Gov. Kim Reynolds renews effort to require higher ethanol blends at Iowa pumps

Gov. Kim Reynolds is trying again to require gas stations to offer gasoline with higher blends of ethanol, after a more wide-reaching proposal last year fell victim to fights between fuel retailers, transportation groups and renewable fuel providers.

“Iowans deserve access to less expensive, cleaner-burning fuel, grown and made right here,” Reynolds, a Republican, told a crowd of hundreds of people Tuesday at the Iowa Renewable Fuels Summit in Des Moines.

The new legislation, House Study Bill 594, advanced through an Iowa House subcommittee meeting. Lawmakers heard a range of objections offered by transportation groups, gas stations and others, as well as praise from renewable fuel producers. The bill passed the House Ways and Means Committee Wednesday on a vote of 16-8.

Despite the objections, key lawmakers say the two sides are much closer to agreeing on language they could both accept, in contrast to the wide gulf that was evident last year.

"We started with a bill about this time last year, spent a lot of time in meetings listening to different people and trying to build a consensus and I think we’re pretty close now," said Rep. Lee Hein, R-Monticello, a farmer who chairs the House Ways and Means Committee.

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How would the bill work?

Fuel retailers like gas stations would be required to offer gasoline with 15% ethanol, known as E15, beginning in 2026. That would greatly expand the availability of E15, which is currently available in a fraction of Iowa’s gas stations and truck stops.

But, unlike last year's version, the requirement only applies if the gas station has infrastructure that is compatible with the higher blend of ethanol. Reynolds' previous proposal would have required many gas stations, truck stops and convenience stores to upgrade their equipment to offer the higher ethanol blend, which retailers said would result in a steep cost.

For gas stations that don’t have compatible equipment — such as tanks that are too old — the bill provides a waiver option. The retailer can either submit an application describing why its equipment can’t support the higher ethanol blend or can hire someone to inspect its facility and certify that it can’t meet the requirement.

From April 2021: Rough road ahead for bill backed by Gov. Kim Reynolds mandating renewable fuel at Iowa pumps

Iowa Agriculture Secretary Mike Naig, who supports the bill, called the new legislation "a very practical approach."

"I think it does recognize the reality that some fueling stations lack the equipment, or compatible equipment, to offer those higher blends and that the cost of upgrading those facilities doesn’t make sense in every case," he said. "So there’s a way to accommodate for that either through waiver or recognizing that equipment is not compatible with those higher blends."

Reynolds is also proposing spending $10 million annually over five years to upgrade Iowa pumps so they can use higher ethanol blends and increasing tax credits for biodiesel production and fuel retailers to expand access.

And, under the bill, any new or upgraded fuel infrastructure must be compatible with E85, or gasoline with 85% ethanol, and B20, which contains at least 20% biodiesel, starting next year.

Industry groups raise concerns about mandates, compliance

Some groups at Tuesday’s subcommittee took issue with the bill’s language about whether particular infrastructure — like pipes and tanks — is compatible, saying it could still require retailers to “crack concrete” to install new equipment at their stations.

“That compatibility, the ‘crack concrete’ part of the bill really needs to be looked at,” said Tom Cope, a lobbyist for Casey’s General Stores. “Because we’re really, really concerned that it could have a negative impact on stores, especially located in small town Iowa.”

More: Gov. Kim Reynolds' support for 'carbon capture solutions' doesn't include incentives for pipelines

And some, like Marc Beltrame, a lobbyist for Fuel Iowa, disagreed with Reynolds’ and lawmakers’ assertion that the new bill allows Iowans to choose to buy E15 at the pump.

“This is not a market-based approach,” said Marc Beltrame, a lobbyist for Fuel Iowa. “I say that respectfully. This is the government dictating an access point.”

Bob Rafferty, a lobbyist for Truckstops of Iowa, said he was expecting the requirement that retailers offer E15 from at least one fuel pump. But for stations with more than one compatible fuel pump, the legislation would require 50% of their pumps to offer E15.

“As you move to 50% of pumps requiring E15, if the customer demand is there, that is no problem,” he said. “But if the customer demand is not there then that creates a pretty significant mandate.”

Renewable fuels groups praise ‘more choices at the pump’

Reynolds touted the biofuels legislation as one of her priorities in her Condition of the State address earlier this month, and renewable fuel groups quickly praised the proposal once it was released this week.

“Iowans will have more choices at the pump, rather than fewer,” said Monte Shaw, the Iowa Renewable Fuels Association’s executive director.

Shaw said about 300 of 2,000 Iowa convenience stores now offer E15. His group estimates that 900 to 1,000 of the gasoline stations would offer E15 by 2026, based on the age of the facilities and their need to upgrade infrastructure.

E15 will sell itself, Shaw said, “once consumers have access to it.”

More: Lawmakers seek to salvage summer E15 fuel

Michael Walz, vice president of public affairs at Poet, the nation's largest ethanol producer, called E15 “America’s next standard fuel” and credited Reynolds with “leading the way.”

“Iowans deserve the freedom to choose E15 every time they fill up,” he said in a statement. “E15 will save Iowans money at the pump, create new value for farm families, support thousands of jobs and drive economic growth across the state.”

Lance Lillibridge, president of the Iowa Corn Growers Association, said the legislation would make Iowa “a leader in using home grown, clean burning ethanol.”

“ICGA will be proactive and continue working on this bill to see it to the finish line and increase opportunities for Iowans to select higher blends of ethanol at the pump,” he said in a statement.

Reynolds contrasts Iowa’s approach with that of the Biden administration

At the Renewable Fuels Summit and in her Condition of the State address, Reynolds has contrasted Iowa’s support for ethanol and biodiesel with President Joe Biden’s efforts to encourage electric vehicles.

She said the Biden administration has focused “all its efforts on electric vehicles and is actively attempting to eliminate gas-powered cars. And that’s a mistake, especially as China looks to lock up the precious metals that make the EV batteries."

“Rather than support a communist economy thousands of miles away, we should be supporting our own economy,” Reynolds said. “We need to embrace an all-of-the-above approach, where we support energy sources that come from right here in Iowa and have the capacity to scale today.”

Reynolds said Iowa must fight “illegal and arbitrary regulatory actions taken by the EPA.”

Reynolds, along with Iowa agriculture and renewable fuel groups, have criticized Biden’s Environmental Protection Agency for proposing to retroactively cut the U.S. ethanol blending requirements for 2020, which was set in 2019. EPA also proposes establishing the 2021 mandate for corn ethanol below the statutory requirement.

The moves would reduce the amount of ethanol that oil refiners have to blend into their gasoline under the federal Renewable Fuel Standard, causing a financial loss for Iowa-based ethanol producers.

More: EPA proposal to retroactively scale back renewable fuel blending requirements draws scorn

"EPA under both parties have walked away from its commitment to renewable fuels, and we’ve had to bring them back," Reynolds said. "And we need to do it again."

When a lobbyist for the governor’s office made similar comments at Tuesday’s subcommittee meeting, she drew a negative response from the one Democrat on the panel, Rep. Mary Wolfe of Clinton.

“I think it’s unfortunate in what is supposed to be a bipartisan bill that almost the first thing we’ve heard was a gratuitous partisan comment about the Biden administration,” said Wolfe, who supported Reynolds’ biofuels bill last year. “So I’m not sure how that’s relevant to this bill. I don’t think it’s a great start to this discussion but I’m keeping an open mind.”

Correction: A previous version of this story misstated a quote from Marc Beltrame. The quote has been updated.

Stephen Gruber-Miller covers the Iowa Statehouse and politics for the Register. He can be reached by email at sgrubermil@registermedia.com or by phone at 515-284-8169. Follow him on Twitter at @sgrubermiller.

This article originally appeared on Des Moines Register: Fuel industry groups set for second round of debate over ethanol bill