Don't scrap incentives for ethanol

Monday, September 22, 2003

Nebraska is going to have trouble coming up with the money to pay the ethanol plant incentives, so the plan should be scrapped or scaled back, right? Not in the opinion of State Sen. Tom Baker of Trenton, the co-chair of the Governor's Roundtable which met last week to discuss incentive strategies.

"The ethanol plants are an excellent way to encourage economic development in rural areas," Baker said Friday on his return from the strategy session. "We are going to find a way to fund the current incentives, and we are looking at ways to provide incentives for biomass plants in the future," he declared.

The way it looks now, four ethanol plants will qualify for the ethanol subsidy program authorized by the 2001 legislature. One of the plants, Plainview, is completed, and the facilities at Trenton, Axtell and Central City are on track to be in production by April of 2004. That is of extreme importance, because the plants must be up and running by April 1st to qualify for up to $22.5 million in incentive payments from the state.

During Thursday's discussion in the Governor's Mansion, Sen. Baker said the state is looking at an increase in the corn checkoff amount to fully fund the incentives. According to estimates of the state's revenue and budget offices, he said an additional one- fourth of a cent checkoff will be required to cover the incentive cost. In the long run, the roundtable participants believe the added fee will pay off, as one of the effects of the ethanol plant is that they increase demand for grain, especially in the area surrounding the plants.

Baker sees further potential in biomass production, such as at the plant being considered for Imperial and the Southwest Biofuels facility at the Perry site west of McCook. "There are so many possibilities for energy conversion, such as soybeans, switchgrass, corn stalks and wheat straw," he said. In upcoming legislative sessions, the Trenton senator predicts bills will be introduced to establish incentive payments for biomass production, much as the 2001 bill did for ethanol.

The incentives are inspired, in large part, by the fierce competition by states in the Midlands to attract ethanol and biomass plants. If Nebraska doesn't come up with additional incentive money, Gov. Johanns said, " ... we'll have to get used to seeing the plants go to Iowa or Missouri or Minnesota."

"When the Trenton plant is in operation, we could be looking at up to 10 cents a bushel more for corn in this area," Baker said. "And that does not count the advantages we will receive from the byproducts, such as the dry distiller's grain for cattle feeding operations."

With the ag economy still reeling from the drought, the state must do all it can to help revive the rural economy. Ethanol and biomass plants have great potential for doing just that. For that reason, Sen. Baker, Gov. Johanns and other state leaders are to be commended for standing firm on ethanol incentives.

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