Governor bars tax breaks to corporate ethanol plants

~ Missouri now has about $1.5 billion in proposed ethanol developments.

SEDALIA, Mo. -- Gov. Matt Blunt barred the state from giving discretionary tax breaks to corporate-owned ethanol and biodiesel plants Thursday, reserving the incentives for facilities owned primarily by farmers.

The move comes just as the state's renewable fuels industry is starting to boom.

The state's fourth ethanol plant is expected to open this fall in Laddonia, and the market for the corn-based fuel got a big boost when Blunt signed a law last month requiring most Missouri gasoline to contain a 10 percent ethanol blend by 2008.

Missouri now has about $1.5 billion in proposed ethanol developments, representing 18 potential projects -- most of which have come about in the past three months and roughly two-thirds of which are being pursued by corporations as opposed to majority farmer-owned groups, said Mike Mills, deputy director of the Department of Economic Development.

"I want as much of it as possible to be owned by Missouri farmers, rather than large corporations located outside the state of Missouri," Blunt said in an interview at the Missouri State Fair.

The governor said the prohibition on discretionary tax incentives for corporate renewable fuel plants will take effect immediately. He announced it to the applause of the 925 people attending the fair's annual ham breakfast.

But he said later in the interview: "There are going to be a lot of disappointed folks -- we do have a number of requests out there for those discretionary tax credits."

Missouri already restricts its Agriculture Department subsidies to ethanol and biodiesel plants owned by a majority of active farmers. But some renewable fuel plants also can qualify for more general business tax breaks overseen by the Department of Economic Development, most notably through the enhanced enterprise zone program.

The enterprise zone tax breaks already have been awarded to a biodiesel plant under construction in Mexico and are being sought in three other renewable fuel plant proposals pending before the department, Mills said. All of those are owned by a majority of farmers.

But Mills said the department also has had conversations about enterprise zone tax breaks with several corporate-led entities looking at building ethanol or biodiesel plants in Missouri. He did not name the companies.

"The last three months have been unbelievable in the amount of inquiries we've gotten about ethanol and biodiesel (incentives)," Mills said, "and that's a reflection of the market our farmers have helped produce."

But those corporations now will be barred from participating in the enterprise zone program, which provides companies an annual tax credit of up to one-half percent of their investment for five years and/or a tax credit of up to 2 percent of their new payroll, Mills said.

It's possible that corporate ethanol or biodiesel plants still could receive other tax breaks to which businesses automatically are entitled if they meet certain criteria.

Mills said the explosion of interest in ethanol plants has raised concerns about whether corn producers can meet the demand of a saturated ethanol market.

But corn farmers are firmly behind the push to develop ethanol plants.

"It's the best thing we've got going out in rural America," said Gary Marshall, the chief executive officer of the Missouri Corn Growers' Association.

The new policy would not appear to exclude tax breaks from going to a proposed ethanol plant in which the governor's brother is an investor -- though it is not clear if the plant is seeking any discretionary tax breaks.

Show Me Ethanol LLC wants to build an $80 million ethanol plant in Carroll County. It is being structured to be owned by a majority of farmers, though one of the investors is a non-farming company called Central Missouri Biofuels LLC, which the governor's brother Andy Blunt helped found.