Iowa governor signs groundbreaking biodiesel legislation into law

Photo: The Office of Iowa Gov. Kim Reynolds

Iowa Gov. Kim Reynolds signed into law May 17 some of the most comprehensive state biofuels legislation in the nation, a move applauded by Clean Fuels Alliance America, the Iowa Renewable Fuels Association, the Iowa Soybean Association, and the Iowa Biodiesel Board. The legislation (HF2128) is expected to boost the sale of higher blends of biodiesel through an incentive-based approach.

Among other measures, the bill increases the biodiesel production tax credit from 2 to 4 cents per gallon (cpg) while updating the state’s Renewable Fuel Infrastructure Program to increase access to higher blends of biofuels. The legislation maintains a fuel-tax differential for biodiesel but applies it to blends of 20 percent biodiesel (B20) rather than B11. It extends current fuel retailer tax credits for B11 and higher, while introducing new credits for higher blends like B20 (7 cpg) and even B30 (10 cpg)—a national first.

“We congratulate Iowa on this significant legislation, helping to strengthen the biofuels corridor throughout the Midwest,” said Clean Fuels CEO Donnell Rehagen. “Iowa joins the ranks of Illinois, Minnesota and others with some of the most forwarding-thinking legislation that values the production and use of biodiesel. Along with renewable diesel, it is our nation’s best option here and now to decarbonize the heavy-duty transportation and home heating-oil sectors.”

Reynolds herself originally proposed the legislation, named the Governor’s Biofuels Access Bill, and made it a top priority for the legislative session. “I am proud that my biofuels legislation will lead to the single greatest expansion of biofuels in our state’s history, while providing our industry with consistency in the face of ever-changing federal policy,” Reynolds said.

Iowa produced an estimated 340 million gallons of biodiesel in 2021, making it the top biodiesel-producing state. A study by ABF Economics shows biodiesel supported 6,513 jobs in Iowa in 2021 and contributed $1.2 billion to the state’s gross domestic product.

“We applaud House and Senate leaders, and Gov. Reynolds, for making this bill a priority,” said Grant Kimberley, executive director of the Iowa Biodiesel Board. “In the face of market uncertainty, the expansion of our state’s producer credit offers a new cushion for biodiesel producers that is quite significant. Worldwide uncertainty and fuel-price instability also impact consumers. A diverse fuel supply with more low-carbon fuel made in America benefits everyone from soybean farmers to the end consumer.”

Kimberley noted that previous legislation successfully encouraged blends of B11, but that the state has reached a plateau. He said the state is eager to move Iowa’s energy transformation onward and upward toward higher blends like B20 and B30.

“[Gov. Reynolds] has shown herself time and again to be a national leader in fostering biofuels,” Kimberley added. “We anticipate this will greatly increase consumer access to higher blends of biodiesel in Iowa. In fact, this is the first piece of legislation passed in the U.S. to incentivize B30.”

Robb Ewoldt, president of the Iowa Soybean Association, said, “Passage of this legislation signifies a huge win for Iowa’s 40,000 soybean farmers and all Iowans. Over the past year, the state’s soybean growers have worked hard with a variety of stakeholders to help the state refine its approach to expanding biofuels production and access in a way that benefits everyone. This legislation positively contributes to farmer success, air quality and economic growth in our local communities. Biodiesel production supports 13 percent of the per-bushel price of soybeans, which equated to approximately $1.78 per bushel in 2021. It also reduces feed costs for livestock producers by $25 to $40 per ton.”

Monte Shaw, executive director of the Iowa Renewable Fuels Association, said, “It is not exaggerating to say that the Iowa Biofuels Access bill is the most important piece of biofuels legislation ever enacted in Iowa.”