Iowa leaders call for biochemical tax credits for ethanol, biodiesel

Source: By Dave Dreeszen, Iowa Farmer Today • Posted: Wednesday, May 27, 2015

GALVA — Quad County Corn Processors passed a milestone last month, producing its 1 millionth gallon of cellulosic ethanol.

The farmer-owned plant near the small Northwest Iowa town of Galva is the first in the U.S. to extract ethanol from corn kernel fibers. Most cellulosic, a next-generation biofuel, is made from inedible plants, such as corn stalks and switchgrass.

The bolt-on technology developed by Quad County is an example of innovations that hold promise for adding value to Iowa’s $11.5 billion-per-year biofuels industry, said Debi Durham, the state’s economic development director.

Durham is championing legislation that would set aside up to $15 million in tax credits per year to encourage ethanol and biodiesel plants to extract chemicals that could be used in consumer products such as plastics and textiles, pharmaceuticals and cosmetics.

Durham said a recent study of the state’s economic prospects show the biofuels sector runs the risk of low growth in future years unless it expands beyond fuel and livestock feeds.

Enter biochemicals, which she said could grow the industry by 20 to 30 percent, depending on the chemicals harvested.

The biochemical tax credit bill has passed the Iowa House and the Senate Economic Growth Committee. It’s currently sitting in the Senate Ways and Means Committee, awaiting a vote to advance to the full Senate floor.

“I think it would be a great program,” Sen. Bill Anderson, R-Pierson, a member of the Ways and Means Committee. “It’s another component that we can add to our renewable fuels industry.”

Durham said she’s confident the bill will win final approval before the Legislature wraps up its annual session. Gov. Terry Branstad has pledged to not only sign the legislation but hit the road to promote the incentives, she said.

The legislation would offer a production tax credit of 5 cents per pound, with a maximum award of $1 million for startup companies and $500,000 for existing businesses.

The building block chemicals would have to be produced from biomass feedstocks, such as starches, oils, sugar or lignin, and sold for uses other than fuel, food or feed. Products used in food additives would be eligible.

Ethanol and biodiesel producers would be eligible for credits only once every five years, and the program would sunset after 10 years.

The state’s economic development head said the incentives will remove some of the risk of investing in new technology.

The tax credits could be a boon to the 11 ethanol plants and three biodiesel refineries in Northwest Iowa, home to one of the state’s largest biofuel clusters.

Quad County Corn Processors has had some early conversations about converting some of its cellulosic ethanol into biochemicals,” said CEO Delayne Johnson.