A long time cornerstone of rural America now at a crossroads.

We discuss the current status and future of Iowa's renewable fuels industry on this edition of Iowa Press.

♪♪ Funding for Iowa Press was provided by Friends, the Iowa PBS Foundation.

The Associated General Contractors of Iowa, the public's partner in building Iowa's highway, bridge and municipal utility infrastructure.

Iowa PBS is supported in part by Wells Fargo.

Fuel Iowa is a voice and a resource for Iowa's fuel industry.

Our members offer a diverse range of products including fuel, grocery and convenience items.

They help keep Iowans on the move in rural and urban communities.

Together we Fuel Iowa.

Small businesses are the backbone of Iowa's communities and they are backed by Iowa banks.

With advice, loans and financial services, banks across Iowa are committed to showing small businesses the way to a stronger tomorrow.

Learn more at IowaBankers.com.

♪♪ For decades Iowa Press has brought you politicians and newsmakers from across Iowa and beyond.

Celebrating nearly 50 years of broadcast excellence on statewide Iowa PBS, this is the Friday, July 30 edition of Iowa Press.

Here is David Yepsen.

♪♪ Yepsen: Political support for ethanol here in Iowa has been a litmus test for governors, senators and potential presidential candidates.

The renewable fuels industry has long fought for favorable legislation and vouched for the financial benefits here in rural America.

But trouble may be on the horizon.

Longstanding battles with the oil industry and a burgeoning push for electric vehicles are raising questions in farm country.

To talk about it we've gathered a trio of experts to discuss the future of renewable fuels.

Monte Shaw is Executive Director of the Iowa Renewable Fuels Association.

Kelly Niewenhuis is a farmer and ethanol producer from Primghar and he is also VP of the Iowa Corn Promotion Board.

And Mark Cobb is President of Cobb Oil Company and a member of the Iowa Biodiesel Board.

Gentlemen, welcome to the show.

Good to have you all with us.

Thanks for having us.

Yepsen: Also joining us across the table, Kay Henderson, News Director at Radio Iowa.

Henderson: Monte Shaw, let's start with you.

Not the majority of Iowans for sure are involved in the ethanol industry, the biodiesel industry or work at a plant.

Why should they care?

Shaw: Sure.

That's a great question.

But I think what we've seen over the years, and we've even seen this in polling we've done, Iowans get it.

The Iowa economy goes the way the Iowa ag economy goes.

And if you look over the last 20 years when we've had great productivity from these farmers like Kelly over here, it needs a market, and it is renewable fuels that have given that market that really pull us out of the doldrums we had in the '90s and obviously the Farm Crisis I grew up through in the 1980's, it has been the shining star.

And so I think whether you're in an insurance company downtown or whether you're on that family farm it is important how this whole economy is going to work.

Henderson: Kelly Niewenhuis, how do you make the argument that Iowans should care about an industry which they may not personally benefit from?

Niewenhuis: Well, it's a great income for the state of Iowa and the renewable fuels is a solid-based industry.

I've been involved in it for about 20 years now and I've always said it was the best thing that ever happened to my farming career was the biofuels industry.

And I think one of the biggest things about it, we've learned so much about it over the past 20 years and if we're truly concerned about our environment and our climate and air quality, biofuels are a big part of that solution.

So we need to continue growing this industry.

Henderson: Mark Cobb, what is your answer to that question?

Cobb: I agree with what they're saying.

I think as a retailer I want to promote and sell renewable fuels through our retail outlets.

Henderson: I'm just going to ask each of you, the Governor said this spring that she was going to assemble a working group this summer and fall to come up with a compromise on the renewable fuel standard that she had proposed for the state of Iowa.

Are any of you on that working group?

No.

Shaw: I've certainly had lots of meetings with everybody from retailers to commodity groups to the Governor's staff.

I don't know if it's a formal working group or if it's just having meetings.

Henderson: So, as our viewers may not know, the Governor proposed a renewable fuel standard in Iowa whereby every gas station should offer E15 by 2026.

There were other elements to that plan, but that is the basic crux of it that would affect consumers.

Monte Shaw, what is the compromise because legislators balked at it?

Shaw: Well, I'm an optimist so I'm not going to say they balked at it.

It did not pass, but it did not fail either.

It did move through the process, got through the ways and means committees and I think often times when you have a big concept like this it takes more than one year to get it through.

There's a lot of education that has to happen.

And so we're still optimistic that something very meaningful can come out of the next legislative session that will provide more consumers access to the lower cost, higher quality fuel.

If you think about it E15, that is a 15% blend of ethanol, has been out on the market about 10 years and today in Iowa 80% of Iowans have access to E0, no ethanol.

Everybody has got access to E10.

80% of stations still offer E0 but only 10% to 11% of stations offer E15.

That's why we've got to do something to move the needle.

Yepsen: What do you say to this argument that retailers say you're trying to tell them how to run their gas station?

Niewenhuis: Well, I disagree with that.

I've been on the RFIP board for the state of Iowa -- Yepsen: Renewable Fuel -- Niewenhuis: -- Infrastructure Program and we've handed a lot of money to retailers to help them with infrastructure.

And I think we need to continue to grow that infrastructure to get more blends out there.

And we're looking at the EV craze right now or however you want to put that.

But to be honest with you the biofuels industry is cleaner than the EV industry.

Henderson: And when you say EV you mean electric vehicles.

Niewenhuis: Electric vehicles.

And I know they're going to be part of our transportation system but it's unrealistic to think it's going to be a huge part of it because we have biofuels here today and it has proven that our greenhouse gas emission reductions is 46% at least, that's pretty much minimal.

And our goal in the ethanol industry is to get to net zero and I know there's a lot of ethanol plants right now that are going there really shortly.

Yepsen: We'll get back to that.

But I want to get Mr. Cobb into this question.

Do you see as somebody who sells gasoline, Cobb Oil Company, and you're also in farming, do you see this as these people trying to tell you how to run your gas station?

Cobb: Well, I understand their position.

They're trying to promote the sale of more renewable fuels.

And I'm not opposed to that.

However, I'm not a big fan of a mandate or being forced to sell something that consumers maybe aren't ready to accept yet.

And to that point, there are still a number of consumers because of the vehicles that they have, I have two, I hate to say this on TV, but I have two European vehicles and in the owner's manual it asks that I use a 91 premium octane with no ethanol in it.

And so I'm going to, to protect my warranty and stuff, I'm going to fill those vehicles with that proper kind of gas.

Yepsen: Mr. Niewenhuis, these people will say they don't tell you how to farm, don't tell them how to run their gas station.

Niewenhuis: Well, I don't disagree with that and I'm not a fan of mandates either.

But we need to grow this industry and since Iowa is the largest corn producing state in the United States, largest ethanol and biodiesel producing state in the United States, we need to send a message to the rest of the country that we support our industries and what we do for our economy in the state of Iowa.

Henderson: Monte Shaw, retailers told legislators it might cost up to a billion dollars to convert all of the gas stations and convenience stores in Iowa to meet this E15 mandate and to sell a product they're already selling and they're going to have to pass that cost onto consumers.

How do you counter that argument?

Shaw: I felt like I was in an Austin Powers movie, you know, $1 billion.

The number started off smaller, kept getting bigger and bigger.

The fact of the matter is that's simply not true.

There is a provision in the bill, and I want to be very clear my association does not support any bill that would force a retailer to do what we call crack concrete.

That is where you have to break up all the concrete, bring out the tanks, replace all those.

That can be expensive.

But there is a waiver provision in the concept of this legislation that would say if you just have to make some minor modifications above ground we have a state grant program that helps you with that, a lot of times these are $8,000, $10,000, there's a $50,000 grant program.

But if you have to crack that concrete you don't have to do it, you get a waiver.

And so when they say that it just wasn't true and that is part of what I talk about, the education process that is going on now that makes me optimistic about the next year.

Henderson: Mark Cobb, if I'm not mistaken you're part of Fuel Iowa, right?

That is the organization which represents convenience stores and gas stations and the lobbyist for that group told legislators that the billion dollar figure was something they came up with, number one, and the exemption that Mr. Shaw just explained was worthless.

Is it worthless?

Cobb: Well, I will take issue with what Monte said as far as the cost because I'm on the midst of, at all 9 of my locations, making the provisions and making the enhancements so that I can offer E15 and the $8,000 or $10,000 that he suggests, I would have been thrilled if I could have brought E15 into my stations for that kind of money.

I was fortunate enough to get a CARES Act grant because every dispenser had to be replaced in order for me to be able to offer E15.

Shaw: Not under Iowa law, not under EPA law.

That's not true.

The Iowa Fire Marshal has ruled that every dispenser that can sell E10 is eligible to sell E15 in the state of Iowa and that is under guidance from the underwriter's laboratory.

Yepsen: Go ahead, you were going to say?

Cobb: So, to that point I have to, to satisfy the EPA, I have to have insurance.

I have to have insurance on my system.

And that insurance company will not honor the fire marshal's, what you're suggesting.

They require that I have a dispenser that is UL listed for E15, which requires replacement.

Henderson: Kelly Niewenhuis, you're sitting in the middle of this debate.

It doesn't seem like it can be easily resolved, does it?

Niewenhuis: I think it can be.

I think we're going to bring the bill back in the next session and we'll have it clean to start with and I feel pretty optimistic that it will pass.

I keep it pretty simple in my thoughts and one of the things I think we need to express more are the health benefits of biofuels.

The American Lung Association did a study in the Midwest in 7 states and they found that just running E10 reduced lung cancer rates by 20% to 30%.

And why are we selling E0 in the state of Iowa?

There are known carcinogens being used for their aromatics, the benzene, toluene and xylene, when we've got a perfect product we're producing right here to replace it.

It just frustrating to me that we even sell E0 in the state of Iowa.

Yepsen: Mr. Niewenhuis, I want to go to the larger question here.

You dismissed electric vehicles.

GM by 2035 is going to be out of the manufacturing of gasoline powered vehicles.

Why isn't your industry, and I want to get all three of you in this, why isn't the ethanol industry a buggy whip factory?

You're producing a product that nobody is going to need in 15 years.

Niewenhuis: I disagree with that totally.

Yepsen: I know you do, but what do you say?

Niewenhuis: I don't dismiss EV vehicles, I think they're going to be part of our transportation system.

But the state of California has mandated EV vehicles for 40 years or 4 different governors and they're at 2% today.

And we also have, we don't have a grid to supply the power.

And so we've got the infrastructure today for more biofuels and to clean up our environment today and to lower our greenhouse gas emissions and be a part of the solution for climate change.

So why not do that?

And I feel there's a lot of potential for large vehicle transportation to be using biofuels.

ClearFlame Engines is a great example that is a diesel style engine that runs on E-100.

That is in the testing stages.

And now we're looking into aviation fuel.

And there are some huge markets.

So I feel we're going to find a replacement for whatever we lose through EV vehicles in the future.

Yepsen: Mr. Shaw?

Shaw: Well, first of all, that is an aspirational goal by GM.

Secondly, they aren't all going to be purely EV's, electric vehicles, some of them will be what are called hybrid where they still do have a liquid fuel powered engine.

And no one who you talk to thinks it can happen that fast.

EV's are going to play a greater role, there's no question about that.

And yet today, if you're running a flex fuel vehicle on E85 in the Midwest you probably have lower carbon emissions per mile than an EV because it was charged on coal.

Here in Iowa we have windmills.

Well, drive up by Ellsworth and you'll see a giant pile of old, outdated windmill blades that they don't know what to do with and the Iowa DNR is really worried about what the environmental impact of that is going to be.

So we need to look at both fuels, both options in a full way.

But we think that we can, if we're allowed to compete we will be a low carbon solution.

The corn plant sucks carbon out of the air and EV doesn't do that.

So we actually have a pathway where in the next 10 years we think we can get to where we are a net zero, actually net negative carbon fuel.

But if we are a California or the Biden administration is asking people to commit to EV's as the only solution then that is going to be a challenge.

So that is why we're working with our delegation to say, set your goal and let us compete for it.

Yepsen: Mr. Cobb, how do you feel about this electric vehicles putting you out of business?

Cobb: Well, I'm concerned about it, yeah, it is something that concerns me because I'm not sure that at my retail stations that they can compete in the electric vehicle charging market.

I think a lot of people will charge their cars at home if they have an electric vehicle.

So that will take the need for my retail facility out of the equation.

And so I very much want to try to figure out a way to work with the renewable fuels people to further their cause in a manner that doesn't necessarily put me out of business or cause me tremendous expense to get there.

Yepsen: Wouldn't it hurt the ethanol industry -- I remember when a thing called the automobile came along and people said, well it'll never go anywhere, it scares the horses.

Well, look what happened.

So is this industry, ethanol and a new way of selling gasoline, really buggy whips?

Cobb: I don't believe so.

Kelly kind of hit the nail on the head when he said that California has been suggesting for 40 years that they were transitioning to electric vehicles.

And much like what he said, I do agree that they're going to play a bigger role in our transportation.

But I don't think they're going to displace liquid fuels totally.

Niewenhuis: The largest increase we have for E85 in the country is California.

They had a 20% increase last year.

So that is showing a point that we're here today.

Henderson: Monte Shaw, if you don't use these ethanol and biodiesel plants to make fuel, what else could you make?

What is the next generation product out there?

Shaw: There are things but to be honest and to go back to the previous question, I think we're going to be making fuel for a very long time because think about it, in the last just over a decade the average ethanol plant has reduced its carbon footprint by 23% and that is without any carbon policy.

If we want to set a carbon policy we can go further, farmers can do more to reduce it on the ground, the plants can do more and then we have the ability to capture the CO2 off of fermentation and sequester that underground.

We can be carbon negative.

A windmill, as low carbon as it might be, will never be carbon negative, the solar panels will never be carbon negative.

So I think we're going to do that.

But you do see diversification.

So I think we're going to be making, I think ultimately if we go down a carbon path we're going to be selling very high levels of ethanol blends, 70%, 80% to do that.

But we have corn oil.

So let me back up.

60% of Iowa's corn goes into an ethanol plant.

Now, for some folks who might oh that's a lot of corn, we just take the starch and turn it into ethanol, all the protein still goes into the livestock feed.

So we make ethanol for cars, we make livestock feed and we make the corn oil which often times does go back into the livestock or renewable diesel.

So right now that corn oil because of the big oil companies getting into renewable diesel is worth 8 times as much per pound as the distiller's grains for livestock.

So we're going to diversify.

There's also different parts of the corn you can pull out of there to make bioproducts.

But I really do think that for the next, even if GM did go to all EV's by 2035, which I think is a pipe dream, even if they did you'd still have legacy cars on the road for another 20, 30 years after that.

Yepsen: Well, you assume GM understands their business.

Do you know the automobile industry better than General Motors?

Shaw: I talk to a lot of their engineers and I think a lot of the public statements right now by automakers are driven by their quarterly earnings reports and the headlines they want to see in the Wall Street Journal.

Niewenhuis: I'll make a comment on that quick.

The auto industry is kind of locked into meeting cafe standards.

And the reason that they're building -- that's fuel mileage -- and the reason they're building EV vehicles right now is because they don't have a high compression engine design that runs on the mid-level blends of ethanol.

And so one of the things the National Corngrowers have been doing, we have a bill that is in the process called the Next Generation Fuels Act, which would entice a mid-level E-30 blend of fuel so the auto industry could build smaller engines, high compression engines to run on that fuel.

That is a 94, 95 octane fuel.

And that would help them compete with the EV vehicles.

And the EV vehicles today are getting $7,500 to $14,000 per vehicle for tax credits to build them.

We used to have flex fuel vehicles being built and they were getting $1200 to build them and they eliminated that cafe credit.

So we need to get flex fuel vehicles back on the cafe credit line so the auto industry can start building them again.

Henderson: So, Kelly Niewenhuis, just a tiny bit of a pop quiz.

For people who aren't familiar, explain the Renewable Fuel Standard in a sentence.

Niewenhuis: It's part of the American Clean Air Act and that is why it was designed.

We helped the oil industry and bailed them out of their MTBE disaster years ago -- Henderson: And that was an additive that was put into gasoline to make it burn cleaner, right?

Niewenhuis: Yes, but it was poisoning all of our water.

So we helped eliminate MTBE and saved the oil industry billions of dollars in lawsuits and they have been fighting us ever since.

So the RFS has been the best fuel bill we've ever had and it has been very efficient.

We just need to abide by that law.

Henderson: So, Monte Shaw, there have been a couple of court actions in the past several months that have impacted the Renewable Fuel Standard.

Number one, let's start with the Trump administration rule that never actually went into effect which would have allowed E15 to be sold nationwide.

Shaw: It did go into effect.

Henderson: It did go into effect but it just got held up at the courts now.

So, what do you expect?

Do you expect Congress to take action?

What is the next step?

Shaw: This is absolutely vital.

So right now high 90 percentiles of our fuel in all 50 states is E10.

If we're going to grow this industry and keep up with the productivity of American farmers we're going to need to have higher blends.

So the Trump administration did do a rule that made it easier to sell E15 in all the states year-round.

Yepsen: Just so people are -- E10 is 10% ethanol, so you're talking about 15%, E85 is 85%.

Go ahead.

Shaw: Exactly.

And that 5% extra doesn't really matter to your car that much, but from an ethanol perspective that's 50% more.

So for us that is a huge billions of gallons of potential market demand if we can make that the new normal.

And so the courts did rule that the EPA did not have the authority to do that, we were very frustrated by a very narrow ruling that they used on the word contains.

I won't get into the legalese.

But we have to fix it.

So we're going to pursue every single option.

Failure is not an option because Congress could pass a law to clarify that.

We're working with our champions on that.

Legislation has already been introduced.

When I saw we, I mean the industry, not just RFA.

I want to give credit to the national groups and others like Corngrowers who help with these things.

But we're going to appeal that decision to the Supreme Court.

We'll also be working with the EPA on a federal regulation to try to redo it.

But here's the key, even in Iowa our state can actually take a state action that would fix it for Iowa.

Now, it wouldn't fix it for other states.

But we can do that.

So we're going to sell E15 this summer, keep doing that, because of the way these court cases we'll have some time to do that, by next summer we need to have it fixed.

Yepsen: Mr. Cobb, does any of this matter to the gas stations?

Cobb: Absolutely.

We want to be able to sell E15 unfettered through the summer months and that is what the one court case affects, yes.

Henderson: The other court case that has impacted ethanol policy at the federal level deals with these waivers granted to oil refiners and the courts ruled one way and now the latest ruling says that the waivers can go on sort of Ad infinitum.

So Kelly Niewenhuis, how do you resolve that issue?

That has been percolating through the courts for years.

Niewenhuis: Yeah, there were actually three court decisions involved in that and they appealed one.

And so it's still going to be very, very hard for the oil refineries to be granted waivers.

Henderson: So do you think this is resolved, Monte?

Shaw: If we would have won the Supreme Court case it would have been done because they wouldn't even be eligible to ask for a waiver.

The Supreme Court said no, they're still eligible to ask for a waiver.

Ironically the other court said hey, you have to have a very narrow definition of contains, you have to have a very broad definition of this one, so we kind of got hit from both sides.

But they did not strike down the very high economic harm thresholds and other aspects.

So I agree with Kelly that it's very unlikely the Biden administration will be able to grant very many of these.

Yepsen: Mr. Cobb, we have just a couple of minutes left.

As I mentioned earlier, you also farm.

Cobb: No, I'm involved with a biodiesel plant, I'm not a farmer.

Yepsen: You're not a farmer, I stand corrected.

How do you feel about this issue of carbon sequestration?

We're not going to get rid of global warming until we get rid of all this carbon.

Everybody is coming to your industry because they emit carbon.

Cobb: So let me clarify.

I'm not big oil.

I'm a small Iowa retailer who is out here satisfying the consumer's need for liquid fuels.

So, as far as carbon sequestration or credits or something like that, I don't have a problem in the world with that.

We just need to figure out a way to do it that doesn't drive me out of business with costs that are -- Yepsen: Yeah, but you sell carbon.

It's called gasoline.

Cobb: Well, but I want to sell more renewable fuels.

I want to make it clear -- Yepsen: Isn't that carbon?

Isn't there carbon that goes into the manufacturing of corn?

Shaw: There is but because that corn plant sucks carbon out of the air we have a chance to actually get to be carbon negative.

There is also carbon that goes into making a windmill, a photo cell, a battery.

In fact, these batteries are pretty scary to me because they rely on rare Earth metals and they are controlled by China, Russia or go Google cobalt mining in the Congo and it's pretty sad what happens there.

Yepsen: 30 seconds left.

What do you say to people who say you ought to be, instead of growing corn for fuel, we ought to be growing it for food?

Shaw: We do.

We only take the starch out of the corn for the fuel.

We're not short of starch in the world, we're short of cheap protein.

By adding value to that starch we actually make more affordable protein available to the world so we're doing both and that is one of the things I wish more people understood.

Yepsen: Gentlemen, I'm out of gas.

(laughter) Yepsen: I'm sorry.

Thank you all for your time and for being here with us today.

Thank you.

Thank you.

Thank you.

Yepsen: And we'll be back next week with another edition of Iowa Press at our regular times, 7:30 Friday night and Noon on Sunday.

For all of us here at Iowa PBS, I'm David Yepsen.

Thanks for joining us today.

♪♪ Funding for Iowa Press was provided by Friends, the Iowa PBS Foundation.

The Associated General Contractors of Iowa, the public's partner in building Iowa's highway, bridge and municipal utility infrastructure.

Iowa PBS is supported in part by Wells Fargo.

Fuel Iowa is a voice and a resource for Iowa's fuel industry.

Our members offer a diverse range of products including fuel, grocery and convenience items.

They help keep Iowans on the move in rural and urban communities.

Together we Fuel Iowa.

Small businesses are the backbone of Iowa's communities and they are backed by Iowa banks.

With advice, loans and financial services, banks across Iowa are committed to showing small businesses the way to a stronger tomorrow.

Learn more at IowaBankers.com.