Iowa lawmakers consider retail incentive extension, expansion

By Erin Voegele | February 18, 2011

Members of the Iowa Biodiesel Board recently met with Gov. Terry Branstad, Lt. Gov. Kim Reynolds and members of the state legislature to discuss extending—and possibility expanding—the state’s retailer incentive for biodiesel. According to IBB Executive Director Randy Olson, the incentive, which was signed into law in 2006, provides retailers with a 3 cent per gallon refundable income tax credit for selling biodiesel blends of B2 or greater. “In order to achieve that incentive, a retailer needs to sell at least 50 percent of their diesel volume at B2 or greater,” Olson said.

The incentive is scheduled to expire at the end of 2011 unless state lawmakers pass an extension. “I personally believe very strongly in renewable fuels like biodiesel,” Gov. Branstad said. “I believe there is a future in it, and we need to capture as much of that development as possible here in Iowa. I’m very interested in helping biodiesel succeed, and growing the Iowa economy.”

According to Olson, retailers in his state have asked for an incentive to support the sale of higher blends of biodiesel. “As you know, B5 is now considered just pure diesel fuel,” he said. “That was not the case when this incentive first took effect. We see retailers wishing to sell higher blends of biodiesel, and we’d like the state to help encourage that action with incentives that would support those higher blends.”

Specifically, the IBB is asking state lawmakers and the governor to support an extension of the incentive that includes higher blends of biodiesel, making more of the fuel available at the pump. In addition, the IBB would like to see funding allocated to the Renewable Fuel Infrastructure Program, which provides cost-sharing grants to biodiesel and ethanol retailers to support infrastructure improvements.

Olson said his organization is currently pushing for a 3-year extension of the program. “It’s yet to be seen what form that will take, whether it will be an extension of the existing law with additional incentives, or potentially a new structure that only incents higher blends,” he continued. “There is a bill that was just introduced yesterday [in the House] that will incent blends of B10 or greater at 10 cents per blended gallon. The legislative process is one of compromise. So, although we strongly support B10 at 10 cents, we realize that an intermediate blend level, such as B5 might need to be included in the legislation.”

To date, the incentive has been effective in helping increase the retail availability of biodiesel. “There is no question that this incentive has allowed some retailers to dip their toe in the water of biodiesel sales,” Olson said. “While that is a good start, the state really needs to create a climate that supports higher blends. A B10 has the potential to increase sales by 5 times over the current law….There is no question that the state of Iowa routinely claims renewable fuel and biodiesel leadership, and many lawmakers have expressed a desire to maintain a strong climate for the biodiesel industry in the state via support on an incentive package.”

According to Olson, updates on the legislative process will be available on the IBB website as they develop.






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