The Iowa Senate has voted to provide tax incentives to retailers who sell more ethanol-blended fuel. The House voted last month to raise the state tax on non-ethanol-blended fuel if certain goals weren’t met, but the Senate’s bill provides incentives rather than penalties.

Senator David Johnson, a Republican from Ocheyedan says the Senate just wasn’t comfortable raising the tax on regular gasoline if the state didn’t meet a renewable energy standard by 2010. Because, he says, the penalty falls on the consumer, not the retailer. “We all know what fuel is costing out there and there are all indications that it’s going to go higher.”

The Senate bill lowers the tax on ethanol-blended gasoline at gas stations which meet the renewable fuel goals. “Let’s say in the year 2012, the renewable-fuel standard for every company will be twelve percent,” Johnson says. Then if someone’s at ten percent, not quite there, they won’t get any incentive. If they’re far below the RFS, the renewable-standard, they won’t get any incentive.

The bill now goes back to the House for further debate. Like the House, the Senate plans to approve separate legislation that would provide state grants to gas stations for installing new pumps and tanks for E-85, the 85 percent blend of ethanol.