The Texas legislature rescinded funding for the state's biofuels incentive program, effective Aug. 31. The incentive program, administered by the Texas Department of Agriculture (TDA), provided quarterly payments to eligible biodiesel producers for the first 18 MMgy produced by each plant during the first 10 years of operation.

Under the program, eligible producers paid the state 3.2 cents per gallon of biodiesel produced. In return, they received 20 cents per gallon. Funding for the incentive payments was previously financed through the state's appropriations bill. The TDA asked for $85 million to fund the program for another two years, but the state legislature decided not to include financing for the program in this session's appropriations bill. Although some producers say the legislature bowed to the erroneous food-versus-fuel issue, Brian Black, a spokesman for the TDA, said the decision was based on the expense of the program. "It seems like it just came down to dollars and cents," Black said. "Other programs took priority."

The program was initially instated to spur the development of biofuels projects in the state to make Texas more competitive with other states that are actively pursuing renewable fuels. Since May 2006, the TDA has made quarterly payments to biodiesel producers totaling about $9.4 million. At this time, Texas is the second-largest biodiesel-producing state in the country. However, that rank may be threatened by the funding cut.

Texas-based ethanol producer White Energy Holding Company LLC, which is developing corn-oil-extraction technology and is in the process of acquiring biodiesel production technology, was considering biodiesel projects in its home state. "We'll reconsider, not about getting into biodiesel but actually where we'll put the facilities," said Kevin Kuykendall, CEO and president of the company. "It doesn't make a lot of sense for us to put more capital into a state that's not willing to support and back what it already committed to."

He continued, "The legislature and the governor not supporting the funding, and then coming back and saying they didn't want to choose between food and fuel-they clearly made a choice."