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ACE Provides Feedback on Implementation of IRA Biofuel Infrastructure Funds to Improve Higher Blend Availability

Posted on 11/29/2022

In written comments submitted yesterday, the American Coalition for Ethanol (ACE) Chief Marketing Officer Ron Lamberty utilized his fuel retailing expertise and input from retailers to share feedback with the Rural Business-Cooperative Service (RBCS) and the Rural Utilities Service (RUS) on implementation of funds for biofuel infrastructure under the Inflation Reduction Act (IRA). Section 22003 of the IRA provides $500 million in grants for infrastructure for blending, storing, supplying, or distributing biofuels and may provide a federal share at up to 75% of the total project cost. This funding builds on previous rounds of funding under the U.S. Department of Agriculture’s Higher Blends Infrastructure Incentive Program (HBIIP), which closed its application window for the latest round of funds last week.

Lamberty’s comments centered around 1) how to ensure funds are more accessible to small retail marketers and incentivize conversions beyond those directly funded, and 2) how progress can be measured to meet greenhouse gas (GHG) reduction goals when expanding infrastructure for renewable, clean biofuels.

Previous HBIIP grants have been awarded mainly to large retailers and Lamberty points out while those chains have added hundreds of E15 locations, they own and operate nearly 10,000 stations, and appear to be converting only locations for which they’ve received grants. Lamberty says small retailers are not following the big chains’ example because they are used to seeing large retailers offering products they don’t offer and often assume competitors have those products because they’re better funded. “To the contrary, when small retailers get funds and build or convert sites to become the first in their market to offer higher blends, the new fuels become part of the station’s identity, and historically, the larger chains add the same fuels to regain market share, using their own money,” Lamberty said.

To incentivize greater E15 and flex fuel availability, Lamberty advises the following:

• Application assistance and grant writing funds be reimbursable for small retailers, or funds be provided to nonprofits and other groups who assist these retailers in the application process.
• A change in “ownership” definitions to apply to the owners of the actual equipment for which the grant was awarded, rather than the property the equipment sits on. This would allow suppliers or others with financial interest in small retail locations and stations in disadvantaged areas to add renewable fuel infrastructure in those locations where it may be difficult to borrow money to upgrade or replace equipment.
• USDA-RD should recognize that conversion of existing assets does have a value and allowing a station owner to claim a depreciated value of existing infrastructure as a reimbursable cost of adding higher blends would allow many retailers to participate in the program without having to buy all new equipment and prematurely retire existing compatible equipment and/or find financing for whatever new conversion expenses they incur.
• Utilize reimbursement percentages to incentivize conversion of a majority of the owner’s locations and/or rewards retailers who already offer higher blends. The reimbursement schedule could provide retailers offering E15 or flex fuels in less than half of their locations a maximum 50% cost share, while those offering higher blends in more than 50%, or whose project(s) puts the share of stations offering higher ethanol blends over 50% of the chain, could receive 75% reimbursement. Lamberty suggests the higher percentage, perhaps coupled with a higher maximum grant amount could motivate larger retailers to offer E15 in stations that have compatible equipment and could offer the higher blend with little conversion expense.

To access ACE’s full comments, click here.

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