Continuing Bleeding Heartland’s coverage of the Iowa legislature’s work during the 2019 session.

Iowa’s environmental community had something to celebrate when state lawmakers adjourned for the year without passing legislation that would crush small-scale solar development. An unusual coalition including solar installers, environmental groups, and livestock farmers helped keep the bill bottled up in the Iowa House despite intense lobbying by MidAmerican Energy and its allies, along with massive spending by undisclosed donors.

Unfortunately, lawmakers approved and Governor Kim Reynolds signed several other measures that will be detrimental for Iowa’s natural resources and take our state’s energy policy in the wrong direction. The new laws take effect today, as the 2020 fiscal year begins.

“CRITICAL TOOL” FOR WATER QUALITY IMPROVEMENT PROGRAMS AXED

Although Iowa has very little public land compared to most states, Republicans introduced several proposals this year to make it more difficult for land to be donated or acquired for conservation projects.

The worst of these, House File 542, was on the Iowa Farm Bureau’s wish list. It would have restricted land donations for public uses and “would have created unnecessary barriers for state and local governments to acquire public lands by preventing the use of state funds to purchase land for parks, trails, or other water quality improvement projects,” the Iowa Environmental Council‘s water program director Ingrid Gronstal Anderson told Bleeding Heartland.

House File 542 failed to advance from a House Natural Resources subcommittee after more than 300 Iowans showed up to oppose the measure and hundreds more called or e-mailed their state representatives. The lawmakers on the subcommittee said they had never received as many constituent contacts on a bill. Gronstal Anderson called stopping that legislation the big water quality “win” of the 2019 session.

Another bad land use bill, Senate File 548, did become law. Gronstal Anderson explained that the legislation “eliminated a critical tool for private/public partnerships on water quality improvement projects.”

This bill removes the use of the State Revolving Loan Fund for private/public partnerships that advance water quality, flood mitigation, and other conservation efforts across the state unless it includes an edge-of-field practice identified in the Nutrient Reduction Strategy. As Iowa experiences record levels of nitrogen pollution leaving our state and an increase in flood events, now is the time to increase access to practices that improve water quality and reduce flooding.

The initial draft of the Senate bill was even worse. As Anna Gray reported for the Iowa Natural Heritage Foundation in March, Republicans agreed to two amendments before moving the bill out of the Committee on Natural Resources and the Environment.

The first preserved the Iowa Income Tax Credit for the Charitable Contribution of Conservation Land. The second grandfathered in use of the State Revolving Fund loan program for properties acquired before July 1, 2019, but the bill still prohibits the loans from being used in future land projects.

Many environmental non-profits and local government bodies lobbied against Senate File 548. County conservation boards and other public entities have used the loan program to buy land from private owners for water quality or flood mitigation projects. The Iowa Natural Heritage Foundation explained its position here. Excerpts:

The State Revolving Fund (SRF) is a low-interest loan program supported by federal funding for water quality projects. The SRF is established in the Clean Water Act to provide low-interest loans for water quality projects. The state does not use general funds to support SRF loans. The Iowa Finance Authority issues bonds to provide the required 20% match to 80% federal dollars to participate in the program. Borrowers must pay back 100% of the loan, plus costs and interest.

The fund has the ability to finance all eligible water quality projects for the foreseeable future. Since its inception, the Iowa SRF has loaned out more than $3 billion to 600 different borrowers. In FY18, SRF funded about $14 million in such non-point source projects. Non-point projects amount to about 10% of the funding made available through the Clean Water SRF. In FY18, it was less than 6%. Use of SRF for land acquisition does not jeopardize other viable uses of the fund, which some proponents of the bill have argued.

SRF projects are transparent to the public and must have a direct, unequivocal water quality benefit. IDNR and IFA set rules and jointly administer the program and each loan is vetted by the Environmental Protection Commission. Public EPC meetings provide opportunity to submit input and comments.

The program works. INHF’s past use of SRF for public land projects has a proven record of water quality improvement projects that provide multiple benefits, including wildlife habitat, scenic beauty and increased opportunities for outdoor recreation.

Big Wall Lake, featured in the picture at the top of this post, is among the projects this loan program has made possible. Had Senate File 548 been in effect, those funds would have been unavailable for expanding the wildlife management area to buffer that Wright County lake.

Reynolds signed this bill after it passed both chambers on mostly party-line votes (roll calls here and here). State Senator Kevin Kinney was the only Democrat in either chamber to vote for the legislation. Only two Republicans opposed it: State Representative John Wills and State Senator Brad Zaun.

“PUNITIVE CHARGES” FOR OWNERS OF ELECTRIC VEHICLES

Relatively few Iowa drivers use electric vehicles. At the end of 2018, an estimated 1,043 battery electric vehicles and 1,964 plug-in electric vehicles were registered in the state.

A new law will discourage Iowa residents from purchasing and businesses from accommodating such vehicles.

As summarized in a fiscal note from the nonpartisan Legislative Services Agency, House File 767

applies an additional registration fee to electric vehicles, an excise tax on hydrogen used as fuel, and an excise tax on electricity used as electric fuel. The registration fees and the hydrogen fees provisions of the Bill would take effect on January 1, 2020. The excise tax on electricity would take effect on July 1, 2023. The additional registration fees would be as follows:

$130 for a battery electric vehicle (BEV) beginning on January 1, 2022. There is a phase-in fee of $65 in Calendar Year (CY) 2020 and $97.50 in CY 2021.

$65 for a plug-in hybrid electric vehicle (PHEV) beginning on January 1, 2022. There is a phase-in fee of $32.50 in CY 2020 and $48.75 in CY 2022.

$9 for a battery electric or plug-in hybrid motorcycle beginning on January 1, 2022. There is a phase-in fee of $4.50 in CY 2020 and $6.75 in CY 2021.

$0.65 per gallon of hydrogen used as fuel (under the Bill, 2.49 pounds of hydrogen areequivalent to 1.00 pound of diesel fuel).

A $0.026 tax on each kilowatt hour (kWh) of electricity purchased at a nonresidential location.

State Senator Rob Hogg noted in an April 30 e-mail to supporters that owners of electric and plug-in vehicles “already pay higher registration fees than comparable gas-powered cars. This will hurt Iowans who want to buy gas-saving technology and will hurt jobs in the clean car industry that is already under attack from the Trump Administration.”

The bill’s stated purpose was to shore up Road Use Tax Fund revenues. The additional registration fees would generate an extra $185,000 for that fund during the first year the law is in effect, rising to $1,344,000 during fiscal year 2024, when all provisions are phased in, the Legislative Services Agency projected.

Entities lobbying for this bill included organizations involved in trucking or road construction, those representing county governments, and the advocacy group for Iowa’s fuel industry. Only environmental organizations lobbied against it.

The Senate vote fell mostly along party lines, with 32 Republicans and two Democrats (Kevin Kinney and Herman Quirmbach) supporting the bill and the rest of the Democrats present voting against it. The House vote was more bipartisan. The 78 yes votes came from 52 Republicans and 26 Democrats (Marti Anderson, Bruce Bearinger, Wes Breckenridge, Timi Brown-Powers, Dennis Cohoon, Tracy Ehlert, John Forbes, Mary Gaskill, Chris Hall, Chuck Isenhart, Lindsay James, Kenan Judge, Jennifer Konfrst, Bob Kressig, Jeff Kurtz, Charlie McConkey, Brian Meyer, Amy Nielsen, Jo Oldson, Todd Prichard, Kirsten Running-Marquardt, Ras Smith, Art Staed, Kristin Sunde, Dave Williams, and Mary Wolfe). Democrat Scott Ourth was absent for the vote but later clarified that he would have supported House File 767. I wondered about the Democratic support, given that no labor unions were registered in favor of the bill. Meyer explained his reasoning: “Road use tax fund. Build roads. Put people to work.”

Eighteen House Democrats (Ako Abdul-Samad, Liz Bennett, Karin Derry, Molly Donahue, Lisa Heddens, Bruce Hunter, Dave Jacoby, Tim Kacena, Monica Kurth, Vicki Lensing, Mary Mascher, Heather Matson, Rick Olson, Mark Smith, Sharon Steckman, Phyllis Thede, Beth Wessel-Kroeschell, and Cindy Winckler) and two Republicans (Andy McKean and Jeff Shipley) voted against it.

The Iowa Environmental Council’s energy program director Kerri Johannsen told Bleeding Heartland that electric vehicles offer “better efficiency, reduced maintenance costs, lower and more stable fuel prices, and environmental benefits.” The new law will be “problematic for EV adoption” here, not only because of its impact on vehicle owners but also because of new burdens on businesses.

The most pressing problem with HF 767 is the $0.026 per kWh excise tax on electricity dispensed at public charging stations. These are the chargers you see at Hy-Vee, Wal-Mart, at hotels and a few workplaces. This bill creates a new financial and regulatory burden for these businesses which may otherwise be offering charging as a loss leader to attract customers or as a workplace perk.

Given that Iowa has few chargers in service (about 160 statewide) every charger is critical to EV drivers. The majority (60%) of public charging stations in Iowa currently are not able to accept payment. To comply with the new excise tax, owners of these charging stations would first need to become licensed by the Iowa Department of Revenue. Next, they would have to either replace their current charger with one that can track the kWh dispensed or they could have a second electric meter installed at their expense that would also require a second monthly meter fee from their utility in order to know how many kilowatt hours are going for vehicle fuel versus the rest of their electric bill. Finally, these businesses will have to remit taxes every six months to the Iowa Department of Revenue and be subject to the same record-keeping requirements as current gas station owners.

This series of regulatory burdens would generate a questionable amount of tax revenue for the costs incurred by the businesses and the state. I am concerned that businesses otherwise considering installing charging infrastructure will take a look at the paperwork and expense involved and take a pass. This new burden will also apply to existing charging stations, causing their owners to think twice about whether to go to the expense and hassle of continuing to offer charging at all. Without charging infrastructure, EV adoption will slow and Iowa will lose out on the potential benefits.

In addition, HF 767 puts in place an unfair and disproportionate annual registration tax on owners of full electric and plug-in hybrid vehicles. The tax amount assumes EV drivers put on the same number of miles as a conventional car driver and uses 22 miles per gallon as the comparable mileage achieved. This is not an appropriate way to do this calculation. EV drivers have been shown to drive fewer miles and mileage should be compared to efficient vehicles, not all vehicles on the road.

Finally, the EVs available today are more expensive than average and already pay the highest percent of their value toward their annual registration fee because they are in the newest car category. In many cases, EV drivers are already paying an annual registration fee that exceeds the registration fee PLUS gas tax paid by the driver of a gas vehicle. All registration fees go to the road use tax fund, so EV drivers are already contributing their fair share (or more) for road upkeep at this point.

Before Reynolds signed the bill, Johannsen told Bleeding Heartland, “The right move would be for the governor to veto this piece of legislation and direct the Iowa Economic Development Authority to convene the appropriate state agencies and stakeholder to implement a more appropriate and balanced approach to keeping the Road Use Tax Fund whole that is not a disincentive to EV adoption.” That didn’t happen.

Josh Mandelbaum, staff attorney for the Environmental Law & Policy Center, summed up the impact of House File 767 this way: “We should be taking a data-driven approach to determining how electric vehicles pay for road infrastructure. Unfortunately, this bill is not data-driven, and the result is punitive charges for EV owners that will adversely affect the development of the EV market and EV charging in Iowa.”

AN “UNNECESSARY HIT” ON ENERGY EFFICIENCY

The “standings” appropriations bill is typically among the last pieces of legislation approved before Iowa lawmakers adjourn for the year. It tends to become a dumping ground for proposals that couldn’t get through the House and Senate as stand-alone bills. This year’s model, Senate File 638, was no exception. Changes to Iowa’s judicial selection system grabbed most of the attention when the standings bill cleared both chambers on the final day of the session. House and Senate members split along party lines, except for one GOP no vote from State Representative Megan Jones.

Another section added late in the game will compound the damage done by a 2018 law Republicans passed and Reynolds signed.

The 2018 law, Senate File 2311, prohibited the Iowa Utilities Board from requiring investor-owned utilities Alliant and MidAmerican to spend more than 1.5 percent of their revenues on gas efficiency and more than 2 percent on efficiency measures to reduce electricity usage. This year’s standings bill said the board “shall not require or allow” the utilities to spend more than 1.5 percent or 2 percent of revenues on such programs. The Iowa Environmental Council’s Johannsen commented in early May,

This change is an unnecessary hit on an industry that has already been decimated by SF 2311 passed last year and the resulting scale-back of Iowa’s nationally-recognized energy efficiency programs. […] The new, hard caps create uncertainty for customers and businesses already hard hit. We will be calling on the Governor to exercise her line-item veto authority on this language that is bad for business and bad for utility customers.

The Environmental Law & Policy Center’s Mandelbaum added,

The energy efficiency language in standings makes bad policy enacted in SF 2311 worse by creating regulatory uncertainty and taking away flexibility for utilities and customers. We have already seen job losses from SF 2311 with one sample of just five energy efficiency focused businesses reporting losing 63 employees representing 66 percent of their combined Iowa workforce and almost $3 million in lost salaries. It makes no sense to double down on the bad results from SF 2311 and further undermine energy efficiency in Iowa.

In his April 30 e-mail, Hogg noted that this part of the standings bill “contradicts the state’s energy plan written by Governor Reynolds [when she was lieutenant governor] to encourage more energy efficiency and will result in more energy costs for Iowa consumers.” Nevertheless, Reynolds did not heed calls to use her item veto power to strike this provision.

Similar legislation introduced by the Senate Ways and Means Committee in mid-April was even worse, because it called for utility company assessments that partly fund the Iowa Energy Center and Center for Global and Environmental Research to be included under the hard caps for energy efficiency spending. The language added to Senate File 638 affects the next round of efficiency plans, to be adopted five years from now, after utility company funding for the energy centers has phased out.

For that reason, Iowa’s Consumer Advocate Mark Schuling said during a telephone interview in May that he doubted the energy efficiency language in Senate File 638 would have “substantial impact.” For one thing, it would apply only to energy plans the Alliant and MidAmerican will adopt in the future. In addition, the latest plans those companies submitted didn’t propose spending more than 1.5 percent on gas efficiency or 2 percent on electricity programs. Since the “utilities are not going to do that on their own,” Schuling reasoned, a new statute barring the companies from doing so will not change spending on efficiency.

STILL UNDER-FUNDING ENVIRONMENTAL PROGRAMS

Asked to sum up the year’s significant legislation relating to water quality, Gronstal Anderson of the Iowa Environmental Council noted that the 2020 fiscal year budget allocated just $12 million to the Resource Enhancement and Protection program. REAP funds a range of education, land management, and open space projects as well as soil and water programs. Under state law, REAP “is authorized to receive $20 million per year until 2021,” but the legislature never approves that level.

Gronstal Anderson added that state funding for the Iowa Department of Natural Resources (DNR) “has not been restored to pre-recession levels, and the agency continues to experience budget reductions. For instance, DNR received $15 million in FY 2014 and just $13.9 million this year. These budgetary decisions highlight a concerning trend in de-valuing investment in Iowa’s environment and natural resources.”

On a related note, Reynolds finally appointed a DNR director, Kayla Lyon, on June 26. Lyon previously served as the governor’s legislative liaison and will start working at the DNR on July 8. A few years ago, she lobbied on behalf of the Iowa Institute for Cooperatives, which represents “agriculture, credit unions, rural electric, rural telephone, farm credit, petroleum, and more.”

The DNR has had only an acting director (Bruce Trautman) in place since May 2018. Reynolds has never publicly explained why she did not nominate someone to lead that agency in time for the Iowa Senate to consider the person’s confirmation during the 2019 legislative session. Staff for the governor did not respond to Bleeding Heartland’s inquiry about the delay or comment on widespread rumors that Reynolds had been holding the job open until after the legislature adjourned for Republican State Representative John Wills.

The governor’s office refuses to release applications for agency director positions, citing an exemption in Iowa’s open records law that covers communications from someone outside of government who might be discouraged from applying for a job if such records became public knowledge. Readers with information about why Reynolds waited so long to appoint a DNR director, or about other candidates who sought the position and were passed over for the relatively inexperienced Lyon, are encouraged to contact Laura Belin confidentially.

Top image: Duck season at Big Wall Lake, October 2015. Photo first appeared on the Iowa Natural Heritage Foundation’s website and is republished with permission.