1.1                          A bill for an act 
  1.2             relating to ethanol; modifying provisions relating to 
  1.3             producer payments; phasing out ethanol blender 
  1.4             credits; appropriating money; amending Minnesota 
  1.5             Statutes 1994, sections 41A.09, by adding 
  1.6             subdivisions; 41B.02, subdivision 20; and 296.02, by 
  1.7             adding a subdivision; repealing Minnesota Statutes 
  1.8             1994, sections 41A.09, subdivisions 2, 3, and 5; and 
  1.9             296.02, subdivision 7. 
  1.10  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.11     Section 1.  Minnesota Statutes 1994, section 41A.09, is 
  1.12  amended by adding a subdivision to read: 
  1.13     Subd. 1a.  [ETHANOL PRODUCTION GOAL.] It is a goal of the 
  1.14  state that ethanol production plants in the state produce 100 
  1.15  percent of the ethanol needed for blending with gasoline to 
  1.16  comply with section 239.791, subdivision 1. 
  1.17     Sec. 2.  Minnesota Statutes 1994, section 41A.09, is 
  1.18  amended by adding a subdivision to read: 
  1.19     Subd. 2a.  [DEFINITIONS.] For the purposes of this section 
  1.20  the terms defined in this subdivision have the meanings given 
  1.21  them. 
  1.22     (a) "Ethanol" means fermentation ethyl alcohol derived from 
  1.23  agricultural products, including potatoes, cereal, grains, 
  1.24  cheese whey, and sugar beets; forest products; or other 
  1.25  renewable resources; including residue and waste generated from 
  1.26  the production, processing, and marketing of agricultural 
  1.27  products, forest products, and other renewable resources, that: 
  2.1      (1) meets all of the specifications in ASTM specification D 
  2.2   4806-88; and 
  2.3      (2) is denatured with unleaded gasoline or rubber 
  2.4   hydrocarbon solvent as defined in Code of Federal Regulations, 
  2.5   title 27, parts 211 and 212, as adopted by the Bureau of 
  2.6   Alcohol, Tobacco and Firearms of the United States Treasury 
  2.7   Department. 
  2.8      (b) "Wet alcohol" means agriculturally derived fermentation 
  2.9   ethyl alcohol having a purity of at least 50 percent but less 
  2.10  than 99 percent. 
  2.11     Sec. 3.  Minnesota Statutes 1994, section 41A.09, is 
  2.12  amended by adding a subdivision to read: 
  2.13     Subd. 3a.  [PAYMENTS FROM ACCOUNT.] (a) The commissioner of 
  2.14  agriculture shall make cash payments from the account to 
  2.15  producers of ethanol or wet alcohol located in the state.  For 
  2.16  the purpose of this subdivision, an entity that holds a 
  2.17  controlling interest in more than one ethanol plant is 
  2.18  considered a single producer.  The amount of the payment for 
  2.19  each producer's annual production is: 
  2.20     (1) for each gallon of ethanol produced on or before June 
  2.21  30, 2000, by a plant that began production before July 1, 1990, 
  2.22  20 cents per gallon; 
  2.23     (2) for each gallon of ethanol produced on or before June 
  2.24  30, 2010, by a plant that began production on or after July 1, 
  2.25  1990, or ten years after the start of production, whichever date 
  2.26  is earlier, 20 cents per gallon; and 
  2.27     (3) for each gallon of wet alcohol produced on or before 
  2.28  June 30, 2010, or ten years after the start of production, 
  2.29  whichever date is earlier, a payment in cents per gallon 
  2.30  calculated by the formula "alcohol purity in percent divided by 
  2.31  five," and rounded to the nearest cent per gallon, but not less 
  2.32  than 11 cents per gallon. 
  2.33     The producer payment for wet alcohol under this section may 
  2.34  be paid to either the original producer of wet alcohol or the 
  2.35  secondary processor, at the option of the original producer, but 
  2.36  not to both. 
  3.1      (b) The commissioner shall make payments to producers of 
  3.2   ethanol in the amount of 1.5 cents for each kilowatt hour of 
  3.3   electricity generated using closed-loop biomass in a 
  3.4   cogeneration facility at an ethanol plant located in the state.  
  3.5   The payments apply to electricity generated on or before June 
  3.6   30, 2010, or the date ten years after the producer first 
  3.7   qualifies for payment under this paragraph, whichever date is 
  3.8   earlier.  Total payments under this paragraph in any fiscal year 
  3.9   may not exceed $750,000.  For the purposes of this paragraph: 
  3.10     (1) "closed-loop biomass" means any organic material from a 
  3.11  plant that is planted for the purpose of being used to generate 
  3.12  electricity or for multiple purposes that include being used to 
  3.13  generate electricity; and 
  3.14     (2) "cogeneration" means the combined generation of: 
  3.15     (i) electrical or mechanical power; and 
  3.16     (ii) steam or forms of useful energy, such as heat, that 
  3.17  are used for industrial, commercial, heating, or cooling 
  3.18  purposes. 
  3.19     (c) The total payments from the account to all producers 
  3.20  may not exceed $30,750,000 in a fiscal year.  Total payments 
  3.21  from the account under paragraph (a) to a producer in a fiscal 
  3.22  year may not exceed $3,000,000. 
  3.23     (d) By the last day of October, January, April, and July, 
  3.24  each producer shall file a claim for payment for production 
  3.25  during the preceding three calendar months.  A producer with 
  3.26  more than one plant shall file a separate claim for each plant.  
  3.27  The volume of production must be verified by a certified 
  3.28  financial audit performed by an independent certified public 
  3.29  accountant using generally accepted accounting procedures. 
  3.30     (e) Payments shall be made November 15, February 15, May 
  3.31  15, and August 15.  A separate payment shall be made for each 
  3.32  claim filed.  The total quarterly payment to a producer under 
  3.33  this paragraph may not exceed $750,000.  If the total amount for 
  3.34  which all producers are eligible in a quarter exceeds the amount 
  3.35  available for payments, the commissioner shall make payments on 
  3.36  a pro rata basis among all eligible claimants. 
  4.1      Sec. 4.  Minnesota Statutes 1994, section 41A.09, is 
  4.2   amended by adding a subdivision to read: 
  4.3      Subd. 5a.  [EXPIRATION.] This section expires June 30, 
  4.4   2010, and the unobligated balance of each appropriation under 
  4.5   this section on that date reverts to the general fund. 
  4.6      Sec. 5.  Minnesota Statutes 1994, section 41B.02, 
  4.7   subdivision 20, is amended to read: 
  4.8      Subd. 20.  [ETHANOL PRODUCTION FACILITY.] "Ethanol 
  4.9   production facility" means a facility that ferments, distills, 
  4.10  dewaters, or otherwise produces ethanol as defined in section 
  4.11  41A.09, subdivision 2 2a, paragraph (a). 
  4.12     Sec. 6.  Minnesota Statutes 1994, section 296.02, is 
  4.13  amended by adding a subdivision to read: 
  4.14     Subd. 7a.  [TAX CREDIT FOR AGRICULTURAL ALCOHOL 
  4.15  GASOLINE.] Until October 1, 1997, a distributor shall be allowed 
  4.16  a credit on each gallon of denatured ethanol commercially 
  4.17  blended with gasoline or blended in a tank truck with gasoline 
  4.18  on which the tax imposed by subdivision 1 is due and payable.  
  4.19  Denatured ethanol is defined in section 296.01, subdivision 13.  
  4.20  The amount of the credit for every gallon of denatured ethanol 
  4.21  blended with gasoline to produce agricultural alcohol gasoline 
  4.22  is: 
  4.23     (1) until October 1, 1995, 15 cents; 
  4.24     (2) until October 1, 1996, ten cents; and 
  4.25     (3) until October 1, 1997, five cents. 
  4.26     The credit allowed a distributor must not exceed the total 
  4.27  tax liability under subdivision 1.  The tax credit received by a 
  4.28  distributor on denatured ethanol blended with motor fuels shall 
  4.29  be passed on to the retailer. 
  4.30     Sec. 7.  [APPROPRIATIONS; ETHANOL.] 
  4.31     Subdivision 1.  [ETHANOL DEVELOPMENT FUND.] $1,500,000 is 
  4.32  appropriated from the general fund to the ethanol development 
  4.33  fund under Minnesota Statutes, section 41B.044, for use in the 
  4.34  ethanol production facility loan program, to be available until 
  4.35  June 30, 1997. 
  4.36     Subd. 2.  [VALUE-ADDED AGRICULTURAL PRODUCT LOAN 
  5.1   PROGRAM.] $500,000 is appropriated from the general fund to the 
  5.2   value-added agricultural product loan program under Minnesota 
  5.3   Statutes, section 41B.046, to be available until June 30, 1997. 
  5.4      Sec. 8.  [REPEALER.] 
  5.5      Minnesota Statutes 1994, sections 41A.09, subdivisions 2, 
  5.6   3, and 5; and 296.02, subdivision 7, are repealed. 
  5.7      Sec. 9.  [EFFECTIVE DATE.] 
  5.8      Sections 1 to 8 are effective July 1, 1995.