Northey: Tax credit lapse sends chilling message

Iowa Secretary of Agriculture Bill Northey says Congressional failure to extend the biodiesel tax credit sends a chilling message to other renewable energy producers.

“At some point, we will have to renew an ethanol tax credit. We also will have to renew the wind energy tax credit,” Northey said Friday in Coralville at an Iowa City Area Chamber of Commerce agribusiness/bioscience breakfast.

“If the biodiesel tax credit does not get renewed by Congress, it makes everybody nervous about what may happen the next time. We're two months into this year and we don't have the extension in a vehicle that is likely to pass the Senate this year.”

The $1 per gallon biodiesel excise tax credit expired on Dec. 31. Producers say the tax credit is essential to making biodiesel production profitable and maintaining the fuel's competitiveness as it reduces the price of biodiesel compared to petroleum diesel.

The original biodiesel tax credit was passed in 2004 and has been extended twice.

Northey expressed confidence that the U.S. Environmental Protection Agency will agree to increase the blend of ethanol with gasoline from 10 percent to as high as 15 percent when the agency announces a decision this summer. He said boosting the blend to 15 percent would increase demand for ethanol by a projected 5 billion gallons annually.

Northey said the value of Iowa agriculture soared from $12 billion annually in 2002 to $20 billion in 2007, partly due to higher corn prices resulting from ethanol demand. He defended the use of corn as an ethanol feedstock, noting that Iowa had “piles of surplus corn on our streets” before the ethanol industry developed.

Northey said the key to feeding those who go hungry in the world is developing sustainable agriculture, rather than continuing to sell cheap grain to countries and driving native producers out of business.

Asked about the possibility of developing reservoirs on farmland in north central Iowa to reduce flooding along the Cedar River, Northey said he sees promise in the concept.

“I think those make a lot of sense,” Northey said. “It has to be done in a way that works for the landowners and works in terms of efficiency.

“If you look at the amount of water that was going down the Cedar River at the peak of flooding in 2008, it's a real challenge to find a way to keep it from breaching levies. We have to do more than what we've been doing and (reservoirs) seem like good strategies to consider.”

While it has been argued that farm tiling contributed to the severity of the June 2008 flood, Northey said the “jury is still out” on the impact of such drainage practices.

“Some would argue that tile drains actually move some of the water out of the way before you have an event so there's more room for the water to go into that soil,” he said. “When you have a flood like we had in 2008 and the rain just keeps coming, everything is full. I'm not sure tile drainage would add that much to the overall event.”