Ethanol: An investment in Nebraska's economy

By Todd Sneller

Unquestionably, the most important value-added product to the State’s economy is, and will continue to be, ethanol production.”

This conclusion is included in the executive summary of an economic analysis commissioned by the Nebraska Department of Agriculture in 2004. The positive impact of 24 ethanol plants operating in the nation’s second-largest ethanol-producing state is even more evident today. Nebraska’s successful ethanol development program can be attributed to several important factors, including the synergies between corn, cattle and ethanol production, transportation infrastructure, natural resources and competitive energy costs. Of equal importance are the public policy decisions made during the past two decades. Those policies helped lay the foundation for the ethanol industry in Nebraska today.

Nebraska lawmakers have a long history of supporting ethanol development in the state. Legislators first provided ethanol production incentives for Nebraska-produced ethanol in 1991. Following a decade of ethanol development and an investment of $170 million in ethanol production incentives, the Nebraska Legislature considered extension of the Ethanol Production Incentive Cash (EPIC) fund in 2000. In keeping with a history of support for the ethanol industry, the Nebraska Legislature enacted LB 536. LB 536 established one of the most attractive ethanol incentive programs in the U.S., especially when coupled with other business development incentives. This legislation provided performance-based incentives for ethanol plants that initiated production prior to the end of June 2004. The incentives continue for a period of up to eight years with annual limits on qualified plants. The incentive program concludes in 2012.

Economic development professionals, communities, utilities and the Nebraska Department of Economic Development compete with other states for business development opportunities. The performance-based ethanol incentive programs established by Nebraska legislators created an important recruitment tool. The program is among the most transparent and accountable incentive programs created. The results of this incentive program represent a return on investment that will have a beneficial impact on the Nebraska economy for decades. The incentives were an essential element in establishing new ethanol plants, yet only 6.5 percent of the installed ethanol capacity in Nebraska received EPIC incentives.

In 2009, Nebraska plants will be able to produce more than two billion gallons of ethanol, nearly 20 percent of national production. The plants represent an investment of more than $4 billion. Projected capital commitments will increase that investment in the years ahead. In turn, the strong presence of an ethanol industry in Nebraska has attracted allied companies that provide goods and services to the industry. One recent example is the construction of a $200 million facility in Blair by Novozymes, an international enzyme production company.

Ethanol plants are also a catalyst for economic activity that impacts other service sectors, including Nebraska engineering firms, financial institutions and law firms. Nebraska manufacturers use a variety of components produced in ethanol plants for food and feed products. Other Nebraska companies use ethanol co-products as substrates for value-added products that range from human health and hygiene products to pet foods and biofuels.

Nebraska cattle producers continue to benefit from the integration of distillers feeds into livestock feed rations that provide distinct advantages, including increased profit opportunities, progressive feeding practices and improved carcass quality. The distillers feeds displace corn use, thereby providing protein replacement and reduced impact on corn supply. Nebraska ethanol plants currently provide a significant volume of distillers feeds for export as well as domestic markets.

Nebraska’s ethanol plants are also employing best practices in reduced water and energy consumption. An emerging trend called “dry fractionation” will provide different feed and food components. Nebraska business recruiters should focus on these opportunities as economic development opportunities for current and next-generation biofuels plants.

Current ethanol plants may serve as incubators for cellulosic ethanol and related biofuel ventures that attempt to capture the benefits of producing low-carbon transportation fuels. Public policy is currently encouraging sustainable low-carbon fuel production at new and existing plants that integrate novel technologies. Building on the current ethanol base in Nebraska will attract additional capital to the state; create employment, including skilled trade jobs; stimulate educational and manufacturing opportunities and enhance value-added product lines for food, feed and fuel.

As the second-largest ethanol-producing state, Nebraska also has an opportunity to increase biofuels infrastructure improvements that will enhance ethanol value and consumer savings. In 2008 alone, Nebraska consumers saved more than $70 million due to the lower cost of ethanol fuels relative to gasoline. The displacement of imported gasoline with Nebraska-produced ethanol will continue to generate economic benefits each year as the economic and environmental impact of oil recovery and refining intensifies.

During the past year, Nebraskans have seen first-hand the impact of the ethanol industry on allied industry recruitment. Increased demand for ethanol-related seed hybrids, enzymes, manufactured components and technology savvy employees has stimulated a host of new capital investment in Nebraska facilities. Investments by domestic companies like Pioneer Seed and international companies like Novozymes are just two recent examples. These investments are enhanced by the creation of skilled jobs and the evolution of education, training and technology centers affiliated with these investments.

State policies or incentives that support these technological, agricultural and environmental trends will continue to produce an excellent rate of return for the state and those who choose to live and work in Nebraska.

Bookmark/Search this post with:

Delicious  •   Digg  •   StumbleUpon  •   Facebook  •   Yahoo