ANKENY, Iowa – After passing the Iowa legislature last week, Senate File 2344 has headed to Governor Branstad’s desk; in it is a 2-cent per gallon refundable tax credit for the first 25 million gallons of biodiesel that a facility produces in a given year.
That may not sound like much, but it can save individual biodiesel producers up to $500,000 every year through 2017. Iowa Biodiesel Board Executive Director Grant Kimberley says that’s a worthwhile investment in an industry that’s powering Iowa’s rural economy in at least three different aspects.
1 – The biodiesel industry supports jobs
The economic impact of biodiesel on the U.S. economy is well documented; roughly 62,000 jobs and $2.6 billion in wages depend directly on the $16.8 billion industry. Kimberley says about 7,000 Iowans work in the biodiesel industry, which contributes an annual $520 million to the state’s GDP.
2 – Demand for soybean oil decreases cost of raising livestock
In crushing soybeans, both soybean oil and soybean meal are created. Biodiesel increases demand for soybean oil, but as oilseed crushers follow the market, they also create an excess of soybean meal, which is a common component in livestock and poultry rations. It’s estimated that demand for soybean oil as a biodiesel feedstock generates annual savings between $10.75 million and $1.46 billion.
3 – Biodiesel production creates a market for Iowa byproducts
Soybean oil, corn oil, animal fats, and even restaurant grease can be used as a feedstock in the production of biodiesel. Resurrecting old cooking oil might not be a game-changer, but Kimberley says it is a contributing factor to American energy security.
However, Kimberley argues the current Renewable Fuel Standard is understating how much biodiesel can be produced. At present the 2014 biomass-based diesel requirement is proposed at 1.28 billion gallons. Kimberley says the industry manufactured between 1.7 and 1.8 billion gallons of biodiesel last year.
“So, if that is not increased to something closer to that amount, we’re going to see a cut-back in production,” says Kimberley. “Production is going to go where it makes the most economic sense: states like Missouri, which has a 30-cent per gallon biodiesel producer credit, would certainly see more production, and state that have large-use mandates like Minnesota, or sales tax exemptions like Illinois, would see additional production and usage.”
According to Kimberley, Iowa’s biodiesel industry is uniquely poised to take advantage of existing industries to produce more than other states.
“The Iowa biodiesel industry has the capacity to produce at about 320 million gallons per year; we’re the nation’s largest biodiesel producer. Last year, we produced at a rate around 230 million gallons. We still have a lot of room to grow and increase that amount. We also are the nation’s largest producer of pork, the largest producer of corn, and soybeans, so it’s in our best interest to maximize the production that we have and also the feedstock capabilities that we have here in Iowa.”