The annual Iowa Biodiesel Day on The Hill will be March 7, when members of the Iowa Biodiesel Board and other supporters of the renewable fuel visit the Iowa Legislature. They’ll meet with lawmakers and discuss benefits of the state’s biodiesel industry and 2019 legislative priorities. Iowa is the nation’s largest producer of biodiesel.
Issues on the agenda include protecting biodiesel production and the biodiesel promotional tax credits, which encourage production and use in the state. They’ll also discuss funding the state’s renewable fuels infrastructure program, designed to assist the retail petroleum industry with equipment, such as pumps at gas stations, to expand the use of renewable fuels.
Members of the Iowa Soybean Association and others who support biodiesel are encouraged to attend. Attendees will meet with lawmakers from 11:30 a.m. to 1 p.m. in Room 116 in the Capitol.
EPA exemptions still a problem
The state produced about 365 million gallons of biodiesel in 2018. Iowa Department of Revenue data show that 51% of the state’s diesel fuel contained biodiesel last year. “Iowa’s state policies pertaining to biodiesel are working as intended, and we need to keep them working,” says Grant Kimberley, executive director of the IBB. “That’s the main message we are giving our legislators.”
However, Iowa biodiesel plants have unused production capacity and could be producing more biodiesel than they are currently, he notes. The problem is with federal policy. The U.S. Environmental Protection Agency has been giving exemptions to some petroleum refiners, so they don’t have to comply with the biofuel blending requirements set by the Renewable Fuel Standard. These so-called “small refiner” waivers allow oil refiners to blend less biodiesel and ethanol into the diesel fuel and gasoline they produce.
Another problem at the federal level is the expired federal tax credit for biodiesel production. It is needed to provide some certainty for Iowa soybean farmers and biodiesel blenders.
ISA urges tax credit extension
Iowa’s biodiesel industry not only supports the soybean industry, but also the state’s economy and Iowa’s livestock sector. However, an expired federal tax credit hinders growth in production of the homegrown fuel and threatens those other benefits.
The biodiesel tax credit has been issued previously to provide a $1-per-gallon credit to blenders who blend biodiesel with petroleum. But the tax credit has expired and was not included in the House’s government funding bill. Iowa Soybean Association farmer leaders and staff have been visiting with senators and members of Congress to urge an extension of the biodiesel tax credit, to provide some certainty for Iowa’s farmers and blenders.
“The biodiesel tax credit is essential for industry growth and prosperity,” says Michael Dolch, ISA’s director of public affairs. “Without action on the expired tax credit, biodiesel producers are forced to shelve capital investment and long-term planning. Some are purchasing less feedstock because of the uncertainty. As a primary supplier, this puts soybean farmers at a disadvantage.”
Multiyear extension preferred
The biodiesel tax credit extension would ideally include a one-year retroactive extension and a seven-year prospective extension, Kimberley says. “We want a multiyear extension because that’s really the only way as an industry you can make a long-term business investment and decision.”
A previous biodiesel tax credit has helped grow the biofuels industry, especially in Iowa. An extension of the tax credit would ensure some certainty for the 11 blenders in the state, which produced 365 million gallons of the biofuel last year.
“The certainty of the tax credits provides an incentive for biodiesel plants, marketers, petroleum distributors to invest in infrastructure, so long term, the industry can be very, very price-competitive against petroleum — no matter what kind of incentives are out there,” Kimberley says.
Studies show that biodiesel adds 63 cents a bushel to the price of soybeans. Soybean oil is a main ingredient in biodiesel, making up over 50% of the total feedstock mix. But other agricultural byproducts and coproducts like recycled cooking grease, inedible corn oil, canola oil, beef tallow, pork fat and poultry fat are also used.
Help to soybean prices
Dean Coleman, an ISA member and farmer from Humboldt, says the price support the biodiesel tax credit provides will help during time of soybean price uncertainty. “With the ongoing trade dispute with China and the impact that’s had on soybean prices, we can’t afford to lose another 63 cents a bushel,” he says.
Coleman serves on the board for the American Soybean Association. Because of soybeans crushed for biodiesel production, the price of soybean meal is reduced for livestock farmers who use it as a feed ingredient. A study shows this reduces the price of soybean meal by about $21 per metric ton.
Iowa’s members of the U.S. House and Senate have said they support the tax credit, but with no extension in sight, Iowa soybean farmers continue to stress the importance of the issue. Visiting with senators and representatives in Washington recently, Coleman emphasized the importance of the tax credit extension. “The tax credits help make biodiesel competitive with petroleum diesel, and without the tax credits, biodiesel plants are not going to be financially viable,” he says.