Iowa Cedes Its Ethanol ‘Crown’ to Nebraska With CO2 Pipeline Start

By Cami Koons

Iowa biofuels and corn experts congratulated Nebraska for its first shipments of carbon dioxide on the Tallgrass Trailblazer pipeline, but said Wednesday that the development means Iowa is no longer king at turning corn into ethanol. 

Monte Shaw, the executive director of Iowa Renewable Fuels Association, said now that Nebraska has a functioning CO2 pipeline, ethanol plants in the state can take advantage of lucrative tax credits from the federal government and sell into the ultra-low carbon ethanol market. 

“Iowa has worn the crown,” Shaw said at a new conference Wednesday. “We have been the world’s best place to turn corn into ethanol, and we’ve held that crown for 25 years. Last week, we got knocked off.” 

Trailblazer and 45z

Tallgrass’ Trailblazer pipeline, which is slated to stretch several hundred miles and transport CO2 from ethanol plants in Nebraska, Colorado and Wyoming to an underground storage site in Wyoming, had its first CO2 shipment Oct. 3. 

The Trailblazer pipeline formerly carried natural gas, but the company was able to convert the pipeline to instead sequester liquified carbon dioxide. By sequestering the carbon dioxide created in the process of turning corn into ethanol, the plants are able to lower the “lifecycle greenhouse gas emissions” of the fuel below a certain level, set by the U.S. Department of Energy, that makes the fuel eligible for a per-gallon tax credit. 

These credits, known as 45z, were initiated under the Biden administration’s Inflation Reduction Act. While the IRA was mostly dismantled by the Trump administration, 45z credits were extended under the Republican led tax cut law, known as the “one big beautiful bill.” 

Shaw said the credits can add about 66 cents per gallon of ethanol, which is a lot for an industry that “usually tries to make a penny or two.” 

Impacts to Iowa

According to IRFA, Iowa produces about 4.7 billion gallons of ethanol annually. Shaw said if each of those gallons could take advantage of the credits and add 66 cents per gallon, it would equate to more than $3 billion in added value to the industry annually. 

“If Iowa wants to maintain low taxes, if we want to do further property tax reform and things of that nature, then the state needs a strong ag economy,” Shaw said. “Ethanol producers need access to the tools in this state to remain competitive with the plants around us that are moving forward.” 

Steve Kuiper, vice president of Iowa Corn Growers Association, said the boost to Iowa ethanol would directly impact corn farmers by increasing demand and potential price for corn, but would also “trickle down” to the state’s economy. 

Farmers have faced several years in a row of high interest rates, high input costs, and low market prices for their crops. Trade wars between the U.S. and the countries where it sells ag commodities and purchases inputs have also added stress to farmers. According to a September survey from the National Corn Growers Association, nearly 50% of U.S. farmers believe the nation is on the brink of a farm crisis. 

“The Iowa agriculture economy is in tough shape,” Kuiper said. “Farmers are farming at a loss. Lenders are very, very anxious right now.”

Dave Miller, the chief economist with Decision Innovation Solutions, said as corn yields continue to grow, farmers need a market that accounts for an extra 150 million bushels a year through 2050. 

Miller said the low-carbon ethanol market facilitated by carbon sequestration could create the potential for an additional 12 million gallons of ethanol, which he said could be fulfilled by the current farming yield increases. 

“The Nebraska plants that are on the pipeline, that door has now been opened,” Miller said. “So there’s a real competitive advantage that’s going to open up for Nebraska farmers compared to Iowa farmers.” 

Seth Harder, CEO of two ethanol plants in Nebraska and one in Iowa, said he has seen the things in the industry that Iowa does “really great” but he also sees that the states he operates in are on the edge of a “paradigm shift.”

“As Nebraska sees this influx of funds, we hear plants are talking about not only expanding, but doubling,” Harder said. 

Harder said the demand for ethanol appears to be on the rise with the recent decision from California allowing the sale of a higher blend of ethanol fuel, E-15, and the prospect of more states joining in on the trend. 

Challenges

Shaw said he believes Iowa is on the cusp of a “fairly substantial farm crisis.”

“Nothing will solve this problem until we grow demand or reduce production, and reducing production would be devastating to the economy of Iowa in the Midwest,” he said.

Carbon sequestration projects have faced challenges in Iowa, largely because of landowner opposition to CO2 pipeline projects, including the Summit Carbon Solutions pipeline. Debate on the topic caused splits among GOP lawmakers during the legislative session and has continued to be a divisive issue in the party.

The Trailblazer pipeline had fewer roadblocks than those that have popped up in Iowa. This is in part because Nebraska does not require state approval for CO2 pipelines, and because much of the pipeline was already built as the natural gas line.

Landowners and environmental groups, including the Sierra Club Iowa Chapter, that are opposed to CO2 sequestration pipelines call the Summit project a “boondoggle.” Opponents worry about property values and the safety of carbon sequestration pipelines. They have also said sequestering carbon should not qualify as a public use, which a project must have in order to use eminent domain.

Shaw said it doesn’t matter what someone thinks about carbon dioxide in the atmosphere and why it should or shouldn’t be sequestered, because for renewable fuel members, this is a “business decision.”

The Summit Carbon Solutions pipeline is the most well known carbon sequestration project in Iowa, but Shaw said there are other companies and facilities looking for places in Iowa to sequester carbon, or to otherwise build carbon sequestration pipelines. 

On the nearest horizon, Southwest Iowa Renewable Energy, or SIRE located near Council Bluffs, is slated to connect to the Trailblazer pipeline and potentially begin sequestering carbon at the plant in late 2026. 

The Summit Carbon Solutions pipeline cannot begin construction in Iowa until it secures permits for storage in North Dakota and for passage through South Dakota, which has become challenging due to the enactment of a restricting law in South Dakota. The company filed to change its permit with the Iowa Utilities Commission to remove the Dakota-specific language, in the event it is able to secure a “​​better solution” for storage and passage. 

Shaw said the “economic consequences” of the development in Nebraska could be a “bump in the road” for Iowa if the state adapts and brings its own carbon sequestration practices online, or it could lead to “production and demand flow from places like Iowa to places like Nebraska.” 

“We’re asking the Iowa Legislature to support President Trump’s energy leadership and to help avert what I personally feel is a pending farm crisis, and to help put Iowa’s economy back on stable ground,” Shaw said.

Iowa Capital Dispatch is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Iowa Capital Dispatch maintains editorial independence. Contact Editor Kathie Obradovich for questions: [email protected]. Follow Iowa Capital Dispatch on Facebook and Twitter.