Iowa 'gas tax' proposal would spur growth of biodiesel use

By The Iowa Biodiesel Board | February 23, 2015

The Iowa Biodiesel Board registered Feb. 20 in support of legislation that would raise the state’s fuel tax. A provision of the legislation would give a partial exemption to the new tax for diesel blended with at least 11 percent biodiesel (B11).

The proposed tax increase (HF 351 and SF 257) is 10 cents a gallon for both diesel and gasoline as part of a plan to address Iowa’s infrastructure needs. A provision provides a 3-cent exemption for biodiesel blends of B11 and above for five years.

The IBB, whose membership includes biodiesel producers, soybean farmers and other stakeholders, called the biodiesel nod a bold leadership move.

“This is smart policy on the part of our state leaders that will benefit the entire state, and we thank them,” said Grant Kimberley, executive director of IBB. “Doing everything we can to encourage biodiesel production and usage generates significant economic activity for Iowa. Every gallon of biodiesel we use at home is one less equivalent gallon from the Middle East, and keeps money in our state.”

Kimberley added that IBB members are hopeful the five-year sunset will be extended to 10 years down the road.

Iowa biodiesel plants produced 227 million gallons in 2014, down slightly from the 2013 record of 230 million gallons. Yet the state’s 10 operating biodiesel plants have an annual capacity of more than 300 million gallons, showing a lost economic opportunity for Iowa.

Moreover, encouraging the blending of biodiesel into the state’s diesel supply can help Iowa meet its own renewable fuel goals, Kimberley said. According to a recent Iowa Department of Revenue report, “…the study forecasts that approximately 13 percent of Iowa’s petroleum…will be replaced by biofuels in 2020, falling short of the Legislative goal of 25 percent.”

Currently in Iowa, gasoline is taxed at 21 cents per gallon with ethanol blends containing at least 10 percent taxed at only 19 cents per gallon. Diesel is taxed at 22.5 cents per gallon with no incentive for biodiesel. The ethanol differential would continue.

“Unfortunately, federal legislation has proven to be unreliable for biodiesel,” Kimberley said. “The states that create the most supportive environment for biodiesel will be the most successful in reaping the industry’s economic benefits.”

New research shows in 2014, the increase in economic activity generated by biodiesel production supported more than 4,300 fulltime equivalent jobs. It contributed more than $471 million to the state’s gross domestic product. Other research shows biodiesel adds 74 cents a bushel to the price of soybeans, lowers soybean meal feed costs for livestock producers by $25 to $40 a ton and also adds value to livestock production.

Biodiesel is an advanced biofuel made from agricultural byproducts and coproducts, such as soybean oil. The Iowa Biodiesel Board is a state trade association representing the biodiesel industry. 


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