Iowa Gives Tax Break for Soy Fluids


In an effort to help farmers by stimulating industrial use of vegetable oils, the governor of Iowa signed into law Monday a bill providing tax breaks to manufacturers that convert to soybean-based metalworking fluids.

Proponents call the legislation a cost-effective way to kick start demand for soy-based products and said they hope to see the program imitated by other states.

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This could be the little push that businesses need to make the switch, said Lou Honary, president and chief executive officer of Environmental Lubricants Manufacturing Inc., in Plainfield, Iowa, which makes lubricants and greases based on soybean oil.

The law signed by Gov. Tom Vilsack offers an income tax credit of $2 per gallon to reimburse Iowa companies for costs of converting metalworking shops to soy fluids. The credit is based on the volume of fluid installed – up to 2,000 gallons – and can be claimed just once on costs incurred during the first 12 months of transition. The law has a sunset clause stipulating that it expires at the end of 2006.

Iowa has actively encouraged industrial applications for farm products as a way to broaden demand for crops. ELM, for example, is a commercial spinoff of the Ag-Based Industrial Lubricants Research Program at the University of Northern Iowa, where Honary is a professor on leave. The state also subsidizes ethanol and diesel made from soybean oil.

Soy-based lubricants are a wonderful example of university research being used to create economic opportunities throughout Iowa, Vilsack said. We must continue to encourage this kind of innovation as we strive to transform our economy and capitalize on our strengths.

Marketers of soy-based metalworking fluids claim they hold a number of advantages over alternatives made from mineral oil. First, they are less toxic and therefore easier to dispose. Second, proponents say they present less of a health risk to employees working with them. They also contend that soy-based fluids provide better lubrication in machining operations.

Our experience with the product has indicated a number of benefits, particularly the higher flashpoint, which represents a better machining environment for our products and improved safety conditions for our workforce, said Bob Yancey, president of Turbine Fuel Technologies in Des Moines, Iowa. The company, a division of aerospace and defense contractor Goodrich Corp., was one of several businesses represented at a Des Moines news conference for Mondays bill signing.

Proponents add, however, that these advantages are sometimes not enough to convince manufacturers to switch from mineral oil-based fluids.

Said Honary, I hear a lot of companies say, We love this product. It looks good, it performs, its less of a hazard. But by golly, if I use it, Ive got all the cost of changing out my old fluid and disposing of it, of flushing my equipment. Its hard for them to justify. This tax credit is aimed at overcoming that resistance.

If the program succeeds, proponents in Iowa will encourage other states to enact similar rules.

We hope to spread it to other states, Honary said. All of these states in the Midwest have soybean associations, and all of them are trying to push value-added initiatives for agriculture.

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