More uncertainty ahead for biofuels

Iowa’s biofuels industry will face continued uncertainty in 2013 about whether federal mandates and subsidies that have fueled its growth will continue.

The Renewable Fuels Standard (RFS), which in 2012 mandated a minimum production level of 13.2 billion gallons of ethanol, has come under fire from livestock producers, who decry the mandate’s effect on feed prices, and from the petroleum industry, which argues it’s flawed and no longer necessary.

The RFS has helped guarantee a market for Iowa’s fledgling ethanol and biodiesel industries. As a result, between 2002 and 2011, the economic activity generated by the renewable fuels industry increased from less than 5 percent of the value added to Iowa’s economy by agriculture to more than 37 percent, according to a study conducted for the Iowa Renewable Fuels Association. And by 2011, ethanol and biodiesel production accounted for nearly 7 percent of the manufacturing output in the state.

Though the U.S. Environmental Protection Agency (EPA) in November denied a request led by cattle and pork producers for a waiver to the RFS, the American Petroleum Institute is now seeking a repeal of the RFS, claiming that the standard is flawed and that new reserves of natural gas and oil have made mandates for minimum levels of renewable fuel content unnecessary.

The Iowa Renewable Fuels Association, however, contends that the standard is working.

“The RFS is forcing open the door of the federal petroleum mandate to finally allow renewable fuels access to the market,” said Monte Shaw, the association’s executive director. Shaw said the petroleum industry’s concerns stem from the fact that E15 fuel – a gasoline blend containing 15 percent ethanol – is poised to become more widely available in 2013.

In addition to lobbying Congress to keep the RFS in place, the association will also be working to get more retailers in Iowa to offer E15, preferably through blender pumps that enable a range of ethanol mixes to be sold, Shaw said. Presently, only one retailer in the state sells E15, though a number of others are in the process of completing paperwork to add the fuel.

“We thought we’d be working with retailers two years ago to do this, but EPA changed the rules,” he said. “But there’s no reason we can’t make it more available by the end of (2013).”

Which way will the wind blow for production tax credit?

The fate of the wind energy production tax credit, a key driver for Iowa’s wind industry, is also in the hands of Congress. The tax credit, first enacted in 1992 and extended numerous times, expires at the end of 2012 and would cost an estimated $12.1 billion to extend for another year.

Harold Prior, executive director of the Iowa Wind Energy Association, said the state’s congressional delegation unanimously favors extending the tax credit and is optimistic that will happen. The state’s wind production capacity grew to more than 5,100 megawatts by the end of 2012, but that figure won’t expand further without support from federal subsidies, Prior said.

“We need some surety for this industry,” Prior said, noting that coal, natural gas and nuclear each receive more federal subsidies than wind. “We’re making strides in getting the wholesale cost lower, but we’re not there yet. In five years, we should be very competitive with other sources of generation.”

For 2013, much of the damage from not extending the credit sooner has already occurred, he said. In Iowa, nearly 1,000 wind energy jobs have been cut as turbine production and new orders ground to a halt. “We’ve very concerned that we’re going to see more job losses,” Prior said.