Ethanol Mandate Idea Stirs Statehouse Debate

Proposal to require mandate for ethanol use in gasoline statewide has lawmakers divided in Iowa Legislature. Rod Swoboda

Published on: Feb 14, 2006

Some Iowa legislators want a mandate to require the use of ethanol in motor fuel in Iowa. Others don't want to have anything to do with that proposal. Still, there are other legislators who are promoting a voluntary inclusion of more ethanol use in Iowa to be accomplished by tax incentives. They want to promote the use of E-10 as well as E-85 ethanol blends.

Sen. Jack Kibbie, a farmer from Emmetsburg in northwest Iowa, introduced the bill to mandate the use of ethanol in all gasoline in Iowa. Kibbie has been supporting this idea in recent years, and his previous attempts to get such a bill passed in the legislature have been unsuccessful.

What's the current status of the mandate bill? Kibbie says he and 18 other Democrats introduced it a couple weeks ago. The petroleum marketing industry and other petroleum interests are lobbying against it.

Three ethanol bills in Iowa Legislature

Another bill, SF2184, which is supported by the ethanol industry and the Iowa Corn Growers Association, has been passed by the Senate Natural Resources Committee. It is now in the Senate Ag Committee for review.

A third bill, the Republican-sponsored bill, SF2129, has an E-25 by 2015 goal in it. But it does not have any mandates in it. "That's just a piece of feel good type of legislation," says Kibbie.

"In the Corn Growers' bill, the petroleum marketers would have to meet certain goals over a period of time, to use E-10 and E-85 blends of ethanol in Iowa," he explains. "I think that's probably the bill that will move along in the legislative process this session."

Everyone favors a renewable fuels standard; they want to use more ethanol in Iowa. But it's how we get there that is the question. Farmers, environmentalists and many motorists who are weary of paying high prices for gasoline are pushing hard for Iowa to use more ethanol. "I think we'll pass some sort of legislation on this during the 2006 session," says Kibbie.

Currently, almost 80% of the gasoline sold in Iowa is 10% ethanol. So mandating it on that front isn't going to increase the use a whole lot more. That's the argument many Republicans in the legislature are using against Kibbie's bill.

Mandate would provide money for E-85

"A mandate will increase ethanol use by another 35 to 40 million gallons," answers Kibbie. "That's about the amount that one plant in Iowa will produce in a year. We're giving the retailers a 2.5 cents per gallon break now, as an E-10 sales incentive. That's the tax break they are getting on all of the ethanol they sell that's over 60% of their sales-per-retail location. That tax break is now costing the state of Iowa about $5.5 million dollars per year in lost tax revenue."

"If we mandate the use of ethanol statewide, we don't have to provide that tax break. There would no longer be a need for such an incentive since the mandate would require all retailers to sell E-10 in all their gasoline. I propose that we give that money the state would save, give it right back to the same retailers to get them to put in E-85 pumps. That would be an economic incentive for Iowa to increase the sales of E-85 blend - which is 85% ethanol - statewide," says Kibbie.

Right now there are less than 30 E-85 pumps in the state. It seems like petroleum retailers are better off to just not put them in until the legislature bids up the financial incentives, until basically it almost makes installing the pumps a no-cost proposition. "I suppose that type of thinking is going on out there with the gasoline retailers," admits Kibbie. "But if we put a deadline on those incentives, we would get the people to get with the program."

There are already state and federal incentives. There's not much cost to a retailer to put in E-85 outlets. "One of the problems is now that the big oil companies and their franchisees have got in the contract that the gas station can't put anyone else's fuel in their tanks to sell," says Kibbie. "So if they do put in E-85 pumps and start selling it, they have to put those pumps off to the side of the station someplace. So that's a hurdle that we need to get over."

Help is needed from federal level too

In the U.S. Senate, Iowa Sen. Tom Harkin has introduced legislation on the federal level to deal with that. Actually there are two separate bills in the U.S. Congress to deal with that. One bill deals with that contract the oil companies have with gas stations, refusing to let the gas stations sell any other company's fuel under the station's canopy.

The other bill that's been introduced in Congress is to require all cars manufactured and sold in the United States by the year 2010 to be flex-fuel vehicles. "Congress needs to pass both of those bills," says Kibbie.

Meanwhile, the mandate bill Kibbie is pushing to try to get through the Iowa Legislature is really the same as the law that's already in place in Minnesota. Iowa's Republican U.S. Sen. Chuck Grassley, has been a long-time supporter of that mandate. He wants to see Iowa enact an ethanol mandate.

"Also, U.S. Congressman Jim Nussle, who is running for governor of Iowa, is for a mandate," notes Kibbie. "The Democrat candidates for governor, at different times on the campaign trail this winter, have said they would support a mandate in Iowa. It's the Republican leadership in the Iowa Legislature that has kept this mandate idea from moving forward."

Some people in the Iowa Legislature say Iowa will not be able to supply enough ethanol if a mandate is passed. Currently, most of the ethanol Iowa produces is being shipped to the East Coast and West Coast. Getting enough ethanol for the state of Iowa, if its use is mandated here, will be a problem, critics say.

Ethanol plants depend on livestock

"I don't think that's going to be a problem," says Kibbie. "We will have enough ethanol produced. These plants are gearing up so more of them are coming on stream. We have eight or nine more on line. They are building ethanol plants in other states too. I think it's great that we're exporting a lot of ethanol out of Iowa."

The new plant at Ft. Dodge is sending ethanol to the northeast U.S. and he distillers grains byproduct is going to cattle feedyards in the southwest, adds Kibbie. "We need to do more to promote livestock in the state of Iowa. We can use this product from the ethanol plants to do that. It's great feed. You buy a bushel of corn for $2 and make 2.7 gallons of ethanol and you still have 85% of the feed value left. It's a no brainer, to make more ethanol and use more ethanol in Iowa. We need to get with it."

A number of people in the livestock industry want the Legislature to keep this going. They want to bring more cattle back to Iowa. "I think we need to work also with DNR and the environmentalists who are worried that more cattle will bring environmental concerns," says Kibbie. "We can have more livestock in Iowa and do a good job of handling the manure and protect our air and water quality. We need to have a thriving livestock industry to use the distillers grains that are produced by these ethanol plants."