LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
April 24, 2001
TO: Honorable David Swinford, Chair, House Committee on
Agriculture & Livestock
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB788 by Swinford (Relating to value-added processing of
agricultural goods into fuel ethanol and biodiesel and
the fuel ethanol and biodiesel incentive program.),
Committee Report 1st House, Substituted
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB788, Committee Report 1st House, Substituted: negative impact *
* of $(10,000,000) through the biennium ending August 31, 2003. *
* *
* The bill would make no appropriation but could provide the legal *
* basis for an appropriation of funds to implement the provisions of *
* the bill. *
**************************************************************************
General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $0 *
* 2003 (10,000,000) *
* 2004 (16,000,000) *
* 2005 (22,000,000) *
* 2006 (28,000,000) *
****************************************************
All Funds, Five-Year Impact:
*****************************************************
* Fiscal Year Probable Savings/(Cost) from *
* General Revenue Fund *
* 0001 *
* 2002 $0 *
* 2003 (10,000,000) *
* 2004 (16,000,000) *
* 2005 (22,000,000) *
* 2006 (28,000,000) *
*****************************************************
Fiscal Analysis
The bill would create a production incentive grant program to be
administered by the Texas Department of Agriculture to promote
value-added processing of agricultural products into motor fuel. The
bill would require the Texas Department of Agriculture to pay producers
$0.20 for each gallon of fuel ethanol or biodiesel produced in each
registered plant in Texas. This would continue until the tenth
anniversary of production from that plant. For each fiscal year, a
producer could not receive payments on more than 15 million gallons of
fuels produced at any one registered plant.
The bill would create the dedicated General Revenue Account - Fuel
Ethanol and Biodiesel Production Account, within the General Revenue
Fund. The account would have General Revenue transferred to the account
to fund the grants.
Methodology
Currently, Texas has no ethanol plants and no plants are scheduled to go
into production. It takes 12 to 18 months for an ethanol plant to become
operational, so fiscal year 2003 is the earliest that grants could be
paid out for ethanol production in Texas. According to the Texas
Department of Agriculture, the State of Minnesota has a similar program
that has 14 ethanol plants and produces incentives of $35 million per
year that pay for approximately 245 million gallons of ethanol. Using
the State of Minnesota's program as a comparison factor, the Department
of Agriculture estimates three plants would be operational by fiscal year
2003 producing a total of 45 million gallons of ethanol. In addition,
it is assumed that other smaller facilities that produce ethanol as a
byproduct may produce a total of 5 million gallons of ethanol. In fiscal
year 2004, five plants would produce 75 million gallons of ethanol and
other smaller facilities that produce ethanol as a byproduct may produce
a total of 5 million gallons of ethanol. In fiscal year 2005, production
would increase to 110 million gallons at seven plants and smaller plants
that produce ethanol as a byproduct. By fiscal year 2006 production
would increase to 140 million gallons at nine plants and smaller plants
that produce ethanol as a byproduct.
Based on how the Minnesota Department of Agriculture (MDA) administers
its ethanol grant program, the Department of Agriculture estimates that
they could administer the program with current funds and FTEs.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 551 Texas Department of Agriculture
LBB Staff: JK, CL, GS