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Incentives pondered to help Minnesota tap billion dollar biofuels market

Larry Novakoske, chief financial officer at Central MN Ethanol Co-op, testifies in support of a bill sponsored by Rep. Rod Hamilton, right, to establish advanced biofuel, renewable chemical and biomass production incentive programs. Photo by Andrew VonBank.

With an emerging market that could grow to hundreds of billions of dollars in the coming years, legislation was introduced in the House Agriculture Policy Committee Wednesday that backers believe could position Minnesota as a leading player while providing the state’s farmers with important new markets.

HF536, which was approved and now moves to the House Agriculture Finance Committee, would create three new bioenergy grant programs to be run by the Department of Agriculture. They would offer incentives to producers of advanced biofuels, renewable chemicals and biomass thermal energy.

The bill, sponsored by Rep. Rod Hamilton (R-Mountain Lake), would pay new and existing companies after reaching target production levels in each of these sectors. At least 80 percent of the raw materials used by producers would have to come from Minnesota in order for them to qualify.

“The worldwide advanced biofuels market will be over $185 billion by 2021, and we want to be leaders right here in Minnesota,” Hamilton said.

Brigid Tuck, University of Minnesota Extension senior impact analyst, presented a report that found $837 million in economic activity would occur in the state and 3,190 jobs would be created if 14 biobased industrial facilities began operating in Minnesota. Tuck said seven facilities are currently under consideration and she gathered data on them that was then used to reach those conclusions.  

Advanced biofuels such as cellulosic ethanol or biodiesel can be made from non-food material, including corn stalks, wood waste or the perennial crop alfalfa. Renewable chemicals are produced from these same sources and are used to make plastics, household chemicals, paint and fabrics.

Hamilton said increased production of biofuels and renewable chemicals would lessen the existing use of fossil fuels and be a huge economic boon to the state. He also said he would introduce another bill that would provide additional funding on top of the $5 million appropriation HF536 would make from the General Fund during the upcoming biennium.

“We have to start somewhere, otherwise we’ll stifle this industry,” Hamilton said. “We’ll stifle the ability to get out ahead of this.”

Water-quality issues raised

Although there seemed to be wide support among committee members for increased production of bio-based fuels, chemicals and energy — as well as the incentive program and the goals of the bill — questions were raised about which feedstocks should be used to make those products .

Hamilton and supporters such as the Minnesota Farm Bureau and Minnesota Corn Growers Association favor the use of corn, with some incentives for perennial crops.  But two committee members voiced concerns about the impact using corn would have on water quality. They worry that if corn stover — the stalks, leaves and other residue left behind after harvest — is then collected and hauled away to use for biobased products, farm fields without crop cover will lead to increased erosion and runoff.

Rep. David Bly (DFL-Northfield) said new practices as the result of biotechnology “can sometimes do more harm than good” and that even though they may lead to producing new food products, the environmental degradation they cause “is concerning.”

Bly voiced support for more use of perennial crops in the production process and was joined by Rep. Clark Johnson (DFL-North Mankato) who had drafted an amendment that said 50 percent of the incentive payments would need to be for biomass products derived from perennial crops.

However, Johnson did not introduce the amendment, instead asking that he be included in the conversations to continue refining the bill as it moves forward.

The companion, SF517, is sponsored by Sen. Tom Saxhaug (DFL-Grand Rapids) and awaits action by the Senate Jobs, Agriculture and Rural Development Committee.

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