Nebraska hitting end of road on ethanol incentive

Source: ART HOVEY • Lincoln Journal Star  • Posted: Friday, February 24, 2012

Nebraska is closing the books on EPIC, its Ethanol Production Incentive Cash fund, after two decades of carving out a sizable presence in corn-based renewable fuel.

The last gasoline tax credits passed from ethanol producers to fuel users were earned last month by the last eligible plants.

The official deadline for earning them is June 30, and the program itself ends Oct. 31, as does the ethanol checkoff fee that farmers paid on grain sales to help promote plant construction and offset lost gas tax revenue.

Along the way, producers of corn and grain sorghum contributed more than $135 million to the cost of covering the incentive. Taxpayers provided about $105 million through the state budget’s general fund.

Despite sizable costs, Steve Sorum, project manager for the Nebraska Ethanol Board, thinks the incentive has been a huge success.

It set the stage for construction of some two dozen ethanol plants and for hiring a combined workforce of some 4,500 people.

“The program was created in timely fashion,” Sorum said. “It accomplished more than producers thought it could. And it helped make Nebraska the second leading ethanol producer in the country at just over 2 billion gallons annually.”

The outlook wasn’t nearly as upbeat in other quarters in 2004. That’s when proposals for building plants were popping up all over the state and the Legislature was wrestling with a potential funding shortfall of close to $100 million.

In the throes of that dilemma, former Lincoln Sen. David Landis, chairman of the Revenue Committee at that time, sounded much more conscious of obligation than opportunity.

“Cher, cockroaches and ethanol will always be with us,” Landis said during a February 2004 committee hearing.

Committee member Patrick Bourne of Omaha suggested at the same hearing that the Legislature had been duped and “sold a bill of goods” by ethanol advocates.

Eight years later, Bourne was asked to revisit his 2004 misgivings.

He admitted on Wednesday that he’s put his legislative career behind him since he stepped down in 2006. As an attorney in private practice in Omaha, ethanol hasn’t been on his agenda in a long time.

But he didn’t take back his concerns either.

“What I didn’t like at the time is that we passed a bill and it didn’t maximize the value to Nebraska.

“By that I mean what I wanted to see was Nebraska workers coming in and building the plants. I wanted to see Nebraska people manage the plants. I wanted to see Nebraska steel makers provide the steel for the plants.”

But in the end, even though he never felt satisfied those expectations would be met, he relented and backed a solution to the shortfall.

“The reason I voted to do that was because I was impressed by the smaller communities in Nebraska that came in to the Legislature and indicated how vital ethanol plants and production were to their communities.”

Back in 2004, “we were in a pretty significant downturn,” he said, “and a lot of those rural communities were barely hanging on.”

Sorum, meanwhile, judges success by the final result.

Seventeen of the 25 plants built in the state qualified for the incentive, he said.

“So we brought a huge industry to Nebraska,” he said. “In 2011, ethanol plants were buying almost half of Nebraska’s near record corn crop. So we provided a huge market for the state’s most abundant product. We created about 4,500 jobs.

“We’ve done what we hoped the program would do.”

Plants qualified for credits either through construction or expansion.

“Many of them came here and expressly said they chose Nebraska because of our incentive program.”

While the overall costs of the incentive topped $200 million, the plus side includes a major surge in corn prices and a spillover effect from agriculture into the rest of the state’s economy.

Landis, now urban development director to Lincoln Mayor Chris Beutler, was unavailable for comment on Wednesday about his caustic assessment of ethanol incentive costs in 2004.

But Loren Schmit, executive director of the Nebraska Association of Ethanol Producers, bears him no ill will.

Schmit and Landis served in the Legislature together, and Schmit was the leading proponent of the ethanol incentive.

“He had concerns about all incentive programs,” Schmit said of Landis. “But, in honesty, without the support of urban legislators, we would never have had an ethanol program.”

Since the incentive began, the value of corn production has been increased by billions of dollars per year.

“We have increased production of corn by more than 500 million bushels,” Schmit said, “but yet, we’ve increased the price from $1.67 to over $6 a bushel.”



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