Approval of E15 by the U.S. Environmental Protection Agency and a new state tax credit on that fuel should provide a significant boost for biofuel sales, says Monte Shaw, executive director of the Iowa Renewable Fuels Association (IRFA). Among the provisions of a renewable fuels bill signed by Gov. Terry Branstad in May is a 3 cents per gallon retailer tax credit for sales of 15 percent ethanol blended gasoline, or E15.

According to an annual report compiled by the Iowa Department of Revenue, biofuels accounted for 9.2 percent of the motor fuels sold in the state in 2010, virtually unchanged from the 9.1 percent share reported in 2008. Shaw hopes that the additional tax credit will help retailers to bump up sales.

In 2006 the Legislature enacted House File 2754, which established a goal that 25 percent of all petroleum used in the formulation of gasoline be replaced by pure ethanol or biodiesel by 2020. The interim goal for 2010 was 11 percent. (graph at right)

“So we did fall short,” Shaw said. “That was the motivation for the IRFA to pursue the legislation that we did. Clearly we weren’t getting the momentum that we needed from the original legislation in 2006.”

The EPA last week announced a final rule that will allow the use of E15 in vehicles that were built in 2007 or later. An automobile manufacturers group has sued to delay enactment because it has not been tested for use in older engines, however.

Higher gasoline prices have spurred sales of ethanol blends. Sales of the higher E85 blend increased by 46 percent in the first quarter of 2011. Statewide, 165 sites sell E85, but flex-fuel vehicle owners in some areas of the state don’t have a convenient fueling location, Shaw said. A survey by the IRFA found that 75 percent of flex-fuel vehicle owners did not have an E85 pump within their ZIP code.

Availability of the new E15 blend will hinge on retailers’ willingness to offer it, Shaw said. The EPA’s rule goes into effect 30 days after it’s published in the Federal Register.

“Then the legal pathway will be 100 percent in place to sell E15,” he said. Shaw said he expects by late September a few retailers will have begun selling the fuel.

Retailers that have blender pumps, which enable customers to choose from several ethanol blends, will be able to more easily add E15, Shaw said.

* On a combined basis, the pure biofuels’ share of all motor fuel sales was 6.2 percent, However, the formula specified in House File 2754 used to determine progress toward meeting the 25 percent biofuels goal, and to figure retailers’ tax credit, is (Pure Ethanol Gallons + Pure Biodiesel Gallons)/ Gasoline-Type Gallons, which does not include diesel fuel sales in the denominator. Using that formula, pure biofuels accounted for 9.2 percent of Iowa retail motor fuel sales last year.