ST. PAUL, MN --- A new report about biofuels, released by the Office of the Legislative Auditor for the Minnesota Legislature, recommends that the state eliminate the producer payment program for corn-based ethanol. Instead, the report advises, Minnesota needs to redirect those funds to other efforts designed to reduce fossil fuel use and greenhouse gas emissions, including programs to develop cellulosic ethanol.

The auditor's recommendations are at odds with those from the Minnesota Department of Agriculture, which favors keeping the producer payment program because "margins have been squeezed by periods of record high corn prices and low ethanol prices," the MDA said. "It is hoped that 10 years of payments will allow plants to retire debt, increase efficiency and develop new products and markets so they can survive the competition and price fluctuations in agricultural and petroleum markets."

Though the legislative auditor's report acknowledged that corn-based ethanol and soy biodiesel help reduce consumption of petroleum and other fossil fuels, the report concluded that "their overall ability to reduce dependence on fossil fuels is constrained by land resources and other considerations."

On the other hand, the report said, cellulosic ethanol "appears capable of greater energy savings and better environmental impacts than corn-based ethanol, but it is just beginning to be produced at pilot and demonstration facilities."

In addition, the report said that algae-based biodiesel "is believed to have promise, but it is still in the research and development stage."

The auditor's report recommends that the Environmental Quality Board and its member agencies examine what land could be used to grow biomass for cellulosic ethanol production and explore how the biomass could be grown and harvested with minimal environmental impact. The report also advises that the Department of Employment and Economic Development not use the JOBZ program for biofuel plants unless they need subsidies and offer significant energy and environmental benefits.