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Posted on  

November 18, 2003

Biodiesel set to accelerate

Joy Powell, Star Tribune Staff Writer

Landmark energy legislation pending in Congress includes the first tax break for biodiesel fuel. That's an incentive that could help Minnesota lead the nation in producing and using fuel made from soybeans, just as it pioneered ethanol production.

"This is the last piece of the puzzle that we needed to begin construction of a biodiesel refinery in Minnesota," said Gene Hugoson, Minnesota's agriculture commissioner.

The massive overhaul of U.S. energy policy drafted by Republicans and now being debated includes $23 billion in tax breaks, with more than $14 billion of it targeted for the gas, coal and oil industries.

But over the next decade, the tax provisions would include about $5.2 billion in tax credits and other benefits for developing renewable energy sources, including tax breaks for corn-based ethanol and a tax credit for using alternative fuels such as soybean-based biodiesel.

Oil in MinnesotaMinnesota Soybean Research & Promotion Council.The new federal tax incentive would help Minnesota processors and distributors jump-start the industry, said Kristin Weeks-Duncanson, chairwoman of the governor's Biodiesel Task Force.

The incentive amounts to 1 cent for every 1 percent of biodiesel produced. For example, a blend of 20 percent biodiesel and 80 percent petroleum would result in a tax incentive of 20 cents, she said.

"It makes it no more expensive to produce and ship biodiesel than petroleum diesel," Weeks-Duncanson said Monday.

Jenna Higgins, spokeswoman for the National Biodiesel Board, said petroleum distributors can purchase the biodiesel, blend it with petroleum diesel and sell it to the consumer at a reduced rate because the distributor is able to get a tax credit.

Not only would the measure double the use of ethanol and other renewable fuels, it would help Minnesotans meet a new mandate to blend soybeans or restaurant grease with petroleum in diesel.

In March 2002, Minnesota became the first state to pass a mandate requiring that all diesel fuel sold here be blended with at least 2 percent of biodiesel beginning on July 1, 2005.

Before the Minnesota law can be enacted, however, the state must have production capacity of 8 million gallons of biodiesel, according to the law.

The solution can be found in tiny Brewster, Minn., home to a soybean-crushing plant that ultimately will cost about $75 million. By Dec. 1, the state's first soybean-processing plant is to begin crushing 100,000 bushels of soybeans into cooking oil and soymeal for livestock feed each year.

The pending tax credit for biodiesel production is encouraging the 2,300 Midwest farmers who own the Brewster plant to move ahead with their next goal: installing equipment to produce biodiesel from soybeans, said Ron Obermoller, vice president of the board of director of Minnesota Soybean Processors, which owns the plant. He also is president of the Minnesota Corn Growers Association.

The Brewster refinery could produce 30 million gallons of biodiesel annually, which is believed to be the biggest operation planned in the nation, Obermoller said.

The tax credit, Weeks-Duncanson said, would make Minnesota's 2 percent mandate "a whole lot easier for all those involved in the industry to be ready" when the state biodiesel mandate takes effect in 2005.

The Republican-drafted energy measure is expected to help generate millions of additional dollars in Minnesota, which ranks third nationally in corn and soybean production.

"We in Minnesota have really led the nation in renewable fuel as it relates to ethanol and biodiesel," said Al Christopherson, president of the Minnesota Farm Bureau Federation.

Christopherson said Minnesota is well positioned to gear up production quickly because it has the infrastructure: 14 ethanol plants in place and a couple more planned, as well as the biodiesel refinery in the works.

While many farmers expected ethanol provisions, news of the biodiesel tax incentive was especially welcome, Hugoson said.

"From the soybean [farmers'] standpoint, there was nervousness over whether the tax credit was going to be in there," the commissioner said. "This is good news for them, and for all of us in agriculture."

While the new mandates are needed to build a stronger market for renewable fuels, Christopherson said, the work is far from over for farmers.

As ethanol production rises, there's a need to foster a market for the byproducts, such as distillers' dried grains that are used for livestock feed, he said. Rather than allow animal agriculture to continue slipping behind other states, Minnesota must encourage more investments and expansion in livestock operations, he said.

"We have to be concerned that all of this reaches into outstate Minnesota, and the rest of the farming economy," Christopherson said. "The livestock portion is a very valid part of that equation."



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