Closing the Books on EPIC

Nebraska producers receive final incentive payments
By Kris Bevill | April 11, 2012

Sept. 30 marks the official sunset of Nebraska’s long-running Ethanol Production Incentive Credit fund, but ethanol producers in this second-largest ethanol producing state have already earned all of the credits available for the year, essentially ending the program months in advance.

The EPIC fund housed a series of three ethanol incentive programs, the last of which has been paying qualified producers 18 cents per gallon of ethanol produced, capped at 22.5 million gallons per year per producer, since 2003, delivering nearly $180 million to the 10 plants that came online between 2003 and 2008. Funds acquired through grain checkoffs provided half of the money used for the ethanol incentive program; the other half came from the state’s general fund.

The goal of the EPIC fund was to encourage companies to establish ethanol facilities in the state. Steve Sorum, ethanol project manager at the Nebraska Ethanol Board, says the program achieved that goal. “It was very successful, partly because it was so timely,” he says. “It was in effect in the building boom of the mid-2000s, so there were companies that were looking to build plants, and Nebraska provided an incentive that made it attractive.” Payments provided through the EPIC fund allowed those producers to amortize their projects during a time when acquiring financing was difficult otherwise, he says. While many believe the corn ethanol industry has matured to the point of no longer needing financial incentives, Sorum says there is no doubt that the end of EPIC will affect the cash flow of Nebraska’s producers, noting that producers received anywhere from $14 million to $22.5 million over the course of the program.

There are no plans currently to create a new corn ethanol incentive program in Nebraska, but Sorum says there has been discussion by the industry and legislators to form a program focused on cellulosic biofuels production. “Because Nebraska has a well-established ethanol structure, it would be perfect for the new era of plants,” he says.

Other Midwest states appear to have similar intentions. Last year, Minnesota also ended its ethanol producer incentive program, after providing incentives to corn ethanol producers for nearly 20 years, but wasn’t ruling out the possibility of forming a new program for cellulosic producers. Sorum admits that because state revenues have been down in recent years, locating funding for new programs will be difficult, but because the corn ethanol industry has been such a success in states like Nebraska, legislators may find a way to make it work. “Ethanol has become an $8 billion industry in Nebraska over the past 30 years and more than half of it happened in the last 10 years,” he says. “It’s been a great addition to the economy in this state and I think it sets the tone for possible future programs.”  —Kris Bevill