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“Iowa Biodiesel Board, Iowa Soybean Association and REG are promoting the 2 Million Mile Haul as a success but if the report is read, THE TRUE RESULTS ARE BURIED IN A MOUNTAIN OF DATA.”
— Steve Lursen, Special Projects Manager, Decker CompaniesBeware of all the hoopla and fanfare surrounding the 2 Million Mile Haul. Sponsors tout test results as evidence supporting a biodiesel mandate. They also imply support of the mandate by Decker Truck Lines, the Fort Dodge-based motor carrier that participated in the study.
Study sponsors regularly tout fuel economy performance and cold weather characteristics, as well as improved lubricity for biodiesel compared to conventional on-road diesel fuel. Decker officials offer a notably different perspective of the results:- Biodiesel MPG was 2% lower during the test
- Cold weather is a major issue
- Lubricating advantages of biodiesel were unsubstantiated
- Quality is inconsistent
- Biodiesel availability is limited
- Biodiesel proved to be significantly more expensive
Despite confusion surrounding the study one thing is clear, biofuel mandates are not the solution. Fuel is a leading expense for trucking companies, who measure profitability by costs per mile. A mandate will force motor carriers to purchase fuel outside Iowa, and this will have a negative, rippling effect on Iowa retailers, our biodiesel industry and our state in general.
CLICK HERE to review full contents of Steve Lursen’s letter.
What’s Motivating an Ethanol Mandate?
- Iowa ethanol plants are celebrating a record year in 2009, with 3.1 billion gallons of ethanol production, 39 operating ethanol plants and renewable fuels accounting for eight percent of the state’s Gross Domestic Product. In 2010, ethanol will account for one-third of Iowa’s corn production, which is expected to exceed last year’s record breaking levels.
- Supporters say a mandate will generate an additional 25 million gallons of annual ethanol sales. That’s less than one percent of last year’s production totals and approximately one-fourth the annual output for any single ethanol plant.
- The figures just don’t add up to good legislation. The projected impact is very limited, and the pitfalls are significant – eliminating fair competition among fuel suppliers will drive up the price Iowans pay at the pump.
Biodiesel Mandate will Deliver Statewide Boycott
- Motivation behind the biodiesel mandate is clearer. The failure of Congress to extend the federal blenders tax credit makes it very difficult to offer competitive pricing for biodiesel products. The answer, however, is not a B5 mandate in Iowa.
- A mandate places Iowa retailers at a competitive disadvantage and will send Iowa diesel sales plummeting. Interstate motor carriers — which account for more than one-third of the state’s total on-road diesel usage — have warned of a boycott if a biodiesel mandate is adopted. This is not an idle threat; with fuel capacity of more than 1,000 miles per tank drivers can easily opt to bypass Iowa retailers.
Which of the following “facts” presented to you by supporters of biofuel mandates are true?
A. Iowa trails 31 other states with ethanol-blended products representing less than 75% of the state’s total fuel consumption.
B. 66% of Iowans support a biodiesel mandate.
C. Iowans for Consumer Fuel Choice is “big oil.”
D. None of the above.
The answer is D.
— The latest Department of Revenue fuel usage figures indicate that E10 and E85 ethanol products represent 82.3 percent (1.269 billion gallons) of the state’s total fuel volume. Is there a more reliable source for this data? No.
— The Iowa Biodiesel Board survey asked if respondents support "...legislation that would require oil companies to blend 5% biodiesel into diesel fuel sold in Iowa." The question failed to inform that biodiesel would be the only fuel option available. Even more deceiving, their propaganda never mentions that only 16% of the 500 people contacted currently, or ever, owned a diesel vehicle.
— ICFC is a coalition of public, private, business and labor organizations. We support renewable fuels, but stand opposed to product mandates that manipulate our free market system and drive up fuel costs in our state. 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 supports renewable fuels, but stand opposed to product mandates that manipulate our free market system and drive up fuel costs in our state. 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.
Four out of every five gallons of gasoline sold in Iowa are ethanol-blended products, according to the most recent Iowa Department of Revenue figures. Yet, in recent weeks, Iowa state legislators are considering a statewide mandate that would make ethanol Iowan’s only fuel option.
The legislation, they say, is necessary to save Iowa’s renewable fuels industry…really?
Iowa ethanol plants are celebrating a record year in 2009, with 3.1 billion gallons of ethanol product, 39 ethanol plants up and running and renewable fuels accounting for 8 percent of the state’s Gross Domestic Product. In 2010, ethanol will account for one-third of Iowa’s corn production, which is expected to exceed last year’s record breaking levels. Do these figures represent an industry that needs to eliminate supplier competition and consumer choice at the pump in order to force all Iowans to use only their product?
Advocates for this fuel mandate claim that with the new legislation ethanol-blended prices would be “5-7 cents lower” than straight gasoline…really?
Ethanol-blended gasoline in Iowa currently is priced competitively only because of more than seven cents per gallon in federal and state tax credits and reduced excise taxes. If ethanol is mandated, there is no need to offer those incentives. Without the tax credits that retailers pass along to consumers, fuel costs escalate. With a mandate, Iowans have no choice but to pay.
Mandates also eliminate competition. Competition keeps prices low. Iowans currently enjoy lower fuel prices because of the competitive marketplace created by thousands of independently owned and operated convenience stores throughout the state. These Iowa retailers buy fuel directly from Iowa ethanol plants (and Iowa biodiesel plants) as well as from the major oil refineries. Major oil refiners do not own any retail locations in Iowa. The ability to supply our market demands with various fuel options ensures competitive pricing approaches from all the sources.
Mandate proponents tout the legislation for economic impact…really?
According to those in favor of the mandate, eliminating Iowans choice at the pump would generate an additional 25 million gallons of annual ethanol sales – or less than one percent of last year’s production totals. That’s approximately one-fourth of a single ethanol plant’s annual production. This minor growth certainly does not justify forcing Iowans to give up their freedom of choice at the pump.
We need to maintain our fair and free market system, and we cannot afford to assume the burden of those select few investors that claim they cannot survive with 80 percent market share. With federal biofuel mandates already in place and the 2006 Iowa Renewable Fuels Standard supporting these requirements, there is absolutely no need for an ethanol mandate in Iowa…really.
— Dawn Carlson, Iowans for Consumer Fuel Choice
Iowa ethanol plants are celebrating a record year in 2009, with 3.1 billion gallons of ethanol product, 39 ethanol plants up and running and renewable fuels accounting for 8 percent of the state’s Gross Domestic Product. Do these figures represent an industry that needs to eliminate competition and consumer choice at the pump?
No Fuel Choice = Higher Prices
Consumer Demand Cannot Be Legislated
Iowans know the value sustainable agriculture brings to our state in the form of food and fuel. In fact, more than 80 percent of all Iowans voluntarily use ethanol-blended gas, according to the most current Iowa Department of Revenue statistics. Iowa retailers also support biofuels. More than 95 percent of the state’s 2,234 retail locations selling gasoline offer ethanol blended products.
Still, ethanol producers want to mandate ethanol blends in all gasoline sold in Iowa. They want to eliminate Iowans fuel choice to, by their calculations, sell another 25 million gallon of ethanol in Iowa, or less than one percent of last year’s total production.
If a mandate is passed, not only is consumer choice lost but so is marketplace competition — and competition among suppliers and between retailers is what drives fuel prices down. Advocates for this mandate claim that ethanol blend prices would be “5-7 cents lower” than straight gasoline. That’s certainly not what we’ve seen in Minnesota, where the price of fuel is consistently higher than the price of fuel in Iowa.
Additionally, one of the reasons Iowan's enjoy low fuel prices because of the number of independently owned and operated convenience stores across the state. Mandates that disrupt the competitive marketplace and force retailers out of business not only hurt small business owners and cost jobs, but ultimately consumers lose when competition is removed from the market place.
Iowa Taxpayers Shouldn’t Fund Another Bailout
Eliminating consumer choice at the pump doesn’t make sense. A mandate is simply a bailout for a small group of investors at the expense of all Iowans.
Should Iowa taxpayers be forced to fund the state’s ethanol industry? That’s exactly what we are doing with a product mandate, and we’re not even asking these businesses to pay us back when all is said and done. If Iowa Legislators truly believe this industry is the key to our future, perhaps the answer is simply offering support by state-backed loans. Let the burden of risk remain with the investors, and let our free market system remain intact.
Moving Forward…
With federal biofuel mandates already in place and the 2006 Iowa Renewable Fuels Standard supporting these requirements, there is absolutely no need for biofuel mandates in Iowa. We need to continue on the path set by the existing standard. It has helped encourage consumer demand and created the infrastructure necessary to market more renewable fuels.
Our goal should be to create demand for Iowa products and sell more ethanol nationwide. Work should continue on the federal level to grant liability protection to retailers for their equipment. Provide these Iowa retailers — who have always supported the biofuels industry — to safely market biofuel products and sell more ethanol featuring blends beyond today’s standard E10 blend .
There currently seems to be a lot of confusion about biodiesel statistical data. Perhaps the issue is simply unbiased sourcing. While the pro-mandate Iowa Renewable Fuels Association “conducted its own analysis” and sourced findings from their national affiliate, Iowans for Consumer Fuel Choice uses documented figures from credible sources such as the Iowa Department of Revenue, the Minnesota Department of Revenue and the Oil Price Information Service (OPIS), a private company that Iowa State agencies such as the Iowa Department of Transportation rely on for purchasing data.
Minnesota’s Mandate andDeclining Diesel Volume
Minnesota was the first state to issue a biodiesel mandate with a B2 requirement in 2005. To ensure that we have not “cherry picked” abnormal market conditions, we have analyzed annual diesel volumes for Iowa and Minnesota over the past seven years. The historical data clearly reveals a negative impact from the Minnesota mandate, with a decline of more than 15 million gallons. If Minnesota had experienced the same growth as Iowa at 17 percent, their seven-year total volume increase would have been more than 110 million gallons — or an opportunity cost of more than 126 million gallons.
Mandates and Prices The Iowa Renewable Fuel Association also claims a biodiesel mandate will not increase fuel prices. The fact is that eliminating consumer choice and taking away supplier competition will produce but one logical outcome — it will raise the price Iowans pay at the pump.
In May of last year, Minnesota increased their biodiesel mandate requirement from B2 to B5. According to OPIS data, since enacting the B5 mandate the average cost of Minnesota diesel has increased by 7- to 9-cents per gallon above Iowa prices.We also should note the Minnesota mandate currently is suspended due to cold weather issues — a provision notably absent from Iowa’s proposed legislation.
Job Creation Proponents tout economic impact and job creation as benefits of biofuel mandates. Yet consider this, Iowa’s entire biodiesel industry today employs fewer than 210 people — less than half the number of Iowans, 443, working for the Iowa 80 Truck Stop. A competitive price disadvantage of 9 cents per gallon, like in Minnesota, would conservatively cause the Iowa 80 Truck Stop to lose 30 percent of its diesel sales and result in a corresponding loss of 132 jobs. That’s just one retailer — multiply the losses by 50 other truck stops and you start to get a pretty good idea of the impact from this “jobs bill.”
ICFC’s Logical Position on Biodiesel Mandates Our facts and figures are clear, and so is our position. With federal biofuel mandates already in place and the 2006 Iowa Renewable Fuels Standard supporting these requirements, there is absolutely no need for a biodiesel mandate in Iowa.
Iowans for Consumer Fuel Choice Oppose Fuel Mandates
In response to pending legislative action to mandate use of both biodiesel (SF 464) and ethanol (SF 2107), a coalition of public, private, business and labor organizations has emerged to support the free market system and protect Iowan’s rights for fuel choice. Iowans for Consumer Fuel Choice (ICFC) supports the use of renewable fuels, but opposes product mandates that will drive up fuel costs.
“Fuel choices at the pump allows for competition and keeps the price of fuel more affordable,” said Dawn Carlson, an ICFC spokesperson and the 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.”
In Minnesota, where they recently administered a biodiesel mandate, data from the Oil Price Information Service (OPIS) reveals the average cost of diesel fuel is 7- to 9-cents per gallon higher than fuel sold here in Iowa. Furthermore, the Minnesota mandate currently is suspended due to extreme weather issues – a provision notably absent from Iowa’s proposed legislation.
According to ICFC officials, in these difficult economic times, legislation that places more financial burdens on Iowans is a bad idea.
“Since nearly everything comes to us on trucks using diesel, biofuel mandates unnecessarily increase our fuel costs by 5 to 8 percent,” said Scott Havens, owner of Scott’s Foods in Norwalk. “Eventually, that gets paid for with higher grocery prices, creating a hidden tax on consumers.”
Proposed Legislation Unnecessary with Existing Federal Biofuel 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 created a competitive market position for renewable fuels in Iowa,” said Delia Meier, senior vice president for Iowa 80 Truck Stop and an ICFC representative. “State mandates will corrupt the free market system and place unnecessary burden on Iowa consumers and Iowa retailers.”
Iowa retailers buy 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.
With biodiesel mandates, Iowa retailers will assume a competitive disadvantage with fuel marketers in neighboring states. A state mandate would create infrastructure issues for Iowa retailers, and would potentially lower overall demand for biodiesel products. Motor carriers typically use an on-board computer program to help plan travel routes and identify the most cost effective refueling options. Given fuel capacity to travel as many as 1,200 miles per tank, drivers can easily opt to bypass Iowa retailers. Last year, truck stops operating along Iowa’s interstate highways sold more than 228 million gallons of on-road-use diesel fuel – more than one-third of the state’s total sales of 612 million gallons.
A state mandate on ethanol also creates economic issues for Iowa retailers and consumers, while further benefiting ethanol producers who are reporting record production for 2009 with 3.2 billion gallons of ethanol made in Iowa.
Proponents of the biofuel mandates have devalued current levels of biofuel consumption in Iowa and claim that sales are declining. Yet the latest Iowa Department of Revenue fuel usage figures indicate that E10 and E85 ethanol products represent 82.3 percent (1.269 billion gallons) of the state’s total fuel volume. Historical data from the 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.
Responsible Leadership Needed
A 2009 Iowa State University research study concludes that neither ethanol mandates nor ethanol subsidies alone can achieve multiple policy goals. Researchers Harvey Lapan and Gian Carlo Moshini surmise that the use of biofuel mandates will lead to higher welfare. They conclude 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,” said 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.”
