LINCOLN — A controversial request for grant funding to install higher-blend ethanol pumps at gas stations, which sparked a lawsuit and criticism from a watchdog group, has been dropped.
It leaves the future of a $3 million state effort to expand availability and use of higher blends of the corn-based fuel, besides the common E10 blend, up in the air.
Jim Macy, the director of the Nebraska Department of Environment and Energy, recently asked the Nebraska Environmental Trust to remove the department’s request for $3 million in funding to help pay for installation of ethanol blender pumps at private gas stations.
Last year, the trust’s 14-member board, which hands out about $15 million a year in grants for environmental projects from state lottery proceeds, approved a first-year grant request of $1.5 million, overruling a subcommittee’s recommendation to deny it. To free up money for the blender pumps, the board voted to defund five other grants — for wildlife habitat, saline wetlands and conserving a Pine Ridge ranch — that had scored higher for funding.
Later, a lawsuit was filed against the grant, led by W. Don Nelson, who served as chief of staff for former Gov. Bob Kerrey and as an aide to former Sen. Ben Nelson. The lawsuit claimed that the grant was in violation of trust rules and that the Trust Board had violated open meeting laws in approving the grant.
The Department of Environment and Energy declined to comment on the decision to withdraw the grant application, saying the lawsuit is still pending. It also answered “no comment” when asked whether the withdrawal was an admission that the lawsuit’s allegations were correct. It also declined to comment on the status of the project to provide more ethanol pumps.
Officials with Omaha-based ethanol producer Green Plains Energy, which was a partner on the grant, could not be reached for comment Thursday.
But a lawyer who handled the lawsuit for Nelson and others said the decision to withdraw the grant request likely renders moot most of the claims in the lawsuit.
“What we wanted to have happen has happened,” Lincoln attorney Rod Confer said.
Former State Sen. Sandy Scofield, president of Friends of the Environmental Trust, which wasn’t a party to the lawsuit, also cheered the decision.
“It gives me some hope that maybe they’ll get back to following the statutes and using an objective process that people can understand and is fair,” Scofield said.
The awarding of the grant stirred controversy among conservationists, who maintained that it was a political decision by appointees of Gov. Pete Ricketts, a major supporter of ethanol, and defied a tradition of using the scoring of grant applications to guide the awarding of funds.
Ricketts had defended the grant funding as “wise,” saying that ethanol is a cleaner-burning fuel and that its increased use would help air quality and the state’s economy.
But conservationists said the grants for ethanol pumps seemed to be more about economic development than helping the environment.
A grant subcommittee of the trust had recommended funding 77 grants in 2020, and had included $1.2 million over two years for the ethanol pump project. But later, the full board decided to defund five other grants, which ranked 7th to 36th in priority, and instead award that $1.5 million to the ethanol project, which had ranked 78th for that level of funding. While some board members said they have the discretion to alter the recommendations, critics — including some former members of the Trust Board — said such a switch was unprecedented.
The lawsuit alleged that giving money for the ethanol pumps violated two requirements of the trust: that grants do not primarily benefit a private interest and that grants shouldn’t be given to projects that could be funded without the trust money.
Confer said a portion of the lawsuit, which alleges that the Trust Board violated open meeting laws at a November meeting, should go forward. He said his clients also want the state to pay its legal expenses. That will be argued at a court hearing scheduled for Wednesday in Lincoln.
None of the grant money approved by the Environmental Trust was ever transferred to the Department of Environment and Energy or Green Plains because the pending lawsuit had blocked it. A year ago, the department asked for applications for blender pump projects from service stations for what was intended to be a three-year program, providing a 50% match from a total of $3 million in trust grants.
But while the future of that program is unclear, the federal government, through the U.S. Department of Agriculture’s Rural Development program, recently provided grants for ethanol projects. One was for $1.1 million to Grand Island-based Bosselman’s Pump and Pantry, and another was for $93,000 to First Stop in Atkinson to install storage tanks and replace existing gas pumps with ethanol pumps.