Report details impact of biofuels on state economy

JEFFERSON CITY, Mo. -- Biofuels could generate an additional $542 million in economic activity in Missouri each year through 2013, according to a state report released Tuesday.

The report, produced by the Department of Economic Development, projects that state subsidies and tax breaks for the ethanol and biodiesel industries would result in a $14.8 million annual loss in state revenue but a net gain in Missourians' personal income of $492 million annually.

Mike Mills, the assistant director of Economic Development, said that if the projections are extended beyond 2013, the state's investment in biofuels increases state revenue. That's because state incentives are being used to build a baseline of biofuels plants. As more plants go online, the state's investments start coming back through taxes and economic development.

Gov. Matt Blunt said the findings prove that state incentives for ethanol and biodiesel are worthwhile.

"In the same way that Missouri's family farmers rose to a great challenge and fed the world in the last century, this century's family farmers will answer another noble calling and fuel America," he said.

Blunt supported a mandate passed last year that requires ethanol to be blended into gasoline whenever it is cheaper than regular gasoline. His budget proposes spending $6.4 million next year on state incentives for ethanol and biodiesel and spending an additional $5.1 million this year to make back payments for ethanol incentives.

Ethanol is a grain alcohol made by turning plant starch into sugar, fermenting it and adding a small amount of natural gasoline to make a mixture that can be used as fuel in most engines when blended, often in a 10 percent mixture with regular gas. In Missouri, it typically is made from corn.

Biodiesel is made by combining soybean oil or animal fat with an alcohol and blending that with standard diesel fuel, often in a 20 percent mixture called B20.

The Economic Development Department's study was based on 21 planned or existing ethanol and biodiesel plants in Missouri. The towns of Craig, Laddonia, Macon and Malta Bend all currently have ethanol plants. Bethel, Bunceton and Mexico have biodiesel plants. But a slew of new biofuels plants have been proposed from Rock Port, about 60 miles south of Omaha, Neb., to Sikeston in Southeast Missouri.

National demand for biofuels has been on the rise with states and the federal government approving incentives and mandates.

Federal clean air requirements have people seeking cleaner-burning additives, while MTBE -- a main competitor for ethanol -- has been phased out because it dissolves in water rather than separating like oil, contaminating water supplies faster than other fuels.

On top of that, there is a mix of state and federal subsidies for ethanol and biodiesel refineries and state tax credits for farmers who supply the agricultural products that are turned into fuel.

The biofuels energy boon has rapidly increased demand for corn and soybeans, which has been good for crop farmers but raised the prices for animal feed.

Sen. Dan Clemens said the higher cost has been a problem for livestock farmers but should become less of a factor. Clemens, R-Marshfield, said delays in producing a byproduct of ethanol refining that can be mixed into animal feed have been a main culprit for the higher feed prices.

Another factor, corn prices that have jumped from about $2 per bushel to more than $4 per bushel, will be sorted out by the market, biofuels supporters said.

Fred Ferrell, the director of the Department of Agriculture, said he and other corn farmers are trying to take advantage of the higher prices and planting more corn, which will eventually lower the price.

"If we keep corn up around $4, I can assure you we'll get it down to $2.35 within a year," Ferrell said.