You asked for information about state subsidies for biodiesel producers. Information in this report comes from the U. S. Department of Energy Alternative Fuels Data Center and the National Biodiesel Board.

SUMMARY

Biodiesel fuel is a replacement for diesel fuel that is made from virgin or used vegetable oils (e. g. , soybeans or rapeseed) or animal fat. It can be mixed with petroleum diesel for use as motor vehicle fuel.

Biodiesel is a renewable fuel that emits substantially lower amounts of most air pollutants than conventional diesel. Most motor vehicle engines can operate on biodiesel without any modification. On the other hand, biodiesel is more expensive, has higher emissions of nitrogen oxides, and can cause problems when used in older vehicles.

We briefly describe biodiesel production subsidies or incentives in Arkansas, Delaware, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Missouri, Mississippi, Montana, North Dakota, Oklahoma, South Dakota, and Washington.

ARKANSAS

Arkansas has an income tax credit available to biodiesel suppliers (wholesalers or retailers that sell in bulk) for up to 5% of the costs of the facilities and equipment used in the wholesale or retail distribution of biodiesel fuels. Additionally, the state’s Alternative Fuels Commission may provide grants for the production of biodiesel of up to $ 0. 10 per gallon, up to 5 million gallons per producer per year, for a period not to exceed five years (Arkansas Code 15-4-2803 and 15-4-2804).

Biodiesel Tax Refund

A biodiesel supplier is entitled to a tax refund of $ 0. 50 per gallon of biodiesel fuel that is used by the supplier to produce a biodiesel mixture that (1) contains not more than two percent (2%) biodiesel and (2) is for sale by the supplier or for use by the supplier in a trade or business. In order to qualify for the tax refund, a supplier must: (1) sign a financial incentive agreement with the Arkansas Department of Economic Development; (2) obtain state approval as a biodiesel producer with production capacity of at least one million gallons of biodiesel in a 12-month period; and (3) certify that it will produce biodiesel fuel meeting appropriate federal and state standards. This incentive expires June 30, 2007 (Arkansas Code 15-4-2803, as amended by House Bill 2657, 2005).

DELAWARE

The Delaware Technology Demonstration Program provides grants of 25% of the cost of a project, including a biodiesel manufacturing facility, that demonstrates the market potential of renewable energy technology in Delaware. No project may receive more than $ 300,000 (Delaware Code Title 29, Chapter 80, Subchapter II, as amended by Delaware Senate Bill 44).

ILLINOIS

When awarding contracts that require the procurement of vehicles, state agencies must give preference to an otherwise qualified bidder who will fulfill the contract through the use of vehicles powered by biodiesel fuels produced from Illinois soybeans (30 ILCS 500/45-60).

The Illinois Renewable Fuels Development Program directs the state Commerce Department to administer grants to those building, modifying, altering, or retrofitting renewable fuels plant located in Illinois. New plants must be able to produce at least 30 million gallons of renewable fuel a year and preference is given to plants using Illinois agricultural products (20 ILCS 689).

INDIANA

Biodiesel Production Tax Credit

An Indiana biodiesel production facility is entitled to a credit of $ 1 per gallon of biodiesel used to produce blended biodiesel. This credit is generally capped at $ 3 million per producer, but may be increased to $ 5 million (Indiana Code 6-3. 1-27-8).

Biodiesel Blending Tax Credit

An Indiana producer that makes blended biodiesel is entitled to a credit of $ 0. 02 per gallon of blended biodiesel. Both the biodiesel blend and the biodiesel used in the blend must be produced in-state (Indiana Code 6-3. 1-27-9).

IOWA

Iowa’s Alternate Energy Revolving Loan Program offers 20-year zero-percent interest loans for up to half the cost of biomass or alternative fuel production projects located in the state, up to a maximum of $ 250,000 per facility. Iowa’s Renewable Fuel Fund’s Value-Added Agricultural Products and Processes Financial Assistance Program offers a combination of forgivable and traditional low-interest loans for projects involving biomass and alternative fuel technologies. Approximately 20% of the money is in the form of a forgivable loan and the remainder is loaned at low-interest.

KENTUCKY

An income tax credit of $ 1. 00 per gallon is available for biodiesel producers and blenders. The total amount of credit for all biodiesel producers and blenders may not exceed $ 1,500,000 a year (Kentucky Revised Statutes Chapter 141. 137 and 141. 138, as amended by Kentucky House Bill 272, 2005).

LOUISIANA

From July 1, 2006 through June 30, 2012, certain property and equipment used in the manufacture, production, or extraction of unblended biodiesel, as well as unblended biodiesel used as fuel by a registered manufacturer, will be exempt from state sales and use taxes (Louisiana Revised Statutes 47: 301).

MAINE

Biodiesel producers earn a state income tax credit of $ 0. 05 per gallon for the production of biofuels used in motor vehicles or as a liquid fuel substitute (Maine Title 36 § 5219-x).

MARYLAND

Under the Renewable Fuels Promotion Act of 2005, ethanol and biodiesel producers may apply to the Renewable Fuels Incentive Board for ethanol and biodiesel production credits. Biodiesel production credits are: (1) $ 0. 20 per gallon of biodiesel produced from soybean oil (the soybean oil must be produced in a facility or the expanded capacity of a facility that began operating after December 31, 2004), and (2) $ 0. 05 per gallon for biodiesel produced from other feedstocks (including soybean oil produced in a facility that began operating on or before December 31, 2004).

The board may not certify biodiesel production credits for more than five million gallons per calendar year, of which at least two million gallons must be from soybean oil produced in a facility that began operating after December 31, 2004. The program ends in 2017 (Maryland Statutes, Agriculture Code 10-1501 through 10-1507).

MISSOURI

Biodiesel Fuel Use Incentive

Through the 2011-12 school year, school districts are allowed to establish contracts with nonprofit, farmer-owned new generation cooperatives to purchase biodiesel blends of 20% biodiesel or higher for use as bus fuel. School districts that contract with eligible cooperatives receive an additional state transportation aid payment to offset the incremental cost of buying the biodiesel (Missouri Revised Statutes 414. 433).

Biodiesel Production Incentive

The Missouri Qualified Biodiesel Producer Incentive Fund provides a monthly grant to qualified state biodiesel producers, provided that 51% of the feedstock originates in Missouri and 100% originates in the U. S. The grant is $ 0. 30 per gallon for each of the first 15 million gallons and $ 0. 10 per gallon for each of the next 15 million gallons produced in a fiscal year. Qualified producers are eligible for 60 months (Missouri Revised Statutes 142. 031).

MISSISSIPPI

Biofuels Production Incentive

The state may make direct payments to new biodiesel producers for biodiesel fuel produced on or before June 30, 2005, or for 10 years following the start of production, whichever is later. Producers receive $ 0. 20 per gallon annually, up to 30 million gallons per year per producer, for a period of up to 10 years. No payments will be made for production that occurs after June 30, 2015 (Mississippi Code 69-51-5).

MONTANA

Biodiesel Production Facility Tax Credit

A tax credit is available to businesses and individuals for up to 15% of the cost of building and equipping a biodiesel production facility. The facility must be operating before January 1, 2010. Biodiesel producers are eligible for a $ 0. 10 per gallon tax incentive for the first three years of production for each gallon of increased production over the previous year. A tax credit also is available for property used to crush oilseed crops for purposes of biodiesel production (Montana Code Ann. Title 15, chapters 32 and 70, as amended by House Bill 756, 2005).

NORTH DAKOTA

Biodiesel Equipment Tax Credit

North Dakota offers a five-year corporate income tax credit for equipment that enables a facility to sell diesel fuel containing at least 2% biodiesel by volume. The tax credit, up to 10% per year for up to five years, is available to biodiesel sellers who adapt or add equipment to a

facility after December 31, 2004. The credit is limited to a total of $ 50,000 in credits for all taxable years (North Dakota Senate Bill 2217, 2005).

Biodiesel Loan Program

A $ 1. 2 million fund was established to buy down the interest rate on loans to biodiesel production facilities for the purchase of real property and equipment, expansion of facilities, working capital, and inventory (Senate Bill 2217, 2005).

Income Tax Credit

A licensed fuel supplier who blends biodiesel into fuel which is then comprised of at least 5% biodiesel is entitled to an income tax credit of $ 0. 05 per gallon (Senate Bill 2217, 2005).

OKLAHOMA

Oklahoma provides a tax credit of $ 0. 20 per gallon for biodiesel production facilities for tax years 2005 through 2011. The credit is for up to 60 months, ending no later than December 31, 2011. Facilities wholly or partially on-line before December 31, 2007 can earn credits. Beginning January 1, 2012, a biodiesel facility can receive a credit of $ 0. 075 per new gallon of biodiesel, for up to 36 consecutive months (68 O. S. § 2357. 67).

SOUTH DAKOTA

A contractor can receive a tax refund for excise taxes and sales or use taxes when he builds a new agricultural processing facility, including an expansion of an existing soybean processing facility if the expansion will be used to produce biodiesel. The project cost must exceed $ 4. 5 million (South Dakota Statutes 10-45B as amended by Senate Bill 214, 2005).

WASHINGTON

Until July 1, 2009, investments in buildings, equipment, and labor for the purpose of manufacturing biodiesel, biodiesel feedstock, or alcohol fuel are eligible for deferred state and local sales and use taxes. Qualifying buildings, equipment and land used in the manufacturing of alcohol fuel, biodiesel, or biodiesel feedstocks are also exempt from state and local property and leasehold taxes for a period of six years. Additionally, a reduced business and occupation tax rate applies to

certain persons engaged in manufacturing alcohol fuel, biodiesel fuel, or biodiesel feedstock (Revised Code of Washington (RCW), 82. 04. 260, 82. 12. 955, 82. 29A. 135, and 84. 36. 635).

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