whether these [biodiesel] grants and loans are still warranted?'"

Tramontina said that although the biodiesel industry in Iowa appears to be doing just fine, it still trails the ethanol industry in sheer momentum. Not only will the status of the industry within Iowa's borders be considered by the IDED staff and board of directors, but the nature of incentives in neighboring states will likely play a role, as well. "I think that the analysis that goes to the board will take into account what neighboring states are doing," Tramontina said.

Monte Shaw, executive director of the Iowa Renewable Fuels Association, agreed that competition from neighboring states should be considered before changing incentive programs for biodiesel. "If Iowa wants to be the renewable fuels capital of the world, it needs to stop pulling back support while other states are ramping up support," he said.

At its April 19 meeting, IDED staff will make recommendations on future incentives for the biodiesel industry to the board of directors.

Tramontina said the continued state support of the biodiesel industry would be a positive thing until the industry can sustain itself. "We think there's value in continuing to be a leader in the industry because of the other industries that will come because of the job creation and wealth creation," he said.
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