States vying for ethanol plants with incentives

Missouri has been a major player in the nation's ethanol boom. The state has $1.5 billion in proposed ethanol developments, three plants are up and running and 18 more are in various stages of proposal or development.

The state currently has an annual capacity of 115 million gallons of ethanol.

But Missouri is almost certain to have competition for ethanol investment dollars in the future. Illinois, for example, has four ethanol plants. The state also has 35 to 40 proposed plants on the horizon, according to the Illinois Corn Growers Association.

What may affect where those investment dollars go are incentives offered to producers and consumers.

One of the principal incentives in Missouri is the state Ethanol Producer Incentive Fund, which provides ethanol producers $0.20 per gallon for the first 12.5 million gallons and $0.05 for the second 12.5 million gallons. An ethanol plant could get up to $3.125 million annually from that fund.

Another market push is the Missouri Renewable Fuel Standard, which requires all gasoline sold in the state contain 10 percent ethanol beginning in 2008. The law stipulates distributors must be able to purchase the blend at the same or lower price than regular fuel.

Gov. Matt Blunt recently announced a move that will redirect some incentive money. He barred the state from giving discretionary tax breaks to any ethanol plants that are not primarily farmer-owned. The move is designed to stem the tide of corporate ownership groups capitalizing on what Blunt and others believe should be a farmer-driven revolution.

"Tax credits are only one piece of the package," said Blunt spokeswoman Jessica Robinson. "What we've said is that we want tax credits to first benefit Missouri farmers and families before they go to outside groups."

But others wonder whether the move will put Missouri at a disadvantage when competing against other Midwestern states for investment dollars.

"I think it could scare away out-of-state capital," said Mitch Robinson, executive director for the Cape Girardeau Area Magnet. "If you've made the playing field two different levels for different groups, then you've changed the game." The credits can be worth an average of $500,000 per year for five years to plant owners.

If Missouri is becoming pickier about investors, Illinois appears to be throwing the doors wide open.

This month Gov. Rod Blagojevich announced a five-part $1.2 billion plan that, if successful, would replace half of the state's gasoline consumption with state-grown alternatives by 2017.

Of the money, $225 million would be used for alternative fuel plants, including as many as 20 traditional ethanol plants and four plants to make ethanol from plant waste like corn husks. In 2003, Illinois passed legislation that eliminated fuel sales tax on E85, a gasoline blend that is made up of 85 percent ethanol. Blagojevich's proposal calls for every gas station in the state to offer E85 by 2017. Illinois also gives preferential bidding for state jobs to contractors who will use ethanol made from Illinois corn to power their vehicles or machinery.

Last week, Illinois announced $25 million in Opportunity Returns grants for five new alternative fuel facilities. One of these grants will go toward an ethanol plant in Sauget, Ill., just across the river from St. Louis.

tgreaney@semissourian.com

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