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Published April 17, 2009, 08:42 AM

Report suggests ending biofuel subsidies

ST. PAUL – Lawmakers should consider ending state subsidies for biofuel production, the legislative auditor’s concluded.

By: Scott Wente, INFORUM

ST. PAUL – Lawmakers should consider ending state subsidies for biofuel production, the legislative auditor’s concluded.

In a report issued this morning, Legislative Auditor James Noble’s office said payments to the producers of biofuels, including corn-based ethanol, may have little impact on biofuel production in Minnesota.

Ethanol subsidies, known as producer payments, were important in helping the ethanol industry get started in the 1990s.

“However, the program is not designed to maximize overall energy savings or reduce environmental impacts and may no longer have much impact on overall ethanol production,” the audit concluded.

Also, producer payments in recent years came as ethanol producers made big profits, auditors noted.

They suggested lawmakers take a good look at the producer payment program in light of the state budget deficit. An estimated $44 million in payments is scheduled to be spent in the next few years.

Rural lawmakers have blocked attempts to end or sharply curb the producer payments in recent years.

Auditors also were asked to explore whether biofuels, including corn-based ethanol and soy-based biodiesel produce more energy than the fossil fuel energy consumed in their production. They also looked at the environmental impacts of biofuels and to what extent biofuels can replace petroleum-based fuels for transportation.

The report concluded that certain environmental impacts of biofuels are unclear.

In addition, the report gave mixed marks to the emerging cellulosic industry. It said cellulosic ethanol - which is made from biomass such as wood, grasses and corn cobs – is still in its infancy and has its own environmental considerations.

A legislative committee will discuss the audit today.

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