Thursday, February 11, 2010

By Gene Lucht

However, they got a boost this past week when the Environmental Protection Agency issued a rule that could help boost biodiesel use.

They got another boost a day later when a state legislative subcommittee passed a bill that would require a 5-percent blend of biodiesel in Iowa.

“The federal tax credit and the Renewable Fuels Standard (RFS) are really important to the biodiesel industry around the country,” says Randy Olson, executive director of the Iowa Biodiesel Board.

“But, it’s also very important that Iowa legislators show support for local biodiesel.”

Olson says the reason is if the RFS and the federal tax credit boost the national biodiesel market, oil companies will increase production in areas where it most benefits them, and that means in states with a usage mandate and in areas near to large population bases.

Only Minnesota and Washington have mandates.

The Iowa legislation still faces an uncertain future, lawmakers say. It was passed by the Iowa Senate in 2009 and moved out of the House Ways and Means subcommittee by a 2-1 vote on Feb. 4. But, there is no specific timetable for when it will come up for discussion before the full Ways and Means Committee.

It was clear the bill had strong supporters and opponents at this past week’s subcommittee gathering.

“The hog producers in the state are being ravaged right now, but we’re not in here mandating eating bacon,” says Rep. Erik Helland, R-Grimes.

Helland says he supports the biofuel industry but doesn’t support mandates.

“I think the incentive model (for ethanol) in Iowa has been fantastic,” he explains.

Joining Helland in opposing the legislation are representatives of the trucking and gasoline retailer industries, who say a mandate could raise diesel fuel prices by 6-8 cents a gallon. But, Rep. Marcy Frevert, D-Emmetsburg, and Rep. Sharon Steckman, D-Mason City, voted to move the legislation to the whole committee, and both expressed strong support for it.

“I’m excited because biodiesel is the future,” Steckman says.

She also says some opponents of the bill may be concerned because if a B5 mandate is passed, it also would mean an increase in the level needed in fuel to qualify for state tax credits from B2 to B10.

“Nobody wants to lose a credit,” Steckman adds.

Monte Shaw, executive director of the Iowa Renewable Fuels Association, says the legislative move this past week is good news as is the announcement by the EPA about ethanol and biodiesel. The EPA announcement is “good enough,” Shaw says, but while it could boost the industry, there is nothing in it that matches the urgency to renew the federal biodiesel tax credit.That EPA announcement was part of its issuance of a final rule to implement the expanded Renewable Fuels Standard (RFS2) provided for in the 2007 energy bill. That legislation requires the nation to meet certain usage levels, and for the first time, it includes biodiesel in that equation.

The original proposed rule, issued in May, included several flaws, according to biodiesel industry leaders.

This final rule changed some of those concerns and is a significant improvement, allowing biodiesel and ethanol to meet several environmental requirements and qualifying them as fuels that improve the environment, the leaders note.

But, farm groups and biofuel industry leaders are disappointed the new rule still includes international indirect land use in its equation. That indirect land use language is based on the idea if the demand for corn or soybeans goes up because of biofuels production, it would lead to more land being put into production in environmentally sensitive areas, such as the Amazon rain forest.

This would make biofuels less environmentally friendly.

Farm groups have said the entire idea is flawed and is not backed up by land-use patterns over the past five years.

They also say increasing crop yields change the math involved, but the indirect land use language remains part of the equation for biofuels.

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