State Bio-Legislation: Summary and Rundown

The passing of the federal JOBS bill remains an encompassing boon for the biodiesel industry, but state incentives ultimately provide strong influence over where biodiesel projects may geographically take root.
By Ron Kotrba | April 01, 2005
Minnesota's trailblazing B2 renewable fuels standard (RFS) is a tough act to follow, but that certainly hasn't stopped legislators in other states from moving ahead with a variety of incentives aimed at encouraging the production and/or use of biodiesel. Below, Biodiesel Magazine reviews the more prominent, current biodiesel incentives in various states' statutes, in addition to looking at key proposals of the 2005 state legislative season.

Key proposals in the West and South Central
In Washington, three biodiesel bills-House Bills (HB) 1645 through 1647-have overcome their first legislative hurdle. HB 1645 seeks to establish a 28-cent-per-gallon (cpg) special fuels tax exemption on the biodiesel portion of biodiesel blends higher than B20 for school districts and other specified public domains. HB1646 proposes additional tax incentives for production. HB1647 intends to provide tax incentives for the installation of biodiesel storage and dispensing facilities. All three bills, although amended, have made it out of the first House committee review.

The Oregon Environmental Council has been instrumental in launching a package of bills to the forefront of Oregon lawmakers' agendas. This package includes HB3032 aimed at offering a 5-cpg tax credit for biodiesel projects. Other packaged bills provide additional crop and use incentives. HB3033 would establish an RFS requiring B2 in all retail diesel sales by mid-2006, increasing to B5 by 2010. At press time, the bills had been introduced, read and referred to committees for further action.

Montana Rep. Gail Gutsche put forth HB756, which would offer a tax credit up to $500,000 or 25 percent of property investments to oilseed crushing facilities for biodiesel production. The bill would also provide a 10-cpg tax credit for producers. A tax committee heard the bill March 22.

The Oklahoma state House passed HB1398, which would offer qualified biodiesel producers a 20-cpg tax credit. At press time, the Senate finance committee had the bill under review.

Big initiatives in the Midwest
After killing some major ethanol legislation this session, the North Dakota House amended Senate Bill (SB) 2217-previously passed by the Senate-to establish a two-year state soybean checkoff program to help fund the construction of a biodiesel plant in the state. SB2217's sponsor, Sen. Jerry Klein, said an investor from New York City was "shopping around the country" for the best place to initiate a biodiesel project, and the amendment was initiated to assist such a venture. Subsequently, plans were announced March 22 to construct a $50 million, 32-mmgy canola-fed biodiesel plant in Minot, N.D., which would be the largest biodiesel production facility in North America (see Industry News on page 17). SB2217 also looks to establish tax credits for suppliers and tax exemptions for retailers. The House-amended bill awaits action from an appropriations committee, after which the Senate would need to vote again to approve the amendments.

South Dakota had an active legislative season with regard to biodiesel. The House passed HB1237, which sought to give biodiesel a 2-cpg excise tax reduction. The Senate later killed the bill, 19-14, according to state Rep. David Sigdestad. "There were a lot of [skeptical] numbers out there," Sigdestad said, which were over-inflating the loss of revenue that would occur as a result of the measure passing.

SB214, passed and signed by the governor, will allow for new or existing agricultural processing facilities over 4.5 mmgy to get a tax refund on contractor's excise taxes paid, so long as the new facility or expansion is constructed for the production of biodiesel. Even though the bill was severely "hoghoused," or changed, Sigdestad said, "With the price of energy, we need to get [biodiesel production] going here."

The Iowa legislature is reviewing House File (HF) 623, which would establish a cost-sharing program to establish off-site biodiesel distribution terminals. The bill proposes to share 50 percent of the costs associated with building these terminals. The program's total financial limit is $325,000 per year for three years, beginning in July 2005. The bill has passed through House and Senate committees, according to Bernie Punt of the Iowa Renewable Fuels Association, and awaits full House and Senate votes. "This has good bipartisan support, and I'd be surprised if it doesn't make it through," Punt said.

Missouri legislators already have a solid production incentive on the books, but funding has not yet been appropriated. If passed, SB147 will appropriate money to the existing grant program, wherein producers are to be paid a 30-cpg producer payment for the first 15 mmgy, followed by an additional 10-cpg payment (added in SB147) for the next 15 mmgy. The bill would allow the incentive to be paid from the general fund, according to Robin Perso of the Missouri Department of Agriculture. The Senate passed the bill, and at press time SB147 was under its second House reading. Perso said the bill's passing looks likely, and the governor is also expected to sign the bill.

In a 48-0 vote, Indiana senators passed an expansion of tax credits for already enacted biodiesel production incentives to the House. SB378 would increase the program cap on tax credits to biodiesel, in addition to offering tax breaks to blenders, distributors and retailers.
The bill passed through the first House committee just before press time.

Michigan is considering HB4235, a statewide B2 mandate modeled after Minnesota's cutting-edge RFS, said Dulcey Simpkins of the Michigan Biomass Energy Program. The bill was originally put forth last year, calling for a B20 mandate with 50 percent of the biodiesel coming from in-state production, "but this was too traumatic for the system," Simpkins said. The bill was since redrafted to a B2 standard, and HB4235 was resubmitted this legislative season. "With the JOBS bill and federal recognition, the bill is easier to support," Simpkins said. "Our prospects are better this year." At press time, the House ag committee still had the bill under review.

Biodiesel bills pending in the East
Ohio state Rep. Steve Reinhard is working with Ohio's Clean Fuels Coalition, the Ohio Soybean Council and others to draft legislation providing grant and tax incentives for producers, said Mindy Bowen, Reinhard's legislative aide. Bowen said that Reinhard is a farmer, and he is working closely with agriculture groups in drafting legislation that would offer production and use incentives to promote the biodiesel industry in Ohio. The draft was to be complete by the end of March, Bowen said.
t least two Northeastern states, Maine and New Hampshire, are considering unique bioheat RFS requirements. In Maine, the director of energy independence in the governor's office, Beth Nagusky, said legislators in her state proposed Legislative Draft (LD) 197, an RFS bill requiring state buildings to use, at minimum, B20 bioheat. The bill would also require state diesel vehicles to burn at least B20. Nagusky said although not yet required, last year the state ran six buildings on B20 with no problems. This year, the state heated 20 buildings with B10, she said, and some of the furnaces experienced filter clogging. Despite a couple of operational hurdles and the higher cost for biodiesel, Nagusky said Maine is "committed to biodiesel as [the state's] resources allow." She also said LD197's passing doesn't look promising.

New Hampshire legislators put forth HB0152, another bioheat RFS, which would require all home-heating oil sold in the state to contain 1 percent biodiesel (B1), said Kym Hall of the New Hampshire Department of Environmental Services. Hall said the bill had very modest support in mid-March, possibly due to its wording. Legislators are looking into redrafting the measure. HB0152 remained under committee review at press time.

Ron Kotrba is a Biodiesel Magazine staff writer. Reach him by e-mail at [email protected] or by phone at (701) 746-8385.
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