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produced), 25% is used to produce ethanol.6 Second, the state government offers a variety of incentives and laws that encourage the use of ethanol and expansion of infrastructure. For instance, the state offers a tax incentive that is “available to retail service stations at which more than 60% of the total gallons of gasoline sold through metered pumps are blended with ethanol. Once station owners surpass the 60% threshold, they are eligible for a tax credit of $0.025 for every additional gallon of gasoline blended with ethanol and sold during the tax year.”7 This credit will last until December 31, 2008. In 2009, this tax credit will shift to an Ethanol Promotion Tax Credit that will:
"provide a $0.065 tax credit to any retailer meeting the renewable fuels standard (RFS) schedule for a given year. For retailers within 2% and 4% of meeting the RFS schedule, the tax credit will be $0.045 and $0.025, respectively, for every gallon of ethanol sold."8
The RFS schedule dictates that by 2020, 25% of gasoline use in Iowa will be offset by biofuels, starting with 10% in 2009 and increasing every year.9
In addition to the tax credit, the state also has an infrastructure support grant that will provide up to 50% of the cost associated with installing E-85 infrastructure, as well as offering up to 50% to biodiesel blenders who wish to construct distribution terminals. There is $13 million set aside over three years for the program.2
As a result of the state’s aggressive ethanol policies, Iowa’s ethanol retailers have sold 1 billion gallons of E10 and 140,000 gallons of E85 in 2004.10 Exhibit 1 shows a map of retailers that sell E85. In addition to the E85 retailers, there are approximately 150 retailers in the state that sell various blends of at least 2 percent biodiesel. 11
In September 2006, the U.S. Department of Agriculture awarded approximately $725,000 of grant funding to four projects in Iowa, ranging from producing ethanol on the farm to marketing biofuels that a company produces.12 Furthermore, the joint DOE-USDA Biomass Research and Development Initiative has awarded over $8 million in grants to various projects in Iowa since fiscal year 2002.
Exhibit 1: E85 Fueling Stations in Iowa13
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