Ethanol and Biodiesel Production - Focus on Scale and Cooperative Ownership

The conversion of biomass into ethanol and biodiesel provides farmers an additional market for their crops. Over the years, many federal and state rules have been developed to promote biofuels production for use in industry and reformulated gasoline. While this page does not include an exhaustive list of ethanol incentives, the rules on this page are unique in that they encourage ethanol and biodiesel production on a small scale. A decentralized, rural biofuels industry tends to favor a greater number of farmers over a wider area. Production credits for smaller facilities also promotes the formation of farmer-owned cooperatives that further increase returns to farmers.

RULES

• Biodiesel Mandate - Minnesota
  In March 2002, Minnesota enacted the nation's first biodiesel mandate that would require nearly all diesel fuel sold in the state contain at least 2 percent biodiesel by 2005 (earlier if certain conditions are met). Biodiesel is a fuel additive derived from animal fats or plant oil, typically soybeans. Proponents of the biodiesel requirement argue it would be a boon for the state's farmers and improve the state's use of alternative fuels.
• Biodiesel Use By School Districts - Missouri
  In 2001 the state of Missouri passed a new law that gives school districts an incentive to purchase biodiesel fuel for their bus fleets. The law begins with the 2002-03 school year and lasts through the 2005-06 school year. Any school district may contract with an eligible new generation cooperative to purchase biodiesel fuel for its buses of a minimum of B-20 (20 percent biodiesel). The state will then reimburse the school district so that the net price to the contracting district for biodiesel will not exceed the rack price of regular diesel.
• Ethanol and Biodiesel Incentives - Missouri
  In 2002, Missouri enacted two incentive programs that will promote in-state, cooperatively-owned biofuels production. Targeted at increasing homegrown production of ethanol and biodiesel, the five-year incentive programs provide grants to producers that are at least fifty-one percent owned by agricultural producers actively engaged in agricultural production for commercial purposes in the state. Ethanol incentives include a payment of 20 cents per gallon for the first 12.5 million gallons and 5 cents per gallon for the next 12.5 million gallons. Biodiesel incentives are 30 cents per gallon for up to 15 million gallons of production. More...
• Ethanol Production Incentives - North Dakota
  In April 2003, North Dakota's Governor signed into law an Ethanol Production Incentive bill (Senate Bill 2222). The legislation implements the first program in the nation to create a market-based support system for the growing ethanol industry. The ethanol incentive operates on a counter cyclical feature that is market-based. It is not a fixed payment, but is provided to a facility when the price of ethanol drops or the price of corn increases to levels that make ethanol less profitable. Incentives are based on a combination of a $1.80/bushel price for corn and a $1.30/gallon rack price for ethanol (price at the terminal). More...
• Ethanol Investment Tax Credits - Hawaii
  In early 2000, legislation passed in Hawaii to provide tax credits for the production of ethanol in the state. The new law will help sugar growers on Kauai and Maui by offering incentives to use molasses and other wastes as the feedstock for ethanol. Supporters also hope the possibility of using municipal solid waste as a feedstock will cut down on the amount of waste being landfilled. More...
• Ethanol Program - Minnesota Model
  To meet its goal of replacing 10 percent of its fuel needs with ethanol, in the late 1980s Minnesota instituted a producer payment program of 20¢/gallon on up to 15 million gallons of ethanol per year for a maximum of 10 years. The payment is limited to in-state producers, and the small scale requirement has resulted in the formation of more than a dozen farmer-owned ethanol processing cooperatives. More...
• Biodiesel Incentives for Schools - West Virginia
  West Virginia state law provides a financial incentive for schools to fuel their bus fleets with alternative fuels. Under the state school aid formula, counties receive about 85 cents for every dollar in transportation costs. By switching to alternative fuels like biodiesel blends or compressed natural gas [CNG], the reimbursement increases to 95 cents. More...
• Ethanol Program - Wisconsin
  Wisconsin's Act 55 provides ethanol producers a credit much like Minnesota's - beginning July 1, 2000 it will provide 20 cents per gallon for no more than 15 million gallons of production. The feedstock must come from a "local" source, definition to be determined. More...