Governor’s ethanol mandate has some powerful groups fuming

By: - February 15, 2021 4:38 pm
biofuel gasoline gas pump ethanol fuel

Fuel pumps at a gas station. (Photo by Perry Beeman/Iowa Capital Dispatch)

What Gov. Kim Reynolds saw as a chance to expand Iowa’s nation-leading biofuels industry has turned into a high-octane political fight among some of the most powerful interest groups in the state.

Reynolds is proposing to require ethanol and biodiesel at all convenience stores and other retailer fuel outlets. Her plan would allow just one pump per site for no-biofuel gas. And it would revamp tax credits to favor higher blends of ethanol, made of corn, and biodiesel, made of soybeans.

CEO Ronald Langston of FUELIowa, for one, is fuming. In an interview, Langston said Reynolds developed the legislation with virtually no input from convenience stores and other retailers, at least from his group. He said the state’s powerful agriculture lobby had the most say on the wording.

“We don’t tell them what kind of corn and soybeans to plant,” Langston said of the agricultural interests pushing the bill. “Yet, in our case they are telling us what kind of fuel we will sell and how we are going to label our pumps.”

Langston said his association of fuel retailers supports biofuels and expanding the market. But Reynolds’ approach could cost retailers as much as $1 billion in upgrades. That means customers would pay more for fuel, he added.

“This is a bad bill,” said Langston. “It’s moving us in the wrong direction. It has an admirable goal (to expand biofuels markets). But as it is written, it will put  a number of our businesses out of business. 

“We don’t think enforcing a government mandate that tells us what kind of fuel to sell is the way to go,” Langston added. 

The proposals are in House Study Bill 185 and Senate Study Bill 1179.

Reynolds ‘willing to lead the fight’

Monte Shaw, executive director of the Iowa Renewable Fuels Association, counters that the bill would lead to a 20% jump in Iowa ethanol demand within five years and would be an economic boost.

Iowa is the nation’s top producer of both corn and ethanol. However, the state has the 24th-lowest consumer demand for ethanol, the U.S. Energy Information Administration reports. Much of Iowa’s ethanol is sold out of state, but the product is seen as a key market for corn.

Shaw said his association proposed similar legislation a decade ago, but Reynolds approached the group with this proposal. “She approached us. She said, ‘Hey, I’m willing to lead this fight.’ We knew from the beginning it wasn’t going to be easy,” he added.

The legislation would mean 200 more Iowa retailers a year would begin offering E15, a 15% ethanol blend, he added.

Reynolds’ proposal grew out of an advisory committee she appointed. The panel included heavy representation from farm interests and no one representing fuel retailers.

The agriculture working group on Reynolds’ Economic Recovery Advisory Board included representatives of the Iowa Farm Bureau, Landus Cooperative, Iowa FFA, ethanol firm Elite Octane, and Corteva Agriscience retiree Russ Sanders of Sanders Advisors. Among the members were Agriculture Secretary Mike Naig and Farm Bureau President Craig Hill.

Running the committee were Naig, Diane Young of Foundation Analytical Laboratory of Cherokee , which serves the ethanol industry, and Nick Bowdish of Atlantic-based ethanol plant Elite Octane.

The advisory board’s final report, released this month, called on the state to immediately allow E15 or 15% ethanol blends, in equipment made for E10. The group also called for “exploring options to ensure that all retailers offer (gasoline) containing 15% ethanol.” 

“New legislation, changes to regulatory policy and/or increasing biofuels incentives would demonstrate the state’s support of farmer economic viability, rural communities and consumer choices. Importantly, under any scenario, retailers would be allowed one hose to offer regular gasoline or E10 for consumers who desire those fuels, and for use in boats, off-road vehicles and small engines,” the board’s report to the governor said. 

The board noted that all underground tanks built since 1979 can handle 10% ethanol and those manufactured after 1990 are approved for up to 100% ethanol. But gas pumps generally are built for up to 15% ethanol. 

Langston said he and his staff only had a general discussion of ethanol with the governor’s staff and were not asked to join the advisory panel or to submit testimony. 

Convenience stores opposed

The Fuel Choice Coalition formed to oppose the bill. Its members include the FUELIowa association of retailers, Kum & Go, Casey’s, Kwik Star, and the Iowa Motor Truck Association, among others. The group opposes the legislation, saying it limits choice, will increase costs to consumers and will lead truckers to buy their fuel outside Iowa.

Supporting the changes are agricultural groups such as the Iowa Corn Growers Association, Iowa Soybean Association, and the Iowa Farm Bureau Federation, among others. The Iowa Renewable Fuels Association also supports the legislation.

A consultant’s report financed by the renewable fuels association and released Monday lays out possible economic benefits of the legislation. 

ABF Economics, which has done work for the industry over the years, projects the legislation would mean an extra $7 million a year in grants to biofuels interests through 2026. The related improvements would add $457 million in gross domestic product, most of it on the biodiesel side, the report notes.

The proposal also would generate $549.8 million in household income through 2026 and would be a net benefit to taxpayers, after credits and grants, of $235 million, ABF added.

The legislation would require nearly all gasoline sold in Iowa to contain at least 10% ethanol, with an E15 mandate possible within four years. 

FUEL Iowa reports 87% of gas sold in Iowa is blended with ethanol and 70% of diesel sold for on-road use contains biodiesel. Shaw said nationally, about 98% of fuels contain ethanol.

In a statement, the Iowa Motor Truck Association asked lawmakers to block the proposed bills. “This swift proposal to force a mandate on the backs of Iowa businesses and consumers will have wide-ranging impacts, not only on the retail fuel industry but across the entire economy,” said Brenda Neville, association president and CEO. “Such a result would cause higher maintenance costs, higher fuel costs for truckers, and a loss of competition in Iowa. Mandates are the wrong mechanism to drive the use of more fuels.”

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Perry Beeman
Perry Beeman

Perry Beeman has nearly 40 years of experience in Iowa journalism and has won national awards for environmental and business writing. He has written for The Des Moines Register and the Business Record, where he also served as managing editor. He also is former editorial director of Grinnell College. He co-authored the recently published book, "The $80 Billion Gamble," which details the lottery-rigging case of Eddie Tipton.