S.F. 2107 Section 1. Section 214A.1, Code 2009, is amended by adding 1 the following new subsection: 2 NEW SUBSECTION . 23A. “Unblended gasoline” means gasoline 3 other than any of the following: 4 a. Standard ethanol blended gasoline. 5 b. E-85 gasoline. 6 Sec. 2. Section 214A.2, subsection 3, paragraph b, 7 subparagraph (4), Code Supplement 2009, is amended by striking 8 the subparagraph and inserting in lieu thereof the following: 9 (4) (a) For standard ethanol blended gasoline, it must be 10 classified as a type of ethanol blended gasoline that meets all 11 of the following requirements: 12 (i) It contains the highest volume of ethanol authorized by 13 the United States environmental protection agency. 14 (ii) It meets the requirements for ethanol blended gasoline 15 as provided in this section. 16 (b) The department shall publish a new classification for 17 standard ethanol blended gasoline in the Iowa administrative 18 bulletin as provided in section 17A.6 as soon as practicable. 19 The new classification shall designate the volume percent 20 of ethanol in the ethanol blended gasoline according to 21 its designation as provided in this section. The new 22 classification for standard ethanol blended gasoline shall 23 take effect not earlier than sixty days after the date of 24 publication. The secretary shall notify the Iowa Code editor 25 by letter of the new classification. 26 (c) (i) Notwithstanding subparagraph division (b), 27 the classification for standard ethanol blended gasoline is 28 E-9 or E-10, until the date that a new classification for 29 standard ethanol blended gasoline is first published in the 30 Iowa administrative bulletin as provided in that subparagraph 31 division. 32 (ii) This subparagraph division (c) is repealed on the date 33 that the first new classification for standard ethanol blended 34 gasoline is first published in the Iowa administrative bulletin 35 -1- LSB 5250XS (21) 83 da/rj 1/ 7

S.F. 2107 as provided in subparagraph division (b). 1 Sec. 3. NEW SECTION . 214A.2C Gasoline advertised, sold, or 2 dispensed by a retail dealer —— ethanol blend requirement and 3 exceptions —— applicability. 4 1. Except as otherwise provided in this section, a retail 5 dealer shall not advertise, sell, or dispense unblended 6 gasoline in this state. 7 2. A retail dealer may advertise, sell, or dispense 8 unblended gasoline in this state if all of the following apply: 9 a. The unblended gasoline is used to operate a motor which 10 powers a qualified motor vehicle which is any one of the 11 following: 12 (1) An aircraft as defined in section 328.1. 13 (2) A motor vehicle used exclusively for motor sports, 14 including on a raceway, if the motor vehicle cannot operate on 15 a highway as provided in chapter 321 or rules adopted by the 16 state department of transportation. 17 (3) An antique vehicle registered under section 321.115. 18 (4) A snowmobile as defined in section 321G.1. 19 (5) An all-terrain vehicle as defined in section 321I.1. 20 (6) A watercraft as defined in section 462A.2. 21 (7) A lawnmower or other implement powered by a small motor. 22 b. The retail dealer does not use more than one metered 23 pump located at a retail motor fuel site to advertise, sell, 24 or dispense unblended gasoline. 25 3. A retail dealer may advertise, sell, or dispense 26 unblended gasoline at a retail motor fuel site owned or 27 operated by the retail dealer pursuant to a waiver issued by 28 the department to the retail dealer. 29 a. The department shall only issue a waiver to a retail 30 dealer after approving an application submitted to the 31 department by the retail dealer in a manner and according 32 to procedures required by the department which application 33 demonstrates that the retail dealer is not able to reasonably 34 obtain ethanol blended gasoline for sale at the retail motor 35 -2- LSB 5250XS (21) 83 da/rj 2/ 7

S.F. 2107 fuel site. 1 b. A waiver issued under this subsection expires six months 2 from the date of issuance. However, a retail dealer who has 3 been issued a waiver may apply for and be issued any number of 4 subsequent waivers. 5 4. a. A retail dealer may advertise, sell, or dispense 6 unblended gasoline at a retail motor fuel site owned or 7 operated by the retail dealer without restriction as otherwise 8 provided in this section until January 1, 2011. 9 b. This subsection is repealed on January 1, 2011. 10 Sec. 4. Section 214A.3, Code Supplement 2009, is amended by 11 adding the following new subsection: 12 NEW SUBSECTION . 3. A retail dealer who advertises the sale 13 of gasoline that is not ethanol blended gasoline shall refer to 14 the gasoline as unblended gasoline. 15 Sec. 5. Section 214A.16, Code Supplement 2009, is amended 16 to read as follows: 17 214A.16 Notice of renewable biodiesel fuel or unblended 18 gasoline —— decal. 19 1. a. If ethanol blended gasoline is sold from a motor fuel 20 pump a motor fuel pump dispenses unblended gasoline , the motor 21 fuel pump shall have affixed a decal identifying the ethanol 22 blended gasoline motor fuel as unblended gasoline . If the 23 motor fuel pump dispenses ethanol blended gasoline classified 24 as higher than standard ethanol blended gasoline pursuant 25 to section 214A.2, the decal shall contain the following 26 notice: “FOR FLEXIBLE FUEL VEHICLES ONLY” identify the ethanol 27 blended gasoline as for flexible fuel vehicles only . 28 b. If biodiesel fuel is sold from a motor fuel pump, the 29 motor fuel pump shall have affixed a decal identifying the 30 biodiesel fuel as provided in 16 C.F.R. pt. 306. 31 2. The design and location of the decal shall be prescribed 32 by rules adopted by the department. A decal identifying a 33 renewable biodiesel fuel shall be consistent with standards 34 adopted pursuant to section 159A.6. The department may approve 35 -3- LSB 5250XS (21) 83 da/rj 3/ 7

S.F. 2107 an application to place a decal in a special location on a pump 1 or container or use a decal with special lettering or colors, 2 if the decal appears clear and conspicuous to the consumer. 3 The application shall be made in writing pursuant to procedures 4 adopted by the department. 5 Sec. 6. Section 422.11N, subsection 9, Code 2009, is amended 6 to read as follows: 7 9. This section is repealed on January 1, 2021 2011 . 8 Sec. 7. Section 422.11O, subsection 5, Code 2009, is amended 9 by striking the subsection. 10 Sec. 8. Section 422.33, subsection 11A, paragraph c, Code 11 Supplement 2009, is amended to read as follows: 12 c. This subsection is repealed on January 1, 2021 2011 . 13 Sec. 9. 2006 Iowa Acts, chapter 1142, section 49, subsection 14 2, as amended by 2006 Iowa Acts, chapter 1175, section 17, is 15 amended to read as follows: 16 2. For a retail dealer who may claim an ethanol promotion 17 tax credit under section 422.11N or 422.33, subsection 11A, 18 as enacted in this Act, in calendar year 2020 2010 and whose 19 tax year ends prior to after December 31, 2020 2010 , the 20 retail dealer may continue to claim the tax credit in only for 21 that part of the retail dealer’s following tax year ending 22 on December 31, 2010 . In that case, the tax credit shall be 23 calculated in the same manner as provided in section 422.11N 24 or 422.33, subsection 11A, as enacted in this Act, for the 25 remaining period beginning on the first day of the retail 26 dealer’s new tax year until December 31, 2020. For that 27 remaining period, the tax credit shall be calculated in the 28 same manner as a retail dealer whose tax year began on the 29 previous January 1 and who is calculating the tax credit on 30 December 31, 2020. 31 EXPLANATION 32 REGULATION OF ETHANOL BLENDED GASOLINE. This bill amends 33 Code chapter 214A, which provides authority to the department 34 of agriculture and land stewardship (department) to regulate 35 -4- LSB 5250XS (21) 83 da/rj 4/ 7

S.F. 2107 the sale of motor fuel, including renewable fuel such as 1 ethanol blended gasoline. Code section 214A.2 provides for 2 different types of gasoline and establishes standards or 3 specifications for gasoline in conformance with federal law 4 and specifically regulations promulgated by the Unites States 5 environmental protection agency (EPA), and in part based on 6 standards published by the American society for testing and 7 materials (A.S.T.M.) international. The Code section provides 8 that standard ethanol blended gasoline is classified by its 9 percent volume of ethanol, referred to as “E-xx” where “xx” 10 designates the percentage (e.g., E-10). 11 INCREASING THE PERCENTAGE OF ETHANOL IN STANDARD ETHANOL 12 BLENDED GASOLINE. The bill increases the ethanol percentage 13 required to be blended in standard ethanol blended gasoline. 14 Currently, standard ethanol blended gasoline used to power 15 vehicles other than flexible fuel vehicles is classified as E-9 16 or E-10 in conformance with EPA regulations. The bill provides 17 that if the EPA allows a higher percentage (e.g., E-15), the 18 department must change the classification of standard ethanol 19 blended gasoline to conform with the higher percentage, so 20 long as the gasoline complies with other state specifications 21 including A.S.T.M. international requirements. The department 22 must publish the new classification in the Iowa administrative 23 bulletin and it takes effect 60 days later. Until that time, 24 the current E-9 or E-10 classification applies. 25 ETHANOL BLENDED GASOLINE REQUIREMENT. The bill creates a 26 new requirement that a retail dealer cannot advertise, sell, or 27 dispense gasoline other than ethanol blended gasoline; either 28 standard ethanol blended gasoline or so-called E-85 gasoline. 29 Gasoline which does not contain the requisite percentage of 30 ethanol is referred to as “unblended gasoline”. 31 EXCEPTIONS. Notwithstanding the prohibition, the bill 32 allows a retail dealer to continue to advertise, sell, or 33 dispense unblended gasoline in limited circumstances. First, 34 the prohibition does not apply to gasoline used to operate 35 -5- LSB 5250XS (21) 83 da/rj 5/ 7

S.F. 2107 aircraft, or motor vehicles involved exclusively in motor 1 sports events. The requirement also does not apply to 2 gasoline for use in certain vehicles such as antique vehicles, 3 snowmobiles, all-terrain vehicles, watercraft, and small 4 motors. The bill prohibits a retail dealer from using more 5 than one metered pump to dispense unblended gasoline. Second, 6 the prohibition does not apply to a retail dealer who has been 7 issued a waiver by the department because the retail dealer has 8 not been able to reasonably obtain ethanol blended gasoline for 9 sale at the retail motor fuel site. The waiver expires six 10 months from the date of issuance. However, a retail dealer who 11 has been issued a waiver may apply for any number of subsequent 12 waivers. Third, a retail dealer may continue to advertise, 13 sell, or dispense unblended gasoline from one or more metered 14 pumps located at a retail motor fuel site until January 1, 15 2011. 16 ADVERTISING. The bill provides that a retail dealer must 17 affix a decal on each metered pump which dispenses unblended 18 gasoline, notifying the public of its designation and any 19 restricted use. The bill eliminates a requirement that a 20 metered pump dispensing ethanol blended gasoline be affixed 21 with a decal. 22 APPLICABLE PENALTIES. Code section 214A.11 provides that 23 a person who violates a provision of Code chapter 214A is 24 guilty of a serious misdemeanor, and that each day that a 25 continuing violation occurs is considered a separate offense. 26 A serious misdemeanor is punishable by confinement for no 27 more than one year and a fine of at least $315 but not more 28 than $1,875. The Code section also provides that in lieu of 29 seeking a prosecution, the state may proceed against the person 30 by initiating an alternative civil enforcement action as a 31 contested case proceeding by the department under Code chapter 32 17A or as a civil judicial proceeding by the attorney general 33 upon referral by the department. The applicable civil penalty 34 is at least $100 but not more than $1,000 for each violation. 35 -6- LSB 5250XS (21) 83 da/rj 6/ 7

S.F. 2107 Each day that a continuing violation occurs shall be considered 1 a separate offense. 2 ELIMINATION OF TAX CREDITS. During the 2006 Legislative 3 Session, the general assembly enacted H.F. 2754 (2006 Iowa 4 Acts, chapter 1142) creating two new tax credits: (1) the 5 ethanol promotion tax credit, and (2) the E-85 gasoline 6 promotion tax credit. That statute in addition to subsequent 7 enactments provides for the terms of the tax credits which may 8 be claimed by retail dealers. The ethanol promotion tax credit 9 expires on December 31, 2010 (see 2006 Iowa Acts, chapter 10 1175), but provides an extension for persons who have tax 11 years beginning after January 1. The bill eliminates the tax 12 credit on January 1, 2011, when the new sales requirement takes 13 effect, and does not allow the extension period for retail 14 dealers whose fiscal year does not begin on January 1. The 15 bill also eliminates a provision affecting the E-85 gasoline 16 promotion tax credit which allows a retail dealer to claim both 17 tax credits based on the same ethanol gallonage. 18 -7- LSB 5250XS (21) 83 da/rj 7/ 7