New Iowa Legislation to Boost Renewable Fuel Use

June 7, 2006

A photo of a fuel pump labeled 'E-85 Ethanol.'

Thanks to a generous set of new tax credits, ethanol fuel pumps could soon become commonplace in Iowa.
Credit: Warren Gretz

Iowa Governor Tom Vilsack signed a legislative package on May 30th that is expected to significantly increase the use of ethanol and biodiesel throughout the state. The legislation creates a tax credit for selling E85 (a blend of 85 percent ethanol with 15 percent gasoline) that starts at 25 cents per gallon and phases out by 2021, and another tax credit of three cents per gallon for diesel blends containing at least 2 percent biodiesel. The legislation also sets an additional tax credit of 6.5 cents per gallon of ethanol sold, but the tax credit is lowered if the retail dealer falls short of the state's goals for total biofuel sales. For dealers that sell more than 200,000 gallons of motor fuel per year, the biofuels goal starts at 10 percent in 2009 and ratchets up to 25 percent in 2010. For dealers that sell less than 200,000 gallons of motor fuel per year, the biofuels goal starts at 6 percent in 2009 and increases to 25 percent in 2021. See the bill, House File 2754, on the Iowa General Assembly Web site.

The legislation also includes cost-shared funding to encourage biofuel conversions at fuel terminals and retail stations, and a separate bill appropriates $13 million for that purpose. See the press releases from Governor Vilsack and the National Ethanol Vehicle Coalition (NEVC).

While Iowa is working hard to encourage biofuel sales within the state, for some cities and states, it's a breakthrough just to make E85 legal to sell. Arizona recently relaxed restrictions on E85 sales in the Phoenix area, which were put in place because of concerns about ozone formation, while Florida just removed a statewide ban on E85 sales. Meanwhile, in New York, Governor George Pataki has directed the New York State Thruway to start installing fuel dispensers for E85, B20 (a diesel fuel blend containing 20 percent biodiesel), and compressed natural gas (CNG). The governor also signed legislation that creates a tax credit of 20 cents per gallon for home heating oil that is blended with biodiesel. See the NEVC press releases about Arizona and Florida and the press release from Governor Pataki.