Fueling the economy: Harper Angel bills would wean Kentucky from foreign oil

Business First of Louisville - February 9, 2007

by Brent Adams

Business First Staff Writer

Photo by Ron Bath
Diane Hare works on an electrical-supply cable for a Saturn vehicle at the Hitachi Cable Indiana plant in New Albany.
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In his recent State of the Union address, President Bush challenged the nation to decrease its dependence on foreign oil within 10 years by increasing production of renewable and alternative fuels, such as ethanol and biodiesel, to 35 billion gallons by 2017.

According to trade organization statistics, about 5 million gallons of ethanol and 200 million to 250 million gallons of biodiesel were produced in the United States in 2006.

Even before the announcement, Kentucky Sen. Denise Harper Angel, D-Louisville, was trying to convince her colleagues that Kentucky should be on the forefront of efforts to encourage biofuel use and production.

Harper Angel filed SB24, which would give ethanol producers a $1-per-gallon annual excise fuel tax credit. The credit would be capped at $1.5 million. Harper Angel also filed SB33, which would require the Kentucky Office of Energy Policy to establish a Biofuel Transportation Grant Program.

Under that program, businesses, nonprofit organizations, public school systems and local governments would be given grants to buy and install biofuel refueling facilities and to buy blended biodiesel or E85 ethanol-gasoline blend.

"Kentucky should step up," Harper Angel said. "We have a good opportunity to be on the leading edge. This is something that will benefit farmers and the economy of Kentucky."

Ethanol incentives similar to biodiesel

Harper Angel said the language in SB24 mirrors language in a similar bill passed for biodiesel by the Kentucky General Assembly in the 2005 regular session and enacted in 2006.

That legislation, which provides tax incentives for biodiesel producers, already has spurred some projects, including Owensboro Grain Co. LLC's current development of a biodiesel plant in Owensboro, Ky.

The plant, which will employ 10 to 15 people, is expected to be fully operational by mid-year. It is projected to produce about 50 million gallons of biodiesel annually, said Melissa Howell, executive director of the Kentucky Clean Fuels Coalition.

Owensboro Grain received $1.2 million -- including a $1 million forgivable loan -- from the Kentucky Agriculture Development Board and a $5 million low-interest loan from the Kentucky Agriculture Finance Corp.

Howell said large-scale projects such as the Owensboro Grain plant are helping to spur a biodiesel revolution in Kentucky. She said she has been privy to negotiations by undisclosed investors to bring production plants to Eastern and Central Kentucky.

"The entire picture of the biodiesel industry in Kentucky is going to change over the next six months," predicted Howell, whose agency works with businesses, government agencies and policymakers to encourage the use of alternative fuels.

Howell cited a new biodiesel distribution and storage facility at Marathon Oil Corp.'s Rubbertown fuel terminal as a factor that will change the biodiesel usage landscape.

The $500,000 biodiesel terminal, which opened this week, has the capacity to store up to 30,000 gallons of biodiesel.

The Kentucky Soybean Board, the Kentucky Transportation Cabinet and National Clean Cities Inc. provided grants in the amounts of $50,000, $149,000 and $36,000 respectively, Howell said.

Howell also cited Jefferson County Public Schools' recent move to operate its 1,056 school buses on a blend of 2 percent biodiesel and 98 percent regular fuel.

She said that in the next six weeks, more than one large private-sector vehicle fleet will announce plans to use biodiesel. Howell declined to identify the companies.

Although Kentucky is on the right track, additional grants and incentives, such as those proposed by Harper Angel, are needed to further encourage alternative fuel usage, Howell said.

"It's going to take more than President Bush saying it has to happen for it to actually happen," Howell said. "These incentives are going to be necessary for us to keep up with our neighbors like Illinois, Ohio and Indiana, where we're seeing incentives make a big difference."