LINCOLN - The state's commitment to being a leader in the production of alternative fuels is being tested again, and cost is the multimillion dollar question.
State Sen. Cap Dierks of Ewing wants to encourage more biodiesel production in Nebraska with incentives that could cost millions of dollars annually. At the same time, the state may owe a total of more than $150 million the next several years to ethanol plants that have qualified for incentives under a different program.
Dierks has introduced a bill (LB626) that calls for paying biodiesel producers 30 cents for every gallon of biodiesel they sell. State fiscal analysts have estimated the program could cost roughly $20 million annually.
For the bill to have a chance of passing, that figure will have to be reduced, Dierks told a legislative committee Tuesday during a hearing on the measure.
Supporters say the state needs to push harder for biodiesel production at a time when alternatives to petroleum fuels are in demand.
Biodiesel is drawn from biological sources including vegetable oils.
“Nebraska has huge potential,” to be a leader in biodiesel production, said Robert Byrnes of Nebraska Renewable Energy Systems, a company that produces biodiesel. But currently there is just one commercial facility, and two are under construction, Byrnes said.
One being built is near Beatrice and expected to produce 50 million gallons of biodiesel annually. The Nebraska Energy Office estimates that about 60 million gallons of biodiesel will be produced in Nebraska next year, and about 75 million gallons the following year - most of that in Beatrice.
Nebraska is not a leader in biodiesel production, unlike ethanol. Only two other states produce more ethanol than Nebraska.
About 10 states have production-based incentives similar to the one proposed by Dierks, according to the National Biodiesel Board, and legislatures are flooded with bills aimed at biodiesel. According to the board, there are now 135 biodiesel-related bills in 35 states, not all of them for incentives.
For biodiesel incentives to pass muster with the Nebraska Legislature, there likely would have to be controls on costs - something that critics of ethanol production say the state's incentive program for that product lacked. The state has to pay more incentives than officials expected it would when the program began.
Sen. Ernie Chambers of Omaha, a member of the Legislature's Agriculture Committee, equated biodiesel incentives with “those begging, boondogglish” incentives for ethanol.
“They're not going to succeed,” in gathering private money, Chambers said of potential biodiesel plants, “so they're going to come back to the state.”