When Iowa’s legislature returned to work, one of their first actions was to pass a biofuel tax incentive bill the Governor is expected to sign into law. While I am encouraged about our legislators engaging on this and related critical issues, the present moment also heightened the need to do more to support Iowa’s fuel industry in our communities, especially small and rural, across Iowa.
FUELIowa is supportive of the growth of E-15 and higher blended fuels. However, we need to take a comprehensive look at every aspect of the fuel distribution system if we truly want to expand the market for ethanol-blended gasoline beyond E-10.
According to Iowa Department of Revenue Retailers Fuel Gallons Annual Report, in 2019 82% of the gasoline purchased in Iowa was E-10, in other words, 1.3 billion gallons out of a total of 1.6 billion gallons of gasoline sold. By contrast, E-15 plus gasoline sales totaled only 70 million gallons.
As of today, there are an estimated 223 fueling stations in Iowa that sell E-15 – the fuel blend legislators just benefited with a tax incentive. Of those stations, 143 (64%) are owned by only three companies, and a majority of those stations are located in urban areas. Under this new tax incentive, rural stations that sell E-10 will now pay higher excises taxes, and that tax increase will pass-through to the pocketbooks of rural Iowans.
Rewarding E-15 fuel with preferential tax incentives over E-10 fuel is, in effect, pitting the big fuel retailers against the small ones. Already, rural communities who help produce E-15 find it hard to purchase locally. Raising the excise tax on E-10 isn’t the way to achieve real market growth for biofuels. It is in reality an unfair penalty tax.
To truly increase the sale of E-15, Iowa’s leaders should help bring this home-grown fuel to every community in Iowa – “rural” and urban. Fuel Iowa estimates 85% of the retail fuel facilities do not have dispensing systems compatible with the sale of E-15. There must be a focus on increasing the number of stations that have the potential to sell E-15, not just pass tax changes resulting in an effective tax increase that benefit only a few large corporations.
What’s standing in the way of having E-15 available across Iowa? As the volume of ethanol in a gallon of gasoline increases, so do the federal and state requirements for storing and handling the product. Compliance usually requires the upgrading or modification of equipment. Upgrading equipment is an expensive process – $300,000 to $7000,00 per location – that places a heavy burden on service station owners. This price tag is a challenge for small fuel station owners under the best of circumstances. When you factor in today’s low fuel sales and the restricted pandemic economy, it’s hard for small businesses to make the numbers add up.
Iowa’s legislative leaders have recognized that fueling equipment upgrades are an essential component in expanding the market for biofuels. The Renewable Fuel Infrastructure Grant Program was created to help fuel operators pay for biofuel equipment upgrades but there are problems with the program. Perhaps the biggest problem is that none of the funds are earmarked specifically for rural and small business operators. Although the program was well-intentioned, the reality is that large companies have the expertise and resources available to navigate and apply for state, federal and private grants quickly. The result is large companies are repeatedly first in line for grant money, leaving little to nothing left for small and especially rural businesses who find themselves at the back of the line.
I encourage the state legislature to consider fully funding the Renewable Fuel Infrastructure Grant Program and designating a percentage of the appropriations for rural and small business operators.
Supporting small and rural fueling stations through this fund will, in turn, support the rural communities that help fuel Iowa every day. After all – the communities that grow the corn and soybeans should have the opportunity to purchase the fuel blend it helps create.