What’s in a Name? Producer Incentives
The Senate recently passed Special Session SB 22, which provides incentives for the state's biodiesel producers, and the State House of Representatives will soon be considering similar legislation. But ERG sees much confusion among policymakers in terms of what these incentives are, and what other states are doing.

ERG has researched all 50 states to look at exactly what these states are really doing to provide incentives for biodiesel and ethanol production…

ERG has researched all 50 states to look at exactly what these states are really doing to provide incentives for biodiesel and ethanol production. The net answer? Twenty-nine states have SOME incentive programs, but only 13 have producer incentive payments. No state east of the Rocky Mountains has a direct payment incentive of more than 30 cents per gallon, despite public belief that some are providing $1.00 or more.

Today, 13 states offer biodiesel and ethanol production incentive payment programs, ranging from Pennsylvania's $.05/gallon to Wyoming's $.40/gallon. Another ten states offer tax credits for biofuels production. Credits are used to balance income and mitigate state tax payments, rather than being dollars put "in pocket."

Most often cited is Iowa's program, which has been called a $1.50 per gallon producer incentive. But the reality is that Iowa provides a 3¢ per gallon tax credit for B2 for retailers, not producers. Iowa has funded its biofuels incentive programs to the tune of $35 million annually through 2020. Indiana and Kentucky have $1.00/gallon production tax credits.

Among neighboring states, only Maryland has a direct incentive payment. Maryland's incentive program pays biodiesel producers $0.10-$0.20 per gallon, depending on the source of feedstock. Soybean oil biodiesel gets a $0.20 credit, while other feedstocks (greases, renderings, waste oils, etc.) get $0.10 per gallon. Similarly, ethanol producers in Maryland using small grains receive $.20 per gallon while producers of corn ethanol receive $.10/gallon.

Complicating things more is a lack of understanding of the industry. The Senate's bill provides 75 cents per gallon for production, but only allows payments up to $2 million per company. As a result, some PA producers would get that full 75¢, but others, because they produce more biodiesel, could receive as little as four cents per gallon, creating a gross distortion in the marketplace in favor of less efficient producers.

Many policymakers, understandably because these terms and programs have been used interchangeably, are being asked to compare apples to oranges on this subject. ERG will continue to work with the legislature and administration to ensure that public policy is based on facts, not suppositions or worse case scenarios.

Click here for a full listing of production incentives from each state. (PDF)

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