Tax sucks life out of biofuels.

For nearly three years, Stan Bingham has been driving around in a Volkswagen he modified to run on used vegetable oil, which the Republican state senator from Denton gets free from the General Assembly cafeteria. His bug gets more than 40 miles a gallon on it, but he has to filter the oil and start trips on diesel until the engine heats it up enough to use as fuel. A few miles before stopping, he has to remember to switch back to diesel to flush the fuel lines. Otherwise, the oil cools, gels and clogs them. "It's really quite a chore to do this," the lawmaker admits.

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But weaning folks from fossil fuels onto biofuels--those made from renewable biological sources--could make North Carolina more self-sufficient and create jobs. So lawmakers pushed through the Strategic Plan for Biofuels Leadership in 2006. It mandates that, by 2017, 10% of liquid fuels sold in the state--about 560 million gallons, using current consumption levels--come from biofuels grown or produced here. Even Bingham is skeptical. "I don't know that we'll ever meet those goals--we'll just have to change them."

The legislature appropriated $5 million to start the nonprofit Biofuels Center of North Carolina, which opened earlier this year in Oxford. It's supposed to support research, improve production, train workers and shape public policy and perception. It has a long row to hoe. Automakers don't build vehicles that run on pure vegetable oil, though diesel vehicles will run on biodiesel blends. Biofuels often cost more than gasoline, and they're not widely available.

As if that weren't enough, the state taxes them the same as gasoline, unless users recycle or make their own. If they, say, buy a jug of vegetable oil at the grocery store, they're supposed to pay 30.15 cents a gallon, one of the highest rates in the nation. After all, those taxes pay for the roads used by all drivers, so why shouldn't biofuels users pay their fair share?

Calculating and enforcing such a tax is difficult, and state revenue officials, used to an orderly system where fuel is measured and taxed before it hits the pumps, aren't apt to expend a lot of energy tracking down the small number of scofflaws buying and using pure biofuels in their vehicles. But those caught face a $1,000 fine and a bill for back taxes.

The center wants the state to eliminate or reduce the tax on biofuels, but that's not likely to happen in the upcoming legislative session, Bingham says, because the highway budget is too tight. "It's going to be a hard sell to take away from the motor-fuels tax." STATE GASOLINE TAX

Cents per gallon 1. Washington 34.00 2. Wisconsin 32.90 3. West Virginia 31.50 4. Pennsylvania 31.20 5. Rhode Island 31.00 6. North Carolina 30.15 7. Nebraska 28.00 Ohio 28.00 Source: Federation of Tax Administrators, 2007