Iowa's Biodiesel Industry Bouncing Back

After last year's fiasco, the federal government's recent renewal of the blender's tax credit has biodiesel manufacturers looking up and enjoying better days. Plants in Iowa are now hiring workers back, and facilities are up and running again.

Published on: Mar 18, 2011

The biodiesel industry was severely crippled last year when Congress decided it would not renew the blender's tax credit of $1.00 per gallon for biodiesel at the end of 2009. As a result, biodiesel plants ran at reduced capacity in 2010, and many of them shut down completely. This year, the government has come back online and renewed the federal tax credit, although it's only a one-year extension. The credit will expire again at the end of 2011 unless Congress acts to renew it.

Randy Olson is executive director of the Iowa Biodiesel Board. "Things are looking better in 2011 for the biodiesel industry," he says. "We're really looking forward to a strong 2011 and beyond. That's good news for soybean growers, as much of the biodiesel manufactured in Iowa is made from soybean oil."

 He adds, "Congress finally extended the $1-per-gallon biodiesel tax credit at the end of 2010, and also extended the ethanol tax credit which is 45 cents per gallon. The biodiesel tax credit, coupled with the federal renewable fuels standard, means we're going to be blending about 800 million or more gallons of biodiesel throughout the country this year. That's a very significant number:  it's more than we've ever produced before in the biodiesel industry."  

Building a stronger national market for renewable biodiesel

How does the tax credit work? On the federal level, the blenders credit is $1 per gallon for the blender of first record. It is designed to get petroleum companies to blend biodiesel in with their petroleum diesel fuel. Also helping is the federal Renewable Fuels Standard. It requires that obligated parties, which are the major oil companies, blend 800 million gallons throughout the course of this year 2011. The question remaining is where that blending is going to happen.

That's one of the reasons why states that have strong supportive policies for biodiesel will see biodiesel blended in their states. "Otherwise, we leave it just up to the oil companies to blend where they think it is most profitable for them, and that's generally going to be in the high population centers on the East and West Coasts," says Olson. "We think it would be a shame that the majority of the product is blended in states other than the Midwest that have supported this industry and where it got its start here. We grow the soybeans here and therefore have the soybean oil which is used to make this great product."

What's Iowa current policy on the state biodiesel tax credit?  

At the state level, what is Iowa's policy on a state tax credit for biodiesel? Right now petroleum marketers in the state of Iowa enjoy the opportunity to blend 2% or greater biodiesel with petroleum diesel and get 3 cents per gallon for that blending, says Olson.

"We are trying to take that a step further and create an opportunity for marketers who want to sell higher blends of biodiesel, and do it profitably," he says. "We have legislation moving through the state legislature right now, House File 452, which proposes to do that. If it passes and the governor signs it into law, retailers will have the opportunity to blend 10% biodiesel, or B10, and get a 10-cent-per- gallon state tax credit."

Legislation would give retailers incentive to blend B10 for a credit

This piece of legislation is a work in progress. "We are working with our petroleum marketing friends to come to the right language and be in agreement," says Olson. "We're really optimistic we're going to come to a joining point that makes a lot of sense for the petroleum industry and the biodiesel industry as well."

Petroleum marketers can make biodiesel a viable part of their business, Olson says. He and other biodiesel industry representatives spoke at a couple of meetings held by the Iowa Biodiesel Board and partnering organizations on March 8 at Ft. Dodge and March 9 at Ankeny. "This program was sponsored by the soybean checkoff," he says. "It was presented by the Iowa Clean Cities Coalition, Iowa Biodiesel Board, Iowa Soybean Association, and a leading company producing biodiesel in Iowa and some other states, the Renewable Energy Group, which is based in Ames."

Groups are fostering a resurgence in biodiesel production

The workshops in Ft. Dodge and Ankeny this past week were designed not only for petroleum marketers, but fleet managers, farmers and anyone else interested in biodiesel. The program ran from 9:30 to 3:30 each day, to explain to folks the facts on biodiesel and how they can blend biodiesel profitably into their business by marketing and using the fuel. Fleet managers, fuel retailers and wholesale petroleum marketers, along with farm co-ops that sell fuels, and some individual farmers and other people interested in biodiesel, took part in these two meetings.

 "There's a lot going on in Iowa these days, a lot of this new economic activity is being driven by biofuels," sums up Olson. "One of those biofuels is biodiesel, and it got clubbed hard last year when the federal tax credits were allowed to expire at the end of 2009. But those tax credits have been restored now, although for this year only, and biodiesel production in Iowa is enjoying a resurgence."

You can find out more information about biodiesel at www.iowabiodiesel.org. Click on the "education" tab.