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Group Opposes Biofuel Mandates Proposed By Iowa Lawmakers

In response to two bills that are pending in the Iowa Legislature -- which if passed would mandate use of both biodiesel (SF 464) and ethanol (SF 2107) in Iowa -- a coalition of public, private, business and labor organizations has been formed to try to prevent those two bills from becoming law.

A leader of the group, which is known as "Iowans for Consumer Fuel Choice" or ICFC, says the organization supports the free market system and will work hard to protect Iowan's rights for fuel choice. Dawn Carlson says Iowans for Consumer Fuel Choice supports the use of renewable fuels, but opposes mandating the use of those products because such mandates will drive up fuel costs. The two bills are Senate File 464 and Senate File 2107.

"Fuel choices at the pump allows for competition and keeps the price of fuel more affordable," says Carlson, an ICFC spokesperson who is president and chief executive officer for the Petroleum Marketers and Convenience Stores of Iowa. "Mandating renewable fuel will create upside-down economics, eliminate the checks and balances of fair competition, and increase fuel costs for Iowans."

Petroleum marketers claim mandates would drive up fuel costs

In Minnesota, where that state's legislature recently put a biodiesel mandate into effect, data from the Oil Price Information Service (OPIS) reveals the average cost of diesel fuel is 7-cents to 9-cents-per-gallon higher than fuel sold in Iowa, says Carlson. Furthermore, she says the Minnesota mandate currently is suspended due to extreme weather issues – a provision notably absent from Iowa's proposed legislation.

Carlson and other ICFC officials say, in these difficult economic times that the U.S. and Iowa are having to deal with today, legislation that places more financial burdens on Iowans is a bad idea.

"Since nearly everything comes to us on trucks that are using diesel fuel, these proposed biofuel mandates would unnecessarily increase our fuel costs by 5% to 8%," says Scott Havens, owner of Scott's Foods in Norwalk. "Eventually, that gets paid for with higher grocery prices, creating a hidden tax on consumers."

Is proposed legislation unnecessary with existing federal mandates?

With national biofuel mandates already established by the U.S. Congress, ICFC representatives say state-level mandates are not needed. In 2006, Iowa lawmakers created the Iowa Renewable Fuels Standard to support federal mandates, encourage consumer demand and create the necessary infrastructure to market more renewable fuel in the state.

"The existing standard has proven effective and has created a competitive market position for renewable fuels in Iowa," says Delia Meier, senior vice president for Iowa 80 Truck Stop and an ICFC representative. "State mandates will corrupt the free market system and place an unnecessary burden on Iowa consumers and Iowa retailers."

Iowa retailers, such as gas stations, truckstops and convenience stores, buy their fuel directly from Iowa ethanol plants, Iowa biodiesel plants and the major oil refineries. The ability to supply Iowa's market demands with various fuel options ensures competitive pricing approaches from all three sources, she says.

Group says Iowa gas stations would be put at competitive disadvantage

With biodiesel mandates, Iowa retailers will assume a competitive disadvantage with fuel marketers in neighboring states, says Meier. A state mandate would create infrastructure issues for Iowa retailers, and would potentially lower overall demand for biodiesel products, she adds.

Truckers and trucking companies typically use an on-board computer program to help plan travel routes and identify the most cost-effective refueling options. Given a fuel capacity to travel as many as 1,200 miles per tank, truck drivers can easily opt to bypass Iowa truckstops and other fuel retailers in the state.

Last year, truck stops operating along Iowa's interstate highways sold more than 228 million gallons of "road-use" diesel fuel – more than one-third of the state's total sales of 612 million gallons.

A state mandate on ethanol would also create economic issues for Iowa fuel retailers and fuel consumers, while further benefiting ethanol producers who are reporting record production for 2009 with 3.2 billion gallons of ethanol made in Iowa, says Carlson.

The biofuel mandates do have some friends in the state Legislature, however. And Carlson says proponents of the biofuel mandates have devalued current levels of biofuel use in Iowa and the proponents claim that sales are declining. Yet the latest Iowa Department of Revenue fuel usage figures indicate E10 and E85 ethanol products represent 82.3% (1.269 billion gallons) of the state's total fuel volume. "Historical data from the Iowa Department of Revenue shows that ethanol-blended gasoline has increased as a share of Iowa gasoline sales over the past 13 years, with E10 increasing steadily over the decade while E85 experienced the largest increase between 2005 and 2008," says Carlson.

Instead of mandates, ICFC favors subsidies combined with fuel tax

A 2009 Iowa State University research study concludes that neither ethanol mandates nor ethanol subsidies alone can achieve multiple policy goals, says Carlson. She says researchers Harvey Lapan and Gian Carlo Moshini surmise that the use of biofuel mandates will lead to higher welfare. She says this ISU study concluded that the most viable policy to achieve targeted biofuel production and usage objectives combines subsidies with a fuel tax.

"Iowa's leadership position with renewable fuels must be driven first and foremost by public interest," says Randy Woodard, president and chief executive officer for Elliott Oil Company and an ICFC representative. "The only way to build a sustainable renewable fuel industry in Iowa is to offer competitively priced products and build consumer demand."

Who are these people?—Iowans For Consumer Fuel Choice

"The ICFC group is a coalition of public, private, business and labor organizations that support renewable fuels, but stand opposed to product mandates that manipulate our free market system and drive up fuel costs in our state," says Carlson. "Our mission is to protect the rights and interests of all Iowans by serving as the voice of reason for a responsible and fair marketplace."

ICFC charter member organizations include: Broadway Flying J Travel Plaza; Casey's General Stores; Hy-Vee, Inc.; Iowa 80 Truck Stop; Iowa Association of Business & Industry; Iowa Association of School Boards; Iowa Automobile Dealers Association; Iowa Good Roads Association; Iowa Grocery Industry Association; Iowa Motor Truck Association; Iowa Rural Water Association; Iowa Section of the American Water Works; Keck Energy; Kum & Go, LC; Kwik Star; Petroleum Marketers & Convenience Stores of Iowa; Pilot Travel Centers, LLC; Teamsters Local 238; and the American Petroleum Institute. For more information, visit GiveMeFuelChoice.org.