Public Policy Issues

HB 245, Ohio Biofuels Availability and Use Bill
Rep. Steve Reinhard (R-Bucyrus)

This legislation was crafted with the encouragement and support of Clean Fuels Ohio, Ohio Soybean Association, Ohio Corn Growers Association and others. HB 245 will increase the availability and use of biodiesel and E85 – strengthening Ohio’s economy and providing other benefits.

Now that the bill has been approved, it will provide a tremendous boost to availability and use of biodiesel and E85 – making, within a few years, biodiesel and E85 real choices, not just for government fleets, but nearly all consumers statewide. Given the burden of high gasoline prices on consumers, cost to our economy of imported oil, and the challenges of non-attainment with federal air quality standards in many counties, making cleaner Ohio biofuels a real choice can’t come too soon.

• The bill creates state grants to support development of refueling facilities, including those for publicly accessible retail, fuel terminal and distributor equipment.

• It also provides grants to cover most of the remaining incremental cost of the fuel for government-related fleets such as school districts. (As mentioned, this small increment may only be temporary with biodiesel and is not an issue with E85.)

• The State of Ohio is now required to use minimum percentages of these and/or other alternative fuels in existing state vehicles. These percentage requirements will increase each year, as refueling infrastructure becomes more widely available.

• The bill also creates a revolving loan fund to support idle reduction retrofits for government-owned diesel vehicles. Idling diesels waste fuel and money while producing harmful emissions.

• The specific amount of funding has yet to be determined, but funds will support biodiesel availability at fuel terminals, retail access for both fuels, and other projects to increase access to and use of the fuel. Details will be forthcoming. It’s worth noting that the Ohio Department of Transportation will realize a windfall of at least $160 million per year beginning in either 2005 or 2006 because of changes to the Volumetric Ethanol Excise Tax Credit (VEETC). These changes in the VEETC were incorporated in the American Jobs Creation Act.

More information on HB 245

Biofuels Policy Initiative

The “American Jobs Creation Act (AJCA),” signed into law by President Bush in October 2004, is making biofuels attractive by offering tax incentives for their use. The law includes reforms of the Volumetric Ethanol Excise Tax Credit (VEETC) and creates a new tax credit for biodiesel, making costs of biofuels on par with conventional fuels.

The new law provides particularly strong support for blenders of E85. The ethanol tax credit is 51 cents per gallon. Because E85 is up to 85% ethanol, the tax credit for E85 is worth up to 43 cents per gallon. Previously, the alternative Minimum Tax (AMT) law usually prevented E85 blenders from receiving the full value of this credit. The new law eliminates application of the AMT to blends of ethanol. The impact will be much greater availability and a lower price at the rack for E85. Another important reform is that the ethanol credit will no longer be debited from the highway trust fund, but instead will come out of the federal general fund. This will result in a windfall to Ohio of at least $160 million.

Changes in the law also allow ethanol and biodiesel blenders to file for the reimbursement quarterly, rather than only once per year, as before.

On the biodiesel side, the Jobs Act offers blenders an incentive of one penny per percent of biodiesel in fuel blends made from agricultural products, or half-penny per percent incentive for recycled vegetable oils. Since 1999, biodiesel use has grown from about 1 million gallons up to 30 million gallons each year. A U.S. Department of Agriculture study estimates that the tax incentive could increase demand to 128 million gallons per year. Others anticipate far greater use over time given the near elimination of the price difference between #2 diesel and biodiesel. More information on AJCA related to biodiesel…

However, in order to aggressively move the biofuels markets forward, the State of Ohio needs to do its part by enacting some additional well-conceived and targeted state actions. These include grant funds for refueling infrastructure and marketing, possibly changes in motor fuel taxation to level the playing field between E85 and gasoline based on energy content, and others.

Clean Fuels Ohio has launched a “Biofuels Policy Initiative” to educate state policy-makers about the need for support to increase availability and usage of E85 and biodiesel. Supporters already involved include the Ohio Corn Marketing Program, Ohio Soybean Council, Ohio Farm Bureau, Ohio Air Quality Development Authority, and Center for Innovative Food Technology. Clean Fuels Ohio and its partners are reaching out to many others, including Ohio State University, Ohio Petroleum Marketers and Convenience Store Association.

As the first step, Clean Fuels Ohio held a two seminars for legislators and other interested parties on January 18 at the Vern Riffe Building in Columbus. About 80 people, including representatives or staff from about 20 legislative offices attended. Many others have expressed interest. The Coalition and its partners are building on these efforts by working with state legislators and administration officials to introduce legislation to encourage biofuels use and availability.

For more information, please contact our office directly.

Including Innovative Mobile Projects in Ohio’s SIP for Ozone and PM2.5

Over the coming year to 18 months, the Ohio EPA will lay the key groundwork for SIPs to meet the federal ozone and PM2.5 standards. EPA staff plan to focus on a limited number of mobile strategies with proven potential to achieve significant reduction. Clean Fuels Ohio and its partners view this as an important opportunity to advance adoption of innovative mobile projects, especially those targeting heavy-duty vehicles, but also including certain fuels. These include idle reduction policy and technology, diesel retrofits, hybrids, and various alternative fuels. All types of on and off road vehicles and equipment could be included. Clean Fuels Ohio and its partners are encouraging the Ohio EPA also to consider other innovative mobile emissions reduction strategies, either as voluntary projects and/or components of the SIP. A new U.S. EPA program called SmartWay, which seeks to develop voluntary partnerships to save energy, and reduce greenhouse gas and other emissions from heavy-duty fleets, is a cornerstone for this effort.

Metropolitan planning organizations (MPOs) play a key role in development of the mobile sources portion of the SIPs. Some MPOs, particularly Mid-Ohio Regional Planning Commission (MORPC) and Ohio Kentucky Indiana Council of Governments (OKI), already have been focusing significant attention in this area. Clean Fuels Ohio and some of its partners have played a role MORPC and OKI stakeholder groups. In addition, Clean Fuels Ohio played a leadership role by educating MORPC about the benefits of using CMAQ funds to support such projects. One of these projects, proposed by the Franklin County Engineer, is now moving through the CMAQ process.