Best Blog of the Week

Ag Policy Blog: The Puzzling Battle Over Ethanol in Iowa

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
Connect with Chris:
A bill has stalled in the Iowa Legislature that would require fuel stations to offer 15% ethanol blends and 11% biodiesel blends. The bill has set up a battle with the state's biggest convenience store chains. (DTN file photo)

I'm not the most versed guy on the subject, but it's surprising this year to watch from a distance as Iowa lawmakers seem incapable of providing a long-term demand boost for the state's biofuels industry and agricultural economy.

A bill in the Iowa Legislature has stalled that would require retailers to offer at least 15% ethanol blends at the pumps and 11% biodiesel blends.

The Legislature has debated the issue all session. The current Iowa House bill, as the Des Moines Register reported, would require Iowa retailers to offer gasoline with E15 by 2026 and 11% diesel by 2022. The plan also provides tax incentives for the retailers to meet compliance goals.

As a state, Iowa is effectively the world's largest concentration of biofuel production at more than 4 billion gallons of ethanol capacity (about 13% of world production) and 350 million gallons of biodiesel. Iowa produces nearly 1.5 billion gallons more than the second-highest state for ethanol production -- Nebraska.

So lawmakers in the state that produces more biofuels than anyplace else in the world are uneasy about driving home the need to support their home-grown, cleaner-burning fuel over petroleum.

There are 41 ethanol plants in the state. There's not a single functioning oil derrick in Iowa, but every now and then there is someone trying to wildcat a well in parts of the state as everyone watches with curiosity.

Having lived in Southwest Iowa and reported on the state as a journalist since 1998, ethanol's growth has spurred the rural economy and kept farmers and other agribusinesses afloat. The steady supply of corn demand throughout the year, the expansion of commercial and on-farm bins, the outflow of the ethanol and the distilled grains -- all of this has been buoyed by policies that promote renewable fuel.

But Iowa's Legislature is caught between the economic engine of renewable energy and the convenience stores that dot the landscape of the state as well -- Casey's, Kum & Go. With thousands of stores each, state lawmakers are probably more likely to have a convenience store in their district than an ethanol plant.

This criticism against the renewable standard is "whether a renewable standard would drive up, or lower, costs for consumers," the Des Moines Register piece noted. Yet, E15 right now typically runs between 5 cents to 10 cents cheaper at the major fuel retailers. The price spread often is even more beneficial at local cooperatives.

A group call the "Fuel Choice Coalition" argues that retailers would have to spend more on pumps -- up to $500,000 a piece. Anyone who drives around Iowa, though, also knows the retailers are constantly expanding and upgrading their stores and pumps. Glenwood, Iowa, where I live, had only a couple of E15 pumps, and zero E85 pumps, until Casey's built a new store three years ago. Suddenly there was some choice to consumers who want to support renewable fuels.

There also are complaints that the 11% biodiesel requirement would cause truckers to bypass Iowa for fuel. That complaint didn't stop Minnesota from moving ahead.

The retailers, though, claim a high percentage of their stores are not equipped for E15. This basically highlights that Iowa retailers have not right now accepted the value that renewable fuels provide for the Iowa economy. Why haven't the retailers so far advanced with the biofuels industry over the past two decades? Apparently, they need an incentive or a mandate to nudge their efforts along?

Former President Donald Trump put a marker down for biofuels when he came into Iowa in summer 2019 and signed the waiver that allowed E15 sales year-round. That policy decision by President Trump and his team was meant to create a spark for greater use of ethanol. Now other policymakers, such as state legislators, are being asked to help firm the support that the Trump administration put in motion.

Iowa's federal elected officials and the renewable fuels industry have been turning to President Joe Biden calling on him to ensure there's a place in his long-term climate policies for liquid fuels that lower the carbon footprint. The biofuels industry built over the past two-plus decades in the Midwest is now battling for some environmental appreciation against a strategy to expand electric vehicles. Ethanol and biodiesel have a lot of potential to continue driving down greenhouse emissions and even boosting fuel economy as policies shift to high-octane fuels. The biofuel market could continue to grow even as sales of EVs rise.

Ethanol and biodiesel can continue to provide a climate-change opportunity, but that effort could grind down if policymakers in the nation's leading state for production do not want to take steps to provide a boost for both use and production.

https://www.desmoinesregister.com/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

Chris Clayton