Iowa gas stations face 2026 deadline to offer E15

Iowa gas stations face a looming deadline and substantial costs to install, replace or upgrade fuel storage tanks and dispensers if necessary to provide ethanol blends that have a higher percentage of the corn-based fuel under a 2022 state law.

Stations have a little more than 10 months to comply or face fines of up $1,000 per day, per violation, and the revocation of their license to sell fuel.

“This is the perfect time for gas stations to help drivers save money at the pump by expanding access to lower-cost biofuels,” Iowa Secretary of Agriculture Mike Naig told The Gazette. “ … Consumers enjoy lower-cost, cleaner fuels, while our farmers gain stronger markets for their corn and soybeans. Biofuels offer so many benefits to both drivers and farmers, all of which boosts the economic vitality of our rural communities.”

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More than half the corn produced in Iowa — and about 40 percent nationwide — is used to produce ethanol. The dominant form of motor vehicle fuel is E10 — or 10 percent ethanol — but the new state law seeks to make a 15 percent blend more available.

In addition to paying the costs associated with purchasing and installing the infrastructure required to safely store and dispense E15, many of the remaining projects are going to require the business to take fuel sales offline for four to six weeks, said John Maynes, president of government affairs at FUELIowa, which represents Iowa's fuel industry

The combination of the two factors creates a difficult scenario for small business to weather, Maynes told The Gazette.

“Our current estimate is that 25 percent to 30 percent of gas stations statewide are currently offering E15,” he said. “Those percentages will continue to tick up as we move into the spring and construction season ramps back up through the end of the year.”

Background

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The law, passed in 2022 and signed by Gov. Kim Reynolds, requires Iowa gas stations to offer the E15 blend of ethanol in at least one pump by 2026.

To date, at least one-third of all licensed fuel retailers are selling E15, according to the Iowa Department of Agriculture and Land Stewardship.

The law allows smaller stations to apply for an exemption to the requirement, and makes financial assistance available for stations that will need to upgrade their infrastructure to store and provide the E15 ethanol blend.

The law also maintains and in some cases increases tax credits for other biofuels.

Stations not in compliance with the new law may be fined up to $1,000 per day and also have their fuel meter license suspended or revoked.

Financial assistance is available through the department’s Renewable Fuel Infrastructure Program, which provides cost-share funding to install, replace or convert fuel storage tanks and dispenser infrastructure to support E15. Applications are available at iowaagriculture.gov and can be submitted to renewablefuelgrants@iowaagriculture.gov.

Retailers also may contact ustlicensing@dnr.iowa.gov for assistance.

What’s happened since

There are more than 2,000 licensed fuel retailers in Iowa. As of Wednesday, the Department Agriculture and Land Stewardship estimates that more than 60 percent are either in compliance or eligible for waivers.

“This number will continue to grow steadily as the department conducts fuel retailer inspections and more stations make upgrades, apply for waivers and share their compliance status,” department spokesperson Don McDowell said. “ … The department is committed to working with convenience stores and fuel retailers to help them understand the law and its requirements, as well as resources available to facilitate compliance and avoid penalties.”

Currently, 32 small retailer exemptions and 72 underground storage tank waivers have been granted, according to the department.

Since the Renewable Fuels Infrastructure Program began in 2006, the department has invested more than $53.5 million toward expanding renewable fuels infrastructure within Iowa. The state funding has been matched with more than $260 million of private investment from Iowa gas stations and fuel retailers.

The state has approximately $21.7 million of funding available to support infrastructure improvements to comply with the E15 access standard.

FUELIowa estimates the 500 gas stations offering E15 today have invested between $100 and $150 million in private money to facilitate the sale of E15.

“Unfortunately, the vast majority of the 1,400 or so gas stations not selling E15 today are going to be your mom-and-pop gas stations located throughout rural Iowa comprising Iowa’s rural fuel distribution network,” FUELIowa’s Maynes said.

The state offers a cost share grant not to exceed $75,000 to assist with the costs associated with the required upgrades at gas stations.

“The agriculture industry drives Iowa’s economy, and our farmer/producer customers represent Iowa’s fuel industry’s largest customer base,” Maynes said. “In terms of the benefit gas station owners realize from expanding E15 availability in Iowa, the in-kind support for our customers in the agriculture industry is the primary benefit for a gas station owner. … At this time, small business gas station owners view the pursuit of a waiver as a last resort. Their focus is on the pursuit of upgrading their site.”

Jason McDermott, president of McDermott Oil Co. based in Cascade, said the company will have invested roughly $2.5 million across its seven stores in Northeast Iowa.

“We’re still in the process (of installing, replacing and upgrading fuel storage tanks and dispensers). We’ve completed a couple sites and we’ve got five more sites yet to do this year,” McDermott said.

The company received both state and federal assistance to sell higher ethanol blends.

McDermott said the business has not seen increased demand for the higher blend.

“Demand as a whole in the industry is relatively flat to even decreasing,” he said. “All you’re doing is moving demand from one product to another. There’s no return on the investment. The things we can take away from this is we’re getting rid of older equipment and replacing it with newer equipment. We’re not going to sell any more gas.

“The mandate wasn’t done for the benefit of the retailer. It’s done for the benefit of the ag economy, which is good. We support that.”

Midwestern states paved the way for the fuel's continuous sale within their borders by asking federal regulators to eliminate an emissions exemption for E10. That has required refiners to reduce the volatility of the gasoline they use for the ethanol blends in the Midwest and enabled year-round E15 sales.

The U.S. Environmental Protection Agency has said the move actually would increase fuel prices because of required changes to refineries, although others have dismissed that prediction.

Annual consumption of fuel ethanol in the United States has been roughly even for the past decade at about 14 billion gallons, according to the U.S. Department of Energy. Domestic production of the fuel is typically about a billion gallons higher than that figure, and Iowa ethanol plants make about 30 percent of it.

The EPA granted Iowa a waiver to offer E15 year-round in 2024.

“Ultimately, Congress must act to provide the industry and consumers with certainty moving forward,” McDowell said. “President Trump has indicated that biofuels are part of his strategy to unleash American energy dominance, and we expect year-round E15 to be part of this strategy.”

According to the Iowa Renewable Fuels Association, year-round E15 could increase nationwide demand for ethanol by 5 to 7 billion gallons annually and save drivers who choose E15 on average 15 to 20 cents per gallon at the pump. In 2023, a record 178.5 million gallons of E15 was sold in Iowa, a 47 percent increase from 2022.

“We expect a similar jump this year when the official numbers for 2024 come out in April,” McDowell said.

Jared Strong and Erin Murphy of The Gazette contributed to this report.

Comments: (319) 398-8499; tom.barton@thegazette.com