By Lynn L. Bergeson
The Iowa Economic Development Authority (IEDA) is offering the first Renewable Chemicals Production (RCP) Tax Credit in the United States. What does this mean? It means that the program provides an opportunity for industry stakeholders to advance Iowa’s economy through a focus on biomass as a feedstock for the production of renewable chemicals. As an attempt to incentivize the production of 30 high-value chemicals derived from biomass feedstocks, IEDA developed the RCP Tax Credit program to “capitalize on its resources and infrastructure and to capture the renewable chemical manufacturing industry.” IEDA is offering tax credit of $0.05 per pound of renewable chemical produced. Start-ups can receive up to $1 million in credit, and established businesses can earn up to $500,000. Applications are open until March 15, 2020, for chemicals produced in 2019.
By Lynn L. Bergeson
On December 3, 2019, Governor of Iowa, Kim Reynolds, signed an Executive Order that requires all new contracts for the purchase of state vehicles with diesel engines to have written support from the manufacturer to use B20 biodiesel (a mix of 20 percent biodiesel and 80 percent petroleum-based diesel) or more. The Iowa Department of Transportation (DOT) started using biodiesel blends in 1994. B20 is used for most of the year already, in most equipment with a diesel engine, including motor graders and snowplows, among others. Largely contributing to Iowa’s job market and accounting for $568 million of the state’s gross domestic product (GDP), Iowa’s biodiesel plants increased their biodiesel production by 20 percent by the end of 2018. Governor Reynolds stated: “Ethanol and biodiesel remain essential to the health of the agricultural economy, sustainable environmental commitments and employ thousands of Iowans. I am proud to stand alongside Iowa Farm Bureau and key stakeholders in the renewable fuels industry to secure the continued demand for biofuels.”
By Lauren M. Graham, Ph.D.
Last week, Senators Chuck Grassley (R-IA) and Joni Ernst (R-IA) responded to the U.S. Environmental Protection Agency’s (EPA) Notice of Data Availability (NODA) regarding the Renewable Fuel Standard (RFS) volume requirements (see EPA Issues NODA Regarding RFS Program). On September 27, 2017, Ernst sent a letter to President Trump expressing concern over the proposed reduction in the volume requirements for 2018 and 2019. In the letter, Ernst highlights the importance of renewable fuel with regard to jobs in rural America, and energy security for the U.S. Additionally, the letter states that “[w]hile the [NODA] technically ‘provides the public notice and an opportunity to comment,’ in reality it serves to make the case for substantially lowering the volumes for U.S. produced biodiesel, just as domestic producers are making investments to bring unused capacity back online.”
In a September 26, 2017, statement, Grassley described the proposed reduction in renewable fuel volumes as a “bait-and-switch from the EPA’s prior proposal and from assurances from the President himself and Cabinet secretaries in [Grassley’s] office prior to confirmation for their strong support of renewable fuels.” According to Grassley, reducing the volume requirements would undermine domestic renewable fuel production, which contradicts the goal of America first, employing U.S. workers, and improving the U.S. economy and meeting the country’s fuel needs.
Additionally, industry representatives have raised concerns over Trump’s nomination of William Wehrum to be the EPA Assistant Administrator for the Office of Air and Radiation (OAR). In a statement regarding the Senate Committee on Environment and Public Works hearing on the nomination of Wehrum, Growth Energy CEO Emily Skor highlighted the essential role the Assistant Administrator plays in managing EPA’s fuel policies and the need for assurance that EPA remains in sync with Trump and his commitment to renewable fuels. Skor urged the Senate to ensure that Wehrum would carry out the duties of the position in a manner that expands on the progress made since the RFS was passed.
By Lauren M. Graham, Ph.D.
In a paper forthcoming in the American Journal of Agricultural Economics, Iowa State researchers demonstrate that their tractable multi-market equilibrium model designed to evaluate alternative biofuel policies confirms that the current RFS program benefits the agriculture sector, and leads to overall welfare gains for the U.S. The model considers biodiesel and ethanol markets and is simulated to analyze alternative scenarios, including the repeal of all RFS mandates, the 2015 level of mandates, and the projected 2022 RFS mandates. The analysis shows that the U.S. benefited from lower gasoline, crude oil, and crude oil import prices. Researchers estimated a welfare gain of $2.6 billion to the U.S. from the RFS program, primarily due to the impact of the policies on trade.
Additionally, the analysis predicts that full implementation of the 2022 statutory mandates will be costly and produce limited welfare gains, stating that the agricultural terms of trade are a significant contribution to the RFS generating a positive impact. To compensate for this, researchers recommend the mandate for corn-based ethanol production expand beyond the 15 billion gallon cap envisioned by the Energy Independence and Security Act of 2007 (EISA). The report also recommends a reduction of biodiesel production from current levels, and no cellulosic biofuel production.
By Kathleen M. Roberts
On May 12, 2017, the Iowa Biodiesel Board (IBB) praised Governor Terry Branstad for signing into law the Rebuild Iowa Infrastructure Fund bill (HF 643), which provides $3 million in funding for the Renewable Fuels Infrastructure Program. IBB stated that it, along with industry partners, worked closely with legislature to ensure the funding language was included in Iowa’s budget, and acknowledged Branstad for being a steadfast supporter of funding renewable fuels and the infrastructure program, which is designed to encourage fuel retailers to offer biofuels. Grant Kimberley, the IBB Executive Director, stated that proactive state policies played a key role in expanding Iowa’s biodiesel production and maintaining Iowa as the leading national producer. According to the Iowa Department of Revenue, 471 on-road Iowa retailers carried biodiesel blends in 2016 compared to 304 in 2011.
By Kathleen M. Roberts
On April 13, 2017, the Iowa Renewable Fuels Association (IRFA) released a statement regarding the passage of a bill, HSB 187, by the Iowa House Appropriations Committee that would cut the value of the Iowa biofuels tax credits and complicate the mechanism for receiving the credit. According to the bill, the value of the tax credits would be determined based on annual sales, and the amount of the credits would be capped on an annual, statewide basis. The purpose of the biofuels tax credits was to incentivize consumers to purchase higher blends of ethanol and biodiesel, such as E15, E85, and B11, by offering a tax credit to fuel retailers. IRFA states, however, that the amendments to HSB 187 undercut the entire purpose of the tax credits since fuel retailers cannot pass the price reduction to the consumer if they do not know what the credit is at the time the fuel is sold.
By Lauren M. Graham, Ph.D.
On April 4, 2017, the Iowa Biodiesel Board (IBB) announced that the Iowa Department of Revenue’s 2016 Retailers Fuel Gallons Annual Report demonstrated that more than half of Iowa’s fuel retailers carried biodiesel blends in 2016. In 2016, 344.8 million gallons of on-road biodiesel blends were sold, which accounts for 54.7 percent of total on-road diesel fuel sales. The report also showed that twice as many gallons of 11 - 20 percent biodiesel (B11-B20) were sold compared to lower blends. IBB credits the growth in the use of higher biodiesel blends to Iowa’s proactive state policies, which are working as intended to increase production and consumption. Due to the instability at the federal level, Grant Kimberley, the IBB executive director, stated that Iowa’s biofuel producers need state tax credits to stay in place now more than ever to remain competitive.
On February 16, 2017, a coalition of Iowa farmers, renewable fuel producers, and retailers urged Scott Pruitt, just prior to his being confirmed as the U.S. Environmental Protection Agency (EPA) Administrator, to protect the Renewable Fuel Standard (RFS) by rejecting the petition to change the program’s point of obligation. The coalition, which includes the Iowa Renewable Fuels Association (IRFA), the Iowa Corn Growers Association (ICGA), Petroleum Marketers and Convenience Stores of Iowa (PMCI), and the Iowa Biodiesel Board (IBB), stated that it is committed to opposing a change in the point of obligation since such a change would be devastating to wholesalers and retailers, who have invested in supporting the RFS program, and to consumers, who would experience a change in pricing dynamics at fuel terminals. Agreeing with EPA’s decision under the Obama Administration, the coalition stated that changing the point of obligation 11 years into the program would create unnecessary chaos and delay. A final decision will be made once EPA has reviewed the public comments on the issue.