Iowa biodiesel industry awaits governor's signature on SF 531

Iowa remains poised to emerge as the country’s frontrunner when it comes to the production and consumption of biodiesel as the state’s Senate and House both voted to extend its biodiesel tax credit program, which was set to expire at the end of this year, to Jan. 1, 2018. The biodiesel tax incentives are one portion of a comprehensive renewable energy bill (Senate File 531) worth an estimated $89.6 million aimed at creating a system that incentivizes local biofuel production in the state. Now all that’s left is awaiting Gov.Terry Branstad’s signature for the measure to be signed into law.

Tim Albrecht, spokesman for Gov. Branstad, told Biodiesel Magazine that he was on travel at press time and that he intends to review the piece of legislation promptly upon his return. “He usually doesn’t give any indication until he fully studies a piece of legislation so once that occurs and he makes his decision, we will let folks know,” said Albrecht, “so, stay tuned.”

If passed, the new renewable energy bill would: extend the Iowa biodiesel retailer credit at 2 cents per gallon for blends of B2 and 4.5 cents per gallon for B5 in 2012, followed by 4.5 cents per gallon of B5 through 2017; make it easier for petroleum marketers to achieve the credit; add a biodiesel producer incentive of 3 cents per gallon in 2012, 2.5 cents per gallon in 2013 and 2 cents per gallon in 2014 (for first 25 million gallons per producer) and provide $3 million a year to the Renewable Fuels Infrastructure Board to help companies offset the cost of installing infrastructure components, such as fuel pumps.

Biodiesel advocacy groups, like the Iowa Biodiesel Board, applauded the pending legislation, which passed the Iowa Senate by a vote of 48-1 on May 2 and subsequently the House by a margin of 81-13 on May 4. If the bill passes, the IBB would also get a seat on the Renewable Fuels Infrastructure Board.

“This is legislation that truly makes Iowa biodiesel competitive in the national marketplace, and I commend our legislators for empowering our state’s industry,” said Randy Olson, executive director of the IBB. “Putting biodiesel producers back to work is good for the state’s economy and also will help make Iowa the renewable energy capital of the world in the face of rising oil prices.”

For biodiesel producers like Ames, Iowa-based Renewable Energy Group Inc., the proposed biodiesel tax credit program extension would be a significant improvement to the states prior and current biodiesel tax credit program, signed into law in 2006 providing retailers with a 3-cent-per-gallon refundable income tax credit for selling biodiesel blends of B2 or greater, according to Jon Scharingson, REG’s director of sales and marketing. REG owns and operates a total of five biodiesel production plants, including two in Iowa, a 30 MMgy plant in Newton and a 12 MMgy facility in Ralston.

“We think the addition of 4.5 cents per gallon [for B5] should increase consumption in Iowa,” Sharingson told Biodiesel Magazine, noting that there are currently 13 biodiesel plants in Iowa, the majority of which have shut down over the past 18 months due to shaky federal support for incentivizing production, coupled with rising feedstock costs, to name a few reasons. “This new legislation was to act as a catalyst to get them back up and running, including REG’s plants.”

Scharingson added, “Big picture, what this means for biodiesel producers and retailers in Iowa is that we should see significant production and consumption, and more plants will see their biodiesel stay in Iowa instead of seeing their product exported out of state. RFS2 requires 800 million gallons of biodiesel this year and 1 billion gallons in 2012, but they can be consumed by anyone. What this [new legislation] does is help ensure that the state will have a significant share of the marketplace.”