Rough road ahead for bill backed by Gov. Kim Reynolds mandating renewable fuel at Iowa pumps

Source: By Donnelle Eller, Des Moines Register • Posted: Sunday, May 2, 2021

Prospects appeared grim for legislation that would require Iowa truck stops, gas stations and convenience stores to offer fuel with higher blends of ethanol and biodiesel after a state Senate subcommittee heard Thursday from farm, fuel and transportation leaders who offered opposing views on the bill’s impact.

Gov. Kim Reynolds and House Speaker Pat Grassley have acknowledged problems getting the bill passed in the Legislature’s waning weeks, even with intense efforts to reach a compromise.

Reynolds introduced setting a standard for renewable fuels use in January, saying it would help support farmers. Iowa leads the nation in ethanol and biodiesel production and in growing corn and soybeans, the raw materials needed to make the biofuels.

Grassley told reporters Thursday that getting a deal on the bill would be “a difficult push,” given ongoing opposition from industry groups.

“I think the bill that we have worked on with the governor, with the Senate, with other groups within the industry, struck that compromise,” he said. “But we are seeing some pushback from all sides of the industry that it doesn’t do everything they want.”

Powerful agriculture, fuel and transportation representatives debated the bill’s potential impact at the Senate ways and means subcommittee meeting, disagreeing sharply about the effects on consumers, the costs of compliance and whether the proposal would drive more renewable fuel use.

A heavily retooled House bill that has the most likely chance for advancing would require Iowa retailers offer gasoline with 15% ethanol by 2026 and diesel with at least 11% biodiesel by 2022. The proposal call for using tax incentives to encourage compliance.

Are renewable fuels cheaper, or more expensive?

A big point of contention was whether a renewable standard would drive up, or lower, costs for consumers.

Iowa farm and renewable fuels groups argue the mandate would lower costs because it would make gasoline with 15% ethanol — or E15 — more widely available across the state. The groups say the higher blend is typically 5 cents cheaper per gallon than a 10% ethanol — or E10 — blend, and up to 40 cents cheaper than gasoline with no ethanol.

But the Fuel Choice Coalition, a group opposing the biofuels standard, said the bill would force retailers to spend up to $500,000 apiece to adapt their infrastructure for the higher blends — costs that would result in higher prices. The group plans to plaster decals on gas pumps across the state Friday that call for consumers to oppose the proposed legislation.

Lobbyists for the Casey’s, Kum and Go and Kwik Star convenience store chain told the 150 people online for the virtual hearing Thursday that the House bill would require millions of dollars of investment to install the underground tanks, lines and pumps required.

Tom Cope, a Casey’s General Stores lobbyist, said 1,700 of 2,100 gas stations in Iowa are not currently equipped to pump E15. And the Ankeny chain has nearly 200 stores in towns of 2,000 residents or less that are 10 to 40 years old and would require major improvements, Cope said.

Proponents of the renewable fuel standard said the cost is typically a tenth of the $500,000 estimate and can be covered with a $50,000 grant from the state. Lawmakers are looking at making $11 million available annually to fuel retailers if the renewable fuel standard becomes law.

The legislation would provide exemptions for gas stations that are unable to comply, enabling them to sell gasoline with no ethanol or E10.

“It allows any station that needs to crack concrete, as we say, to be exempted,” said Chris Riley, ADM’s state government relations director. “And that’s so important for older stations and smaller stations.”

But Cope said the fuel offered at the older stores would be “much more expensive “for consumers, who would stop shopping at them. The bill would “upend the fuel market in Iowa,” Cope said.

On the other side, Tom Brooks, general manager of Western Dubuque Biodiesel, contended that setting a standard for ethanol and biodiesel use in Iowa “shouldn’t really be a difficult question. This industry is way too important to Iowa.”

A study paid for by the Iowa Renewable Fuels Association says the proposed standard — requiring Iowa retailers to sell motor fuel with at least 10% ethanol or 11% biodiesel — would add millions of dollars annually to the state’s economy, reaching nearly $460 million in 2026.

The increased economic activity, combined with tax credit changes, would generate about $235 million in added tax revenue over five years, the study says.

Biodiesel mandate opponent: Iowa could become a ‘drive-through state’

Biodiesel also came under fire in the hearing. David Scott, a lobbyist the Iowa Motor Truck Association, said that truckers would avoid Iowa if it set a biodiesel standard, arguing that it would cost companies more to fill up massive tanks that hold hundreds of gallons.

“It doesn’t take much difference in price to begin … to drive up costs by tens of thousands of dollars annually for a trucking company that may have several hundred trucks,” Scott said.

He said 75% of the Iowa Motor Truck Association’s 650 members have restrictions on their drivers filling up in states where there is a biodiesel mandate. Already considered a flyover state, Iowa, he said, could become a “drive through state.”

Proponents of the expanded biodiesel mandate said Minnesota, which has a renewable fuel requirement, has had lower diesel prices than Iowa since January.

In addition, Sam Annis III, vice president for Metro Fuel Inc., a small, family-owned convenience store chain in the Waterloo-Cedar Falls area, questioned why the bill exempts farmers from using higher blend of biodiesel. “If anything they should be leading the way,” Annis said.

Monte Shaw, director of the Iowa Renewable Fuels Association, said Thursday other industries — not farmer groups — sought the exemption.

Chairman says ‘path forward’ for bill not clear

Sen. Dan Dawson, R-Council Bluffs, the ways and means subcommittee chairman, said the bill would be passed onto the full committee for consideration. He added, though, that he struggled to “see a path forward” for the bill, given its complexity and the concerns the fuel and transportation industry raised.

Reynolds said Wednesday that if the bill doesn’t gain passage this year, she plans to convene a meeting before next year’s legislative session to iron out the two sides’ differences.

“I’ve already talked to different stakeholders and have indicated this is my intent,” she said. “And let’s see what we can do and maybe come back next year in a unified position that will create a better environment for us to get that done.”

Donnelle Eller covers agriculture, the environment and energy for the Register. Reach her at deller@registermedia.comor 515-284-8457

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