Iowa biodiesel producers struggle amid federal policy and market challenges

February 27, 2025

By Jenna Higgins Rose, Iowa Biodiesel Board

Across Iowa, many once-bustling biodiesel plants now sit idle or operate at minimal capacity, casualties of volatile market conditions and federal policy uncertainty. These facilities, which have long fueled Iowa’s agricultural economy and America’s energy needs, face an uncertain future as critical industry policies remain unresolved.

Among them is Western Dubuque Biodiesel in Farley, Iowa, which shut down December 24 in the face of unfavorable market economics and federal policy uncertainty.

“Had we continued running, we would have been losing anywhere from $0.30 to $0.50 per gallon,” said Tom Brooks, general manager of Western Dubuque Biodiesel. “The economics simply do not favor running, and without clear policy direction, we can’t make sound business decisions.”

The plant, like many others across the state, has faced mounting difficulties mostly stemming from two major federal policy challenges: Renewable Fuel Standard volumes that fail to reflect actual industry production, and the expiration of the Biodiesel Tax incentive 40A followed by delayed guidance on the new 45Z Clean Fuel Production Credit.

“These are tough times for Iowa’s biodiesel producers, and it’s frustrating to watch plants sit idle when we know how much they contribute to our economy and energy security,” said Grant Kimberley, executive director of the Iowa Biodiesel Board. “The people behind these facilities—our neighbors, friends and community members—are feeling the strain. We need federal policies that support biodiesel production, not leave producers in limbo.”

Soybean Oil Disadvantages in the Marketplace

The issues surrounding the 45Z credit can be boiled down to a two-part problem, Kimberley said. The first is that the U.S. Department of Treasury needs to issue a final rule on how the mechanics of the incentive work. The second problem is the credit’s carbon intensity scoring system, which currently favors products like imported used cooking oil and animal fats over domestic soybean oil. How climate-smart agriculture will be incorporated also has not been finalized.

“This two-tiered market has created a pricing disparity that has left many domestic biodiesel producers struggling to compete,” Kimberley said. “We need to continue using and updating the GREET model to reflect the latest science-based data on the low carbon intensity of today’s agricultural products. Otherwise, our most abundant agricultural feedstocks, like soybean oil, are being subjectively penalized based on outdated and inaccurate assumptions about indirect land use change.”

Kimberley added that the U.S. Environmental Protection Agency can work to address the disconnect between the RFS volume obligations and what the industry has already demonstrated it can produce by sending appropriate market signals this year when establishing volume obligations for 2026 and 2027.

Workforce and Future Recovery

Despite the shutdown, Western Dubuque Biodiesel has retained its workforce of about 22, keeping employees engaged with maintenance projects including cleaning and repainting the plant.

“We sat down with our employees and conveyed how important they are to us,” Brooks said. “We see them as valuable assets and have asked them to hang in there as we wait for markets to improve. Many livelihoods in Iowa depended directly or indirectly on biodiesel production, and we don’t take that lightly.”

State Policy Support

During the February 27 Iowa Biodiesel Day on the Hill in Des Moines, farmers and producers told Iowa lawmakers at the capitol that state-level incentives such as Iowa’s enacted Biofuels Access Bill do help support production and sales, even if they are not enough to counteract the overarching federal policy challenges.

“When the market turns around, producers in states with pro-biodiesel policies will be the first to bounce back,” Kimberley said.

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